This new restriction is thought to be especially important for those on the Channel Islands and other investors overseas buying or selling property in England or Wales.

According to the Law Society, expensive or high-value properties without a mortgage, or with an outstanding mortgage where the owner resides abroad, are particularly vulnerable to title fraud. Without the owner’s presence in the country, the threat of fraud understandably rises.

Michael Morris, UK property expert at Collas Crill, spoke to Isle News about the problem of fraud: “Property fraud is surprisingly simple. We have seen property fraudsters use forged documents to represent themselves as the owner of the property.

“All they need to do is then register the forged documentation at the Land Registry and, once this is done, can sell the property from under the feet of the genuine owner, or take out loans against the property. The fraudsters then pocket the cash and leave the property owner saddled with debt, of which they may be unaware until they try to sell the house and then discover several mortgages.”

He highlighted that houses which are empty whilst their owner remains abroad, or those with tenants and an overseas landlord, are all more vulnerable to fraud.

However, it is not only property investors abroad who need to be aware that they are at risk of this fraud; the Land Registry’s more stringent new measure also “provides an additional layer of protection and control for trustees owning land in England. It means that a beneficiary of the trust cannot deal with the land without the trustees’ knowledge,” Mr Morris continued.

Results from the London property auctioneers since the beginning of March show mixed results as the table below shows. The table shows the most recent sale first (3 April) down to the earliest (6 March):

But statistics can conceal trends. We can have two successive sales where we have a 75 per cent success rate but I can find one very hard work with each lot necessitating a lot of effort to drag bidders up, in a half empty room, to just scrape reserve, whereas the next sale, while producing the same result, can be relatively effortless with bidding often starting above reserve and several bidders competing for most lots.

You also need to look at levels of prices and source of lots. It should be very hard not to sell pretty much 100 per cent of lots offered for mortgagees, receivers or local authorities so this may not be a reflection of a strong market.

Strettons’ experience in April (and to a slightly lesser extent in our February sale) suggested that things are improving but apart from a better willingness to bid, what other trends are there?

My impression from speaking to buyers and lenders is that there is a slight improvement in the availability of funding, especially for development rather than investment properties. A freehold commercial unit in Camden, N7, with planning for three flats and a commercial unit far exceeded expectation selling for £610,000 off a guide of £150,000 plus.

A 1930s semi-detached house in urban Essex with consent to split part of the garden to build a small two bedroom house sold for £510,000 against a reserve of £450,000. The buyer is left with the original house although the site is less spacious so that the value of this is reduced.

Obtaining new funding for commercial investment is still tough, but if buyers are able to “leapfrog” by funding a property that they already have and using the proceeds to buy the next one, which is then funded but they are building a relationship with a lender, there seems to be a better chance.

Equally, for commercial lots, there are lots of private pension funds with £500,000 to £1 million earning very little in the bank, who seem to be prepared to buy commercial investments, even where they are not traditional pension fund stock.

Examples are two shop investments which we sold in April in Waterloo, let to indifferent covenants, which sold for £355,000 and £432,000 against reserves of £219,000 and £249,000.  In East Ham, London E6, a small part of a shop let to Superdrug for five years certain sold for £780,000 against a reserve of £749,000. On the face of it, the yield of 7.47 per cent looks attractive but I have noticed a marked reluctance from funders and investors to lend off parts of properties. In fact, my feeling is that this adds to the scope and thus, the attraction.

The market anywhere outside London is certainly weaker, especially where there is uncertainty, so that a car sales site in Buckinghamshire let at £45,000 with a break clause this year  and probably with some development potential sold for £350,000; a yield of 12.85 per cent. With a longer term or planning consent in place it would have looked quite different.

A portfolio of perfectly presentable houses in Rugeley, Staffordshire, producing £42,458 per annum sold for £462,500, a net 8.7 per cent. In London the yield would probably have been a good two per cent less.

At our February sale we achieved similar results and we noticed similar trends but we had to work a lot harder for our money, although even then we were noticing an appetite for development in the right location. In Crouch End, North London, we sold a former British Legion Hall without any consent and clear development potential, albeit probably after a battle with the planners, for over £1 million against a reserve of £675,000. The developer buyer didn’t seem perturbed by the lack of consent.

In contrast, our December sale was poorer still – our auction report for the year stated, “to end the year, mixed results generally reflecting the tone of 2011 being one of a generally cautious market led by a variety of factors, not least limited loan security finance, but with realistic prices being paid for sensibly priced lots.”

Appearing at Reading Crown Court, they all faced varying numbers of charges of conspiracy to defraud, conspiracy to commit fraud by false representation, conspiracy to commit corruption and conspiracy to commit money laundering, according to a Thames Valley press release last November.

Mark Entwistle, aged 45, from Kings Road, Windsor; Jonathon Gilbert, aged 42, from Meliden Road, Penarth, Wales; Matthew Robinson, aged 37, who’s address has been withheld on order of the court; Philip Barker, aged 44, from Oatlands Drive, Harrogate; Nicholas Pomroy, aged 55, from Heath End Road, Baughurst, Tadley; Shon Williams, aged 45, from Nightingale Close, East Grinstead; George Tilemachou, aged 52, from Oatlands Chase, Weybridge; and Demi Charalambous, aged 28, from Oatlands Chase, Weybridge, were all released on conditional court bail after they appeared in court, stated the press release.

Mark Entwistle, 45, of Kings Road, had been charged with 23 counts of conspiracy to defraud and conspiracy to commit fraud by false representation. He also faced one charge of conspiracy to commit money laundering and one of conspiracy to commit corruption.

Also entering a plea was George Tilemachou, 52, formerly of Thames Street, who had been charged with one offence of conspiracy to commit fraud by false representation.

They are in relation to allegations made by the Royal Bank of Scotland and other lenders who claim mortgage loans were fraudulently obtained to the value of over £30 million.

In November, the Windsor Express publication reported that a number of the defendants had been charged by the police’s economic crime unit.

The crown claims the eight garnered large sums of cash through fraudulent mortgage applications and then used the money for other means.

All appeared for a plea and case management hearing and were on conditional bail. However, we have not yet heard the result of this case – we shall keep you posted as and when we do.

During the MBE Manchester 2012, visitors will be able to talk to lenders, access over 40 key suppliers and source unique funding solutions to assess for their clients. This year’s event is set to offer unrivalled access to residential and buy-to-let lenders actively lending and supporting mortgage intermediaries in the North of England and beyond.

James Prosser, Show Director for MBE Manchester, commented: “We look forward once again to welcoming the industry to Manchester MBE in what is gearing up to be an even busier event than last year.”

Steve McColl, Director of Soho Corporate, said: “I’m excited about the prospect of attending this year’s MBE. It is a great networking opportunity, not only for meeting other brokers but also key funding partners. The MBE is always very relaxed and not too formal – it is a good old-fashioned networking event.

“I’m also going to be looking forward to having a few beers the night before. We had a pretty big night out last year!”

MBE Manchester will once again host a series of free seminars hosted by the industry’s trade association, Association of Mortgage Intermediaries (AMI), and will include sessions on the latest trends and forecasts.

Terry Pritchard, of PWF Commercial Finance, commented: “Love it or hate it the Manchester Expo is getting closer (May 23rd) and James Prosser and his team have done what appears to be another great job getting a diverse mix of businesses together. It is still the best networking event in the North and although the bias has changed to more specialist lending it is still the premier event to attend as a broker. I hope that we can get as many people as possible through the door this year so that those still looking for opportunity realise that there is plenty to be offered working with the right partners.”

Arron Bardoe, of Temple Capital Finance, said, “There’s always one thing worth attending for and even if the event helps you place just one case it’s worthwhile.

“A lot of brokers are unaware of the opportunities surrounding bridging finance but with criteria changing with a lot of lenders, the MBE gives them the exposure and provides greater access for brokers.

“In some cases you can only place a deal by hunting out a lender; some don’t tend to market themselves as much as others, so the Expo provides a good opportunity.”

Registration is free and visitors can register in advance via the MBE website http://mortgagebusinessexpo.com/manchester

Earlier this year, B&C reported on the case of Gavin Sutton, who pleaded guilty to “siphoning” £100,000 out of his clients’ accounts into his own.

The surveyors, who work with top bridging lenders, became aware of the fraud after the company’s computer system crashed and an account manager who recovered computer data saw evidence of the fraud. By this time, Sutton had already left the firm.

Sutton, 34, of Grundy Street, Westhoughton, transferred money from clients’ accounts on 32 different occasions. He had attempted to pass off the money transfer by claiming it was going to a cleaning company.

After his arrest, Sutton told police that his money had been spent on alcohol, kids, holidays and an ex-wife. According to the Manchester Evening News, Laura Foster, defending, said: “The majority of it went on alcohol – drinking with his ex-partner who had a long-standing alcohol problem. He did leave his employment to stop that temptation, he continued to try and address the problems with life, leaving his wife and moving away from alcohol.”

Despite offering to repay the money, it has been revealed that Sutton can only afford to pay £250 per month – meaning it will be another 33 years before the debt is cleared. A proceeds of crime hearing will take place later this year.

The topic of valuations, which was raised by one audience member curious to establish what percentage of cases reach completion after a valuation has been done, resulted in the lenders on the panel revealing very different approaches.

Whilst many of the lenders rely on an approved panel of valuers whom they can out-source valuations to, Goldentree Financial Services chooses not to rely on valuations for the majority of the deals it lends on. We caught up with a valuer and some of the lenders who were present at the AOBP event to find out why the companies have chosen to adopt such different approaches…

Shaf Ali, Partner at Belleveue Mortlakes Chartered Surveyors, told us: “Any property transaction involving the transfer of an interest in land or buildings should be valued by an independent panelled Chartered Surveyor specialising in property valuations. This process should form part of each party acting knowledgably and prudently to safeguard their interests.”

He explained that his firm’s training and registration with RICS means that the company is “duty bound to provide an unbiased and professional opinion.”

So, what about lenders who don’t rely on valuations?

Shaf continued, “Lenders that don’t use valuers run the risk of being unable to demonstrate that they have exercised due diligence in agreeing a loan or an advance.”

However Simon Ismail, Director at Goldentree, advocated his company’s decision to not necessarily utilise an independent valuer, stating: “For the lenders who do not visit the security they are lending against, a valuation is essential. We prefer to do this ourselves and be comfortable that both the property and the borrower are worth the funds being lent against it/to them.

“Local values, recent sales prices and planning history can all be checked easily online, within minutes usually. Fraud is a very real problem within our industry and we believe at Goldentree that our loan procedure (visiting the property – meeting the client and stringent in-house diligence) is the best deterrent against this crime. I do not see what improvement a valuation can give to our already diligent procedure when protecting against fraudulent applications.”

Simon explained that his company’s model involves visiting every single property, and meeting every borrower. He said, “We are the ones lending the cash so we want to be certain that the deal we are recommending is the right one for us and the borrower. There is no-one better positioned to make that decision than ourselves!”

He also provided some insight as to why Goldentree is less inclined to seek valuations. He said, “Most, if not all, lenders have no choice but to obtain a valuation as their funders insist on this. Goldentree is in the fortunate position of lending its own funds. We are not regulated by banks or other funders’ rules and covenants.

“We believe we have a wealth of experience which varies from bankers, surveyors, lawyers, accountants, developers and entrepreneurs. Collectively, we make decisions to lend on deals that make sense to us. This enables us to lend on deals that other lenders cannot due to restrictions put in place by their funders, credit lines or investors.”

Does Goldentree ever outsource?

Simon revealed that a valuation is only outsourced if the lender believes some local knowledge or greater detail on a difficult/specialist asset is needed. In that case, “a ‘local’ surveyor is then instructed, or a surveyor who specialises in that particular field.

Tomer Aboody, a Director at MT Finance, revealed that his company doesplace emphasis on valuations. “As non-status lenders we are uniquely placed to assist borrowers whether they have great credit or not. That is because at MTF we lend on the open market value of the property and not on a borrower’s last three pay slips and credit file.

“This is not only fairer, but faster. This is a major advantage of our operational model and also means that great reliance is placed on an accurate open market valuation of the property. We feel it is vital to seek the opinion of experts to provide this valuation.”

Brian Levin, Underwriting and Operations Manager at Masthaven Bridging Finance, said: “As a lender which lends across England and Wales it is not possible to have an in-depth knowledge of such a large area. We feel that by outsourcing our valuations we are able to get a valuation conducted by a local surveyor, which gives us greater comfort as to the accuracy of the value of the property.

“The property market is also still recovering from the events of the past few years and it will be some time before the market becomes “normal” again. Each area and, specifically, property has different factors that would affect the value and the best way to ascertain these is by having a valuation undertaken.”

Are lenders who don’t outsource leaving themselves more vulnerable to fraud?

Despite choosing to rely on valuations, Tomer does not necessarily think in-house systems leave lenders more vulnerable. “We fundamentally believe an independent valuation is in all parties’ interests,” he told us. “However, we feel that if a lender chooses to value all assets internally, and if they have the in-house expertise to do so, if they stick to the RICS Red Book requirements, and if they fully inspect the properties, then there should be no increase in the risk of fraud.

“It all depends on the approach employed. Clearly, if a lender decides to run desktop valuations only, then we would consider this to be an invitation to fraudulent applications. Either way, the idea of in-house only valuations runs contrary to our principal of transparency and is not something we would ever consider.”

Jonathan Rubins, Managing Director of Alternative Bridging Corporation Limited, said: “We are firm in our belief that to work in the bespoke area of bridging in which we lend, you require specialists in the various disciplines: law, tax, valuation etc. to ensure the best advice possible allows our credit team to make the best decisions which we in turn can offer to our borrowers.”

He added, “We look to attain an accurate valuation for the basis of every loan we offer; for this we have a large panel of valuers who are pre-agreed with our funders. We tend to try and use specialists either through geographical expertise or sector specialism, to ensure the most accurate and secure valuation for both ourselves and the borrowers.”

Shaf highlighted that he believes in the importance of valuations. “We estimate that of the 1,200 – 1,400 valuations we carry out per year, 40-50 per cent are lower than the purchase price/estimated value (the majority of these valuations fall within 10-15 per cent of the specified value). However, there are a number of valuations that fall outside this range where the lack of a formal valuation could potentially put both the lender and borrower at significant risk of financial loss.

“The purchase price may not reflect the true value, as there may be other factors. By way of an example, we recently valued a substantial residential dwelling in Kensington where the purchaser openly admitted that she was aware that the agreed purchase price was around £100,000 above market value, but the client was willing to pay more to secure the purchase.”

Brian believes that, without a valuation, “There is definitely a chance that the risk of fraud is increased; the level of this risk will depend on each loan. It is always worthwhile to have a survey done as in our experience the feedback from the surveyor not only relates to the property itself but in many cases the borrowers involved. This additional feedback has proven to be invaluable to Masthaven over the years.”

Whichever method each particular lender chooses to rely on, what is important is ensuring that they are as fully protected as possible from fraud, and that the right decision is being made for both their own company and for the borrower.

Hull Crown Court heard how Alan Muscroft, a motor trader, had boasted that he earned £79,000 a year and had dishonestly filled out an application with Mortgage Plc in order to buy a detached house, reported the Selby Times.

Muscroft, 33, who was found guilty as part of a £223,000 mortgage fraud, also falsely stated that he ran Alan Muscroft Contractors for ten years in order to buy Prospect Villa on Main Street, Hemingbrough, which was purchased for £240,000 on 12^th September 2007, according to the Zoopla property website.

The Court heard that at the time of the scam he was actually a dodgy car dealer, known as “Donny Soldier”, who was claiming social security benefits. He bought the house near Selby, North Yorkshire, as his family home but made only one mortgage payment before it was repossessed, costing the bank thousands.

Muscroft was one of four friends who jointly conned the banks out of £1.6 million using the offices of convicted mortgage adviser Anthony Gott, 46.

Gott used his mortgage advice company as a cover for the scam, through which he provided loans for a string of friends and acquaintances.

Crown barrister Nicholas Lane said Muscroft was part of the group headed by Gott, which also included David Hood, 47, and his girlfriend Tina Lacy, 40, which took part in mortgage deception. Muscroft actually bought Lacy’s house in Hemingbrough as she moved on to bigger scams.

Muscroft pleaded guilty to a charge of fraud by knowingly making a false representation to Mortgage Plc that he earned £79,000 between February and October 2007.

The case became notorious in the press as one of the group, Hood, called himself Del Boy in one of the documents he submitted to Gott to mastermind the joint release of £1,034,017 in house loans. They all fooled banks by claiming they had much-dreamed-of “executive size” pay packets.

Muscroft’s co-accused were all given suspended prison sentences. Gott was handed a two-year suspended prison sentence, while Hood and his girlfriend were given 18-month suspended prison sentences and 300 hours community punishment.

Sentencing Judge James Sampson told Muscroft that what he did was “entirely dishonest”.

He passed a six-month sentence, suspended for two years, and also ordered Muscroft to complete 200 hours un-paid work.

The Land Registration (Scotland) Bill will make it an offence to knowingly or recklessly register land under false pretences, reported the Daily Record.

MSPs warned that solicitors could be imprisoned for up to two years for “genuine mistakes” under the proposals. However, Conservative MSP Murdo Fraser, Law Society member and Chair of Holyrood’s Economy Committee, told the Scottish Parliament yesterday that the Bill contains no detail on how a solicitor can avoid being prosecuted for “recklessness”.

Mortgage fraud is estimated to cost the UK economy £1 billion a year but ministers believe that it is difficult to prosecute fraudsters and their accomplices in the legal profession under current laws.

The types of crime can be extremely varied, but some fraudsters take out a mortgage for land or properties under false pretences at an inflated value, sometimes with the help of a corrupt solicitor, and then skip the payments and allow the property to deteriorate.

Others use the illegally-purchased properties for other criminal or fraudulent activities, such as drug production.

Another example is where some fraudsters buy and sell the same property back to themselves under assumed names several times, at ever inflating prices, until the bank finally forecloses and finds the land or property has been ruined.

In order to crack down on crimes like the ones highlighted above, the Scottish Government wants to create a statutory land register accompanied by a new offence of false registration.

Murdo Fraser said: “The committee heard this was a serious additional measure to tackling serious organised crime, particularly related to mortgage fraud, but we heard a lot of evidence that the scope of the offence was too wide, and that it could cover genuine mistakes made by solicitors.

“It does not mention fraud, even though it is intended to deal with fraudulent behaviour, and did not provide any detail on what solicitors need to do to make sure that they are not prosecuted for recklessness.”

Fellow Tory MSP Annabel Goldie said fraudulent purchasers, landowners, heritable creditors, surveyors, solicitors or other advisors “can be prosecuted under existing laws”.

She stated: “I think the proposed new law is unnecessary and grossly disproportionate, and I would urge the minister to remove this section or heavily amend it.”

Enterprise Minister Fergus Ewing announced: “The aim of the offence provision is to disrupt serious organised crime and to criminalise those individuals who knowingly use the land register to facilitate criminal behaviour.

“It is not the government’s intention to criminalise honest solicitors who make genuine errors in applications for registration.”

Mr Ewing pledged to work with the Law Society to provide the necessary clarity to avoid wrongful prosecution and said the Government “will carefully consider” whether the Bill itself needs to be clarified.

Currently, around 55 per cent of title holdings in Scotland are registered in the existing land register, but this only equates to around 21 per cent of the land mass.

The Land Registration (Scotland) Bill was introduced to Scottish Parliament on 1^st December 2011 and seeks to reform and restate the law on registration in the land register. The Bill is currently in the ‘Stage One debate’, with ‘Stage Two’ expected to begin by early May 2012.

During the operation, six people were arrested and initially charged. Three pleaded guilty and the remaining accused pleaded not guilty. The latter trio were in the Old Bailey last week where the jury only found mortgage broker, Jonathan Flynn, of Gobridging Ltd, guilty in the fraud case.

The defendants found not guilty last week included Sarah Compton, who works at a firm of solicitors and was accused of stamping the applicant’s fake passport, and a man who was accused and found not guilty of pretending to be one of the fake wealthy sheikhs in a meeting.

The Fake Sheikhs

The case involved a gang of fraudsters who tried to con Masthaven out of £1.5 million using two ‘fake sheikhs’. Masthaven was told that wealthy Arab brothers, Said and Malthoum Mebjar, would back the loans with an exclusive flat in London’s West End.

The ‘sheikhs’ did not exist and the property had been ‘hijacked’ using land registry documents.

But the fraud was spotted by Masthaven’s underwriters when they liaised with utility companies for proof of address in the deal’s documentation and became suspicious of the case. Masthaven subsequently informed the authorities, the City of London Police, who started their investigations.

Andrew Bloom told B&C, “I was delighted that Masthaven’s robust underwriting procedure spotted this attempted fraud. It is a credit to the expertise and training of the underwriting team that these fraudulent applications are detected.”

The Police

The City of London Police’s investigation started when they took fingerprints of all the staff at Masthaven who had touched the fraudulent documentation. They excluded their prints in their analysis of the papers which led them to their first arrest.

The Chester Chronicle reported in May 2010 that Shane Martin, 50 at the time, had been charged with committing fraud by making false representation to Masthaven. He was accused of conspiring with Ahmed Ali, Shakil Ahmed and Ahmed Onmar and was arrested on the 18^th May 2010 at his home by Cheshire Police, who were assisting the City of London Police in their investigations.

On the 20^th December 2010, Ahmed Ali, 46 at the time, admitted in court to using a false identity in the group’s bid to secure the £1.5 million loan.

B&C found out that the gang had also tried to defraud another finance company, in their ‘fake sheikhs’ con, out of a figure believed to be in the region of £1.5 to £3 million. But Masthaven’s swift action in stopping the deal from going forward in 2010 and their cooperation with the authorities ensured that both companies were safeguarded and that the police were on the case.

The Property In Question

The initial details in the press about the property which the ‘fake sheikhs’ tried to secure the loan on only revealed that it was a £5 million property in Bayswater, but B&C have now tracked down the house in question and can disclose the actual details for it.

The unencumbered property in Orme Square, Mayfair, W2, was on the market for £6.4 million and was being sold through Harrods Estates at the time.

The sales details highlight that over 5,830 sq ft and five floors the freehold property comprised of nine rooms including four en-suite bedrooms and also a conservatory, a terrace, garden and a separate flat on top of a double garage.

The Valuation and I.D.

Andrew Bloom informed us that one of the fraudsters had arranged a viewing with Harrods Estates on the property and had told them in advance that ‘his surveyor’ was joining him to look around the property. They had arranged with Masthaven for the valuation to take place during this viewing whereby the lender’s instructed surveyor assessed the property and valued it for the application.

Further investigations by the City of London Police working with Masthaven discovered that the passport number used for identity verification was of a deceased nine-year-old boy’s and that his photo had been replaced.

The Sting

The police held a sting operation where a police officer, who was undercover as a PA, accompanied Andrew Bloom to a meeting with the fraudsters at a Marriott Hotel in London.

In early January 2012, B&C learnt that Andrew Bloom gave evidence for three consecutive days in the London courts, where he brought a number of his underwriters to the hearings so that they could see first-hand what was going on in this case. This action will surely boost Masthaven’s underwriters’ due diligence even further when looking through potential applications in the future.

Speaking on how this case has showcased bridging lenders fighting fraud, Andrew Bloom added, “Each successful conviction helps deter others from attempting to commit this crime. Mortgage fraud is not a victimless crime and pushes up the cost of borrowing for everyone.”

Mortgage fraud is still a huge issue and the National Fraud Authority estimate that mortgage fraud costs the industry around £1 billion a year. One of the most common types of fraud that bridging lenders are usually subjected to is when a borrower deliberately misstates their income on an application.

Andrew Bloom concluded by saying, “All brokers must ensure that they never deliberately or inadvertently collude with people who are attempting to commit mortgage fraud. Even, if the broker has done nothing more than turn a blind eye, the courts take a very dim view of professional advisers who act in this way and are increasingly likely to hand out a lengthy custodial sentence.”

It is rumoured that Flynn may receive a jail sentence of three to four years for this type of fraud but we shall await to discover his and the other guilty fraudsters’ fates when they are sentenced in due course.

Some lenders and other parties involved in completing a deal remain largely unfamiliar with the way the industry operates, attracted primarily by the potential to make a ‘quick buck’. In such instances, what some claim to offer on paper may not be reflective of the service they really can provide.

Not only this, but increasing mainstream press coverage about bridging has also begun to attract applicants who may be unsuitable for this type of finance, creating a significant time-consuming stumbling block.

There have been many occasions where lenders have voiced their dissatisfaction with how and when brokers submit information, suggesting a lack of sufficient communication or professionalism on the broker’s behalf. However, our initial investigations found that lenders often present their requests for information in an inconsistent or unclear format or third parties involved can be a significant obstruction. It is with this in mind that B&C spoke to the broker community to provide a forum to voice their concerns…

Ken D’Cruz, Owner of The Money Man brokerage, told us that, “some lenders are much more transparent in their disclosure of fees in the indicative terms and some documents may not be as easy to understand for a client, which can often slow down the process.”

Information requirements can also differ, as Steven McColl, Partner at Soho Corporate, explained: “Most of our funders are ‘all-status’, so documents like bank statements are not required. These kinds of funders will lend against the strength of the underlying property asset.”

James Harries, Sales Director at Manor Mortgages, told us that lenders tend to differ in the approach they take to self-employed clients. He said: “How lenders assess income and affordability varies enormously. Some insist on accounts, others still refuse to accept SA302s. The market is evolving and clients need broker support more than ever.”

Further highlighting that the processes are rarely consistent, Keith Forster, Managing Director of Property Finance and Development, added:  “Some I feel ‘shoot from the hip’ whilst others are very astute, and these are my preferred lenders.”

Success rates

Steven McColl told us that, “Bridging is a ‘cast the net wide’ industry – you have to quote a lot of deals to land the fish. Once a deal progresses from DIP to valuation, the odds swing in your favour. You probably have a 60/40 hit rate at that stage in favour of the deal completing.  I would say that you have to issue ten DIPs for every completion.”

Offering similar estimates, Keith Forster said that from enquiry to completion success rates are quite low but from a lender’s application to completion, probably one in three. The problem at the enquiry stage is likely to lie within the client’s unsuitability for bridging finance, with very few lenders willing to lend in the specific circumstances.

However, Richard Martin, Business Finance and Mortgage Specialist at F1 Finance, drew our attention to another reason a deal may fall flat. He told us that, on rare occasions, lenders may pull out of a deal even after pursuing the application, which “often depends on how much funding they actually have available.”

Overcoming difficulties

There appears to be an overwhelming consensus amongst the broker community that legal firms or overestimated valuations provide the most common stumbling block in a bridging deal, but why?

Ken D’Cruz offered his thoughts: “The main weakness is that they see it as a dangerous product, but this is due to a lack of knowledge. We have been involved with cases where the solicitor has advised their client that a bridging loan is not the best option for them because it is expensive, regardless of if their client is pursuing the loan.

“From a broker’s and lender’s point of view, good money can be earned from a deal but solicitors will often earn the same for this finance as for mainstream mortgages so are less motivated to move quickly.”

Yet Arron Bardoe, Director at Temple Capital Finance Ltd, said that not only do the clients fail to respond quickly but the lender’s solicitor may not always ask the standard questions at the outset.

Andrew Hosford, broker at Voltaire Financial, suggests another potential hurdle brokers are often faced with: “The valuation not stacking up and slight variations of the truth from the client are the main stumbling blocks. The borrower perceives their credit history to be a concern – they are often reluctant to admit that they have a chequered past, which can kill the deal but if they were upfront about any issues we may be able to work around them.”

He continued: “There is sometimes a sizeable gap between what the client believes the property to be worth, which is how we will initially structure the deal, and the valuation for the lender. So the LTV will change, which could alter dramatically or even kill the deal.”

Many brokers will only deal with a select few lenders as they are familiar with their requirements and processes. Existing relationships present a lucrative stream of business in bridging, the brokers we spoke to explained.

Steve McColl agreed that established relationships means as a broker they are able to manage a clients’ expectations in terms of turn-around time, yet he stressed: “Some funders are slower than others, but sometimes the ‘slower lender’ is the better option for the client in terms of the overall package; I find as long as you are upfront with the client about the process and the timings involved they will be happy and work through the requirements with you.”

Similarly, Andrew Hosford said: “The relationships that we have can play a part. You get an understanding for how specific lenders operate and the way that they like deals and information presented of course, but ultimately it comes down to the quality of the deal.”

Richard Martin and Ken D’Cruz both told us that they don’t limit themselves to particular lenders and will compare the responses to offer their client the best rate, which will demonstrate to the client that they have researched the options available thoroughly.

What brokers want

Leaving us with their lasting thoughts, the brokers we spoke seemed to agree that commissions were not the driving force behind a deal. Steve McColl said: “Fee-wise, it is usually much of a muchness because if a fee is obtained via a proc fee or broker, the same ballpark figure is usually achieved. In my mind, it is more about finding the right funding partner for a client rather than commissions.”

Similarly, Ken D’Cruz offered his thoughts on the crux of the issue: “It is not turnaround time or service but about getting the deal done, which is about communication throughout the deal. Our interest is ensuring the client is properly informed to ensure the deal completes – we only earn our fee upon completion so the driving force for us has to be the commitment the lender has to the deal.”

And so, it would appear that consistency is what is needed from lenders. Fees are, to an extent, irrelevant and instead being able to deliver lenders delivering on promises is what is of vital importance to maintain their relationships with their clients. Very few brokers expect to receive ‘headline’ rates, which are there primarily to attract business. Instead, the ability to pay out on the deal is at the forefront of broker concern.