Gavin Diamond is finance director at Cheval
One interesting aspect of the current bridging market is that the arrangement all lenders had become accustomed to, where considerably more deals were submitted by brokers than by packagers, has been turned on its head.
Today we get many more cases from packagers than we do from intermediaries: exactly the opposite of what applied four or five years ago.
A key reason for this sea change has to be the level of expertise required to get a bridging loan application to a position where it is ready to be funded.
From a broker’s perspective it must be reassuring to be able to forward an application to a packager who has built up a reputation and is expert in this field. Packagers specializing in bridging loans have a thorough understanding of the elements that make up a bridging application and the key informational requirements of lenders.
After all bridging applications are relatively few and far between when compared to mortgages. Many brokers are still fairly untutored in this area, may only process one or two bridging applications per year, and greatly appreciate the indemnity they get from a knowledgeable distributor.
We reflected this new market reality recently by allowing unregulated packagers to prepare a KFIs on behalf of the regulated broker.
Previously we only permitted regulated intermediaries to log on and prepare KFIs for their clients, which meant unregulated packagers had to rely on regulated brokers to prepare KFIs on their behalf. Clearly not something that could continue.
Now our system can be accessed directly by unregulated distributors, allowing them to prepare a KFI on behalf of the regulated broker, and enabling the packager to maintain control of the entire application.
The new set up has the added advantage of safeguarding the packager/intermediary relationship, because Cheval need not have any contact with the broker.
Interestingly, a feature of the growth in packager activity in the bridging space is that many of the packagers that we deal with are “one and two-man bands”. Such small operations are developing in-depth bridging expertise that intermediaries are only too willing to tap.