Questions and Answers

Nia Williams

January 30, 2009

1. Who are you?

I’m Gary Bailey, sales and marketing director for the Blemain Group of lending companies, which includes Blemain Finance, Cheshire Mortgage Corporation and Lancashire Mortgage Corporation. We’ve been in business for nearly 35 years and between these three companies we cover the entire spectrum of intermediary-based secured lending including residential, commercial and semi-commercial; mortgages, 2nd charges and bridging finance. We also cater for a number of niche areas like buy to let, right to buy and shared ownership. Blemain Group is an ‘all status lender’, so we will lend to high-net worth individuals with excellent credit ratings and payment profiles through to those who may have had serious arrears and payment difficulties. We’ll consider any income source and we aim to be as flexible as possible. If a case doesn’t fit our standard guidelines we will take a view based on the merits of the case.

2. What do you do on a day-to-day basis?

Speaking very broadly my responsibilities are threefold. Firstly, I am responsible for the management of our sales and marketing functions. This includes our National Sales Manager, DSMs, BDMs, BDEs, Senior Sales, call centre and the Marketing Department. I also form part of our product and risk committee, which is responsible for developing and monitoring our lending criteria, volumes and liquidity. Liaising with brokers and representatives from networks and packagers to strengthen our relationships and discover how we can work together more efficiently also forms a large part of my role.

3. Where do you think interest rates and the housing/mortgage market will go in 2009?

I believe that property prices will continue to fall until early 2010, probably down to the same levels as the 2005 market, and it will be 2011 before we see any true signs of stability. We could also see a heavy interest rate cut in 2009, and maybe even lower in line with the USA. Of course, none of the experts seem to agree on this currently so my educated guess is as good as anyone’s!

There are a number of things that need to happen before the market begins to recover. Confidence must be bolstered by the recommencement of inter-bank lending, the re-opening of the wholesale capital markets and the equalisation of property prices with realistic income multiples. Further injections of capital from the IMF would also help, but we’re in uncharted territory at the moment so it’s impossible to say if and when these things will occur.

4. Who do you think is to blame for the recent problems in the mortgage market? Did providers, brokers and consumers get the support they needed?

There are a multitude of factors that have contributed and the problems cannot be laid at the door of any single institution. All the major banks and rating agencies must share a degree of responsibility. There have also been issues in terms of the regulator keeping up with the pace of change in the market and lenders over-extending their criteria to borrowers who were not considering their own affordability when assessing the offers being made to them. I think it is telling that a lot of the early withdrawals from the UK market were by lenders who relied on the big US banks for their funding lines – a classic case of America sneezing and the rest of the world catching a cold.

Blemain Group has always catered for borrowers with adverse credit histories but this has not prevented us from accomplishing a large securitisation and refinancing deal in the period since the credit crunch began and we are still very much open for business. This is because we have always focused on affordability and responsible lending. Lending at very high income multiples and LTVs was never going to be sustainable and to claim otherwise is absurd. The lenders offering these deals were being short-sighted if they genuinely thought a 125 per cent LTV mortgage wouldn’t cause problems down the line.

As to whether the market got the support it needed, I believe that both the British and US governments should have acted a lot quicker when the scale of the issues facing us became apparent.

5. What advice would you give to intermediaries looking to enter the market?

Times are tough for the mortgage intermediary and I’d be very surprised at anyone who was entering the market at the moment! I recently read a report which said that 68 per cent of intermediaries are unable to source mortgages for their clients due to product withdrawals and criteria restrictions. Apparently 72 per cent of brokers are also having difficulty placing remortgage business, and bear in mind that a year ago people said that remortgages would be the bread and butter for brokers in 2008.

With this in mind I would say that anyone entering the market would need to offer as diverse a portfolio of products and services as possible, working with established lenders who are committed to the market and can cater for every type of client and every set of circumstances. You need be handling all types of business: residential, commercial and short term funding, so that you maximise the number of leads you can convert and increase the opportunities for cross-selling.

6. How high would you say intermediary confidence is in the current market?

Confidence is obviously very low at the moment. The mortgage and loan intermediary has been at the sharp end of the downturn from the beginning and I think that the overall mood in the sector is unlikely to improve until some of the things I mentioned previously with regard to recovery begin to take place.

7. What is your company’s philosophy?

We are committed to building strong relationships with brokers and working in partnership for the benefit of ourselves and our mutual clients. We also strive to provide our brokers with innovative and competitive products and we are as motivated as they are to see their cases complete.

The range and flexibility of products that we provide has been a key factor in our success and we are always on the look out for improvements that will give our brokers an edge. Another important feature of our service is that we consider each case on an individual basis – no automated underwriting models – with a view to finding solutions and helping brokers to complete more business. Despite the current conditions we remain 100 per cent committed to the market.

8. If there was one aspect of the current market you could improve, what would it be?

I can answer this question in three words: Liquidity, liquidity, liquidity! This is essential. When the capital markets re-open it will allow old lenders to return and new ones to enter, which will benefit borrowers and intermediaries alike.

9. Where do you think the market will be in 2012?

I hope that by 2011 we will be enjoying some stability and by 2012 property prices and mortgage availability will be on the mend. But with the global economy currently being put through the wringer it really is difficult to make any kind of reliable predictions for the next 6 months, let alone the next 3 years. Back in March people were saying that the mortgage markets would begin to improve by the end of the year and just look at what has happened since! Only once the current volatility has subsided can the experts and economists start providing us with some credible assessments of how things are likely to develop in the longer term.


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