Whether it’s a breakdown in communication, a lack of due diligence or a failure to recognise fraudulent applications, there are numerous reasons why bridging cases can experience difficulties. B&C spoke to Claire Wasbrough, Underwriting and Operations Manager at Masthaven Bridging Finance, to highlight recent problematic cases from which brokers can take note…
I’m often asked to highlight areas in cases where we frequently experience problems and, although each case is different and has its own difficulties, I’ve tried to narrow down a few common problem areas and ways of resolving them.
One key area which leads to delays is when clients use solicitors who are not familiar with bridging. The legal work for a bridge is very similar to a standard conveyancing transaction; the speed, however, is not. I have lost count of the number of cases where clients’ solicitors have sat on the legal pack and taken several weeks, if not longer, to actually work through the items requested and get their clients into their office to sign paperwork.
Using a solicitor who is familiar with bridging would without a doubt speed things up and eliminate a large number of problems.
I am working on a case at the moment which has been delayed due to a number of legal factors.
The first problem arose due to the fact that the property being offered as security is not registered with Land Registry. Masthaven’s solicitor, in this instance, needs to review all the documents relating to the title of the property and be satisfied that Land Registry will accept the application and not raise any questions. In this particular case, the client’s solicitor is sending the documents over in dribs and drabs which is not helping the situation. My advice for clients in similar situations is either to ensure that their solicitor deals with the registration prior to taking out the loan, or to ensure that their solicitor obtains all of the deeds and associated documents to send over in one pack to the lenders solicitor, enabling them to easily review everything simultaneously.
A second problem in the case has arisen from the fact that the other property being offered as security is on a large title deed, though the client only wants to offer part of the title. In these situations, the lender has to be satisfied that they are getting the area they think they’re getting, so a plan is crucial. The initial plan that was provided in this case was shown to the valuer, who wasn’t happy that it correctly depicted what he had valued. In addition to this, our solicitors had to ensure that the plan being provided would be accepted by Land Registry, so it had to be to the correct scale and so on. In this case, there was a delay while the correct plan was obtained, but had the clients solicitor ensured a correct plan was available initially these delays could easily have been avoided.
ID and proof of address
Moving away from the legal aspects, another area where there are problems is in obtaining correct ID and proof of address. All lenders will need to comply with their own ‘know your customer’ and AML requirements. For the majority of borrowers this won’t present a problem. Some clients who don’t have standard forms of ID, however, may struggle to provide something that is acceptable. There are ways that this can be satisfied if the usual passport and driving license are not available; if you know your client doesn’t have the standard items, check the lender’s specific requirements up front to avoid any delays.
The same goes for proof of address. Masthaven’s standard requirement is for two recent bank statements or utility bills registered to the borrower at their home address. If a borrower has recently moved house, then ensure that they change their address on their accounts as soon as possible so they will have the correct documents to provide. If this is not possible, make the lender aware upfront so that an alternative solution can be found.
I was recently working on a non-regulated case where a borrower was using bridging to complete the purchase of a property, which we had been informed they were going to be letting out and refinancing. During the initial conversation with the client, it transpired that in actual fact the client was planning on moving in to the property, therefore requiring the loan to be regulated. The broker was authorised to give advice so that the loan could proceed, but unnecessary delays were caused because we were not made aware of this upfront.
A number of brokers are under the impression that if a borrower does not live in a property during the course of the loan then the deal is not FSA-regulated. The FSA handbook does state, however, that a mortgage contract is regulated if there is the “intention” to live in the property, which may be during the course of the loan or after redemption. Ensuring that the lender is aware of this upfront will ensure delays do not occur.
In all the above examples, communication between the client, broker and lender is key to ensuring delays are minimised and problems are overcome efficiently.