Bridgers still use possession as exit
Bridging distributors claim some lenders are still trying to underwrite short-term deals based on the borrower being forced to sell their property to repay the loan.
Brokers say there are small bridging lenders “in dark corners” trying to generate business by effectively underwriting the exit as repossession of the property.
But the borrowers are being led to believe they will be offered refinance at the end of the bridging term as a feasible exit.
Mel Fordham, chief executive of bridging packager Centrado, said: “It is the people who continue to hide in dark corners who bring about irregular lending and lend to vulnerable people in the wrong circumstances.
“I always feel unsafe when we get an approach three times a month from a lender who we wouldn’t have any association with and their exit is repossession, it’s a very real consideration.”
Although he wouldn’t name the lender Fordham added that he believed this was the type of activity that should be worrying the Financial Services Authority rather than the larger bridgers that tend to dominate trade press coverage.
Another large bridging distributor Malcolm Scanlon, head of lending at Niche Financial Solutions, said he had come across a number of enquiries where a client had been led into a bridge with the promise of a refinance when there was no hope.
Scanlon said: “I think the broker introduced it with that type of bridging company to do the deal with no firm exit.
“It hasn’t been underwritten on exit, it’s been done on the basis that they’re going to have to sell it but the client doesn’t want to do that. They’ve been promised the finance.”
Martin Gilsenan, sales director at bridging lender Omni Capital, condemned the practice and said lenders and brokers had no excuse to be naive about whether a deal would achieve a refinance exit.
And he added: “We’ll all underwrite to exit as stated, aware of changes in the mortgage market and the dynamics in the mortgage market, aware of whether an exit is realistic or absolutely not. Bridging doesn’t exist in a bubble anymore.”
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