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short-term finance used for investment purposes whether it be buy-to-let, redevelopment/ refurbishment or buying properties at auction. There are also customers looking at bridging loans to complete a transaction when their lender has let them down at the last minute or tiding them over cash flow issues where they want to grab an investment opportunity but don’t have the cash to hand to do it.
“The purpose of bridging has
changed dramatically so naturally your exits are changing as well,” explains Bailey. “Bridging finance used to be bridging the gap between buying one property and another but it’s become short- term funding for businesses and investors. It’s moved and the range of exits we see consequently is far wider – business stock sales for example. But ultimately sale of a property is still stated as a predominant exit which now has to be viewed with more caution – you have to ask who is selling property at the minute. You do have to be careful.”
PAST TO PRESENT The focus put on the exit is indeed much stronger now that mainstream lenders have stopped vying for market share – there are far fewer refinance options available for borrowers paying a bridging loan. As with many lenders operating in the first charge market in the run up to 2008, the over abundance of refinance options contracting to no refinance options practically overnight has left many borrowers in tricky positions. Many bridging lenders struggled because they simply couldn’t survive under the weight of bad debt they were consequently left carrying. But Bailey explains that because of the balance of lending Blemain Group is able to offer they’ve put
30 BrIDGInG InTrODucer MAY 2012
a range of forbearance measures in place. “For example, if appropriate we
have the commercial first charge lender as well so we have been able to use that to take borrowers out of bridge and put them on a term loan – not many bridgers have that option,” says Bailey, though he’s keen to underline that there has only been an odd occurrence. “Most of our bridges last around eight months and you have to remember that is about getting the underwriting spot on on day one. I think a lot of the newer lenders coming to the bridging market are going to have to learn that. It’s very easy to lend to 85% but you’re not going to get a remortgage on that – that’s where our experience and knowledge come into play.”
FUNDING MODEL While Bailey is reticent about confirming how much cash Blemain Group has to lend, he does reveal the group now has multiple funders providing money. The group is funded partly
HISTORY
Blemain Group is one of the oldest bridging lenders in the market setting up in 1973 to initially offer residential second charges. In 1997, the lender had secured funding lines and syndicates and had an ambition to grow. Bailey was brought on board to help penetrate the short-term market. That year Bailey’s lending target was around £1m per month and by the lender’s peak in 2006/7, it was completing around £85m per month. The group comprises of several brands including Blemain Finance offering residential secured loans, bridging finance, business loans and buy-to-let; Lancashire Mortgage Corporation offers commercial and business lending; Cheshire Mortgage Corporation is the FSA regulated first charge mortgage and bridging finance lender. Blemain Group is a national lender covering England, Wales and Scotland.
They will lend to most status of borrower from those with perfect credit histories to those who have had some financial difficulties in the past. Maximum LTV is 75% but Blemain Group says it will lend against “pretty much any property” including standard and non-standard construction, land, factories and residential. It won’t lend against football stadiums or night clubs and isn’t keen on offshore vehicles. Published rates start from 0.75% but typically cases are agreed from 1% a month up to 1.45%. Predominantly the group lends up to £500,000 though it will consider cases up to £1m.
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through reinvestment of retained profits and partly through syndicated banks including “mainstream” banks which remain unnamed. The final line of funding is Blemain Group’s securitisation which it got away in 2007. It’s unusual for the
securitisation model to be one worth mentioning in this day and age given the gridlocked state of the money markets since 2007. “Our securitisation landed
in november 2007 but we have a conduit securitisation across all the types of lending we do,” explains Bailey. “We securitised a significant part of our book and as far as I know it’s unique as it covers both commercial and residential lending.”
REGULATION
The short-term market has been barraged by the looming prospect of regulation since late last year when the FSA stated openly its concerns that brokers might be funnelling regulated cases to unregulated bridgers. Indeed the
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