Bridging standards welcomed with caution
Precise Mortgages’ bid to “clean up” the bridging market and its consequent tie-up with seven networks and clubs has been tepidly welcomed by bridging distributors.
Most distributors specialising in short-term finance agreed that professional standards and transparency are key to the future of bridging but some voiced concerns that networks limiting their bridging panel to Precise Mortgages could negatively impact borrowers.
One broker not wishing to be named said he worried that incentivising network members to use Precise Mortgages might mean they don’t recommend the most appropriate product for the borrower.
He said: “I don’t necessarily think this is a great idea. Precise is good but they’re not always the cheapest and they don’t do commercial loans or big ticket loans like some of the other lenders. Borrowers might suffer as a result of their broker being told to use the network’s preferred lender.”
But Alan Cleary, managing director of Precise, hit back at the claim saying network members were more than welcome to go off panel.
And he added: “We don’t think we’re the only bridging lender in the market but we are trying to improve standards in the bridging market.
“Networks prefer if members stay on panel for a host of compliance reasons and we’re paying a bigger proc fee to encourage that but it doesn’t stop brokers using other short-term lenders if they want to.”
Yesterday Precise signed a deal with PMS, Sesame, Pink, PTFS, Ingard, SimplyBiz and Mortgageforce to be the preferred bridging partner for network and club members.
Precise said the reason networks had done the deal was because of opaque processes in the short-term market including charging interest on rolled up interest.
In a bid to be transparent Precise has also promised to issue brokers with a KFI-style document for every offer and claims it offers the cheapest legal fees in the market as well as more stringent fraud checks.
But short-term distributors said while Precise did offer these things there were other lenders in the short-term market doing an equally good job of being transparent.
Lucy Hodge, director of packager Vantage Finance, said although interest charging methods vary from lender to lender she thought it “unfair to assume that a lender is taking advantage of borrowers and failing to be transparent by using one and not the other”.
She said: “Provided a client is made fully aware of how they will be charged at the outset then that to me is not poor treatment of a borrower.”
Hodge said there were many considerations when comparing short-term products and it doesn’t always come strictly down to overall cost.
And she added: “It’s a specialist market and whilst some may take advantage of that the industry should not be tarred with that same brush as a whole.”
Mel Fordham, chief executive of packager Centrado, agreed with Cleary’s view that not all lenders had the same definition of transparency.
But he added: “It is not the lenders and brokers in the market who act in a professional, ethical and responsible manner that bring our industry into disrepute, it’s those who engage in poor practices.
“On balance it’s the diversity, ability for interpretation, flexibility and uniqueness that every lender offers that gives borrowers choice. Any restriction on this in my opinion is not championing clients’ best interest.”
And Fordham added: “Whilst Precise has a fantastic reputation I can state for the record that all the lenders we deal with are no less professional, have equal standards, ethics and codes of conduct all of which are carefully balanced by an ability and appetite to lend.”
Meanwhile David Copland, chief executive of Pink Homeloans, tried to allay fears of restricting borrower choice.
Pink has had a panel of short-term lenders since 2008 including Affirmative, Cheval and Lowry Capital.
Copland said: “While short-term lending market it is not regulated it is on the radar of the Financial Services Authority but as with Buy-to-let and everything that comes through Pink we treat it as a regulated contract.
“This means that our advisers still fill out a fact find, research the market for the best product and they explain the charges and how interest is calculated – just as they would if it was a long term mortgage. “
Rob McCoy, senior product and communications manager at PMS, said this treatment of bridging as regulated had spurred their decision to work with Precise.
He said: “We have chosen to work with Precise Mortgages as it treats the product it offers as a regulated product, and the charges to be incurred by the client are wholly transparent.
“Precise also require a clearly defined exit strategy from the client. These factors give us comfort that our advisers in the network are selling bridging products in a manner that we expect from them when selling mortgages and other regulated products.”
Other bridging lenders were divided about the move by networks however.
While Dragonfly Property Finance, West One Loans and Tiuta all declined to comment Montello Finance and Bridgebank Capital said they considered Precise’s view as unfair.
Christian Faes, director of lender Montello Finance, said: “With respect to Alan Cleary it is a little bit unfair to say that their way is the right way of doing things.
“By its very nature bridging finance is more often than not a largely bespoke lending product, so of course all lenders are going to have different ways of doing things.”
And Laurence Goodman, managing director of lender Bridgebank Capital, said: “Yet again Cleary is overstating and creating / inventing a situation that really does not exist.
“There is no evidence at all of “risky lenders” amongst the Association of Short Term Lenders trade body members - of course Precise is no longer a member.”
Other competitor lenders were less critical of the move.
Bob Sturges, head of communications at Omni Capital, said: “Those of us taking the long-term view appreciate the implications of failing to adjust to the changing landscape.
“While there’s more to do – and some of the more opportunistic players will deservedly be left behind – there are good, visible reasons to be positive about the future prospects and conduct of the sector.”
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