Bridging Finance News
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.
The fraud, featured on the BBC’s You’ve Been Scammed programme which ran this morning, began at the start of 2010 when bridging loan firm Masthaven was contacted about a potential £1.5m loan by mortgage adviser Jonathan Flynn.
The broker said that he had two clients from the Middle East who owned a £5m property in Bayswater, London. Flynn said the pair of sheikhs were seeking a £1.5m loan on the property and then provided fake passports and proof of ownership to the lender.
The pair of ‘investors’ were Ahmed Ali, 47, and Shakil Ahmed 36, and the house was actually owned by a family from the Middle East.
The family was not living in the property at the time and had put the house up for sale. The scammers had used the Land Registry to acquire the deeds to the property to find their details.
Masthaven, unaware of the scam, sent a surveyor to the property to confirm its value. The fraudsters were able to gain access to the home by arranging a viewing with the estate agent and pretending that they were representatives of an Arabian princess who required a detailed viewing to see if her furniture would fit into the property.
However the scam soon began to unravel because Masthaven policy dictates that a face-to-face meeting must be held with all clients who wish to take a loan of over £1m. When the lender contacted the borrowers, they quickly changed the loan required to £925,000.
This caught the attention of Andrew Bloom, managing director at Masthaven. He told the programme that such big alterations made him doubtful about the case.
“When we asked then why they needed £1.5m in such a rush they were very flakey with their answers,” he told the programme.
“We contacted them and a day later the loan dropped to £925,000 and that made us suspicious.”
Bloom contacted the City of London police who began to track the case and he decided to recheck the original documents provided. He looked to verify a utility bill by contacting the energy company who were said to have provided it, they said it did not match the address they had on file.
The police became confident that the case represented a fraud, but were unable to track down the criminals as every address provided was false.
But the criminals were caught when a sting operation was launched. This saw a meeting take place with Masthaven and the fake sheikhs to catch the crooks in the act.
Ali and Ahmed were arrested at the scene and later sentenced to 30 months in prison. Mobile phones seized from the pair proved that broker Flynn was the mastermind behind the scheme and he was sentenced to four years and six months behind bars.
Bloom said he was pleased that the criminals were handed lengthy sentences.
“I was delighted that people were given a significant amount of time behind bars. Mortgage fraud is not a victimless crime. It increases the payments of me and every other consumer out there.”
The police later discovered that the passports belonged to a child that had passed away and had been altered to include a different photograph, name and address. A fourth man, Shane Martin, was also implicated in the crime but remains on the run.
We are delighted to announce that Masthaven Bridging Finance have been selected as a Mortgage Strategy Awards 2013 finalist.
We have been shortlisted in the following categories:
4. Best Short-term/Bridging Lender
The shortlists were compiled from online nominations and, where applicable, also from nominations submitted to the CML or AMI by selected lenders and brokers. The top companies that received the most nominations in each category were put forward to be discussed at the judging day; given the rigorous judging process it is a great achievement to have reached this stage.
The results will be announced at a glittering awards ceremony and gala dinner on Wednesday 13th February 2013 in the Great Room at the Grosvenor House Hotel, Park Lane.
A director has admitted that he carried out an extensive property fraud, involving faked emails and a fictional real estate investment and totalling £250,000, The York Press reports.
However, former property firm director Guy Brudenell still denies two further frauds involving potential property investments worth £1 million.
The bankrupt businessman, who racked up debts of £21 million in 2009, admits committing fraud between the 23rd and 25th March 2009 by falsely claiming that a £240,000 investment would be put into property.
Brudenell has also admitted sending fraudulent emails in other people’s names on 23rd March, 2nd April, 15th April and 8th July in the same year.
He also admitted making an article for use in fraud by opening a NatWest bank account in 2009 which was used to hold some of the money involved.
The outstanding charges against Brudenell detail two instances where the North Yorkshire businessman deceived would-be investors into giving him six-figure sums, claiming that the money would be used for property deals.
In November 2008 he allegedly claimed £600,000 from one potential backer and, between December 2008 and January 2009, £400,000 from another.
The charges against Brudenell also maintain that he sent email messages connected to the fraud between January and September 2009.
Brudenell once had commercial interests both in the UK and abroad, including stakes in aviation, hotels, restaurants and property companies, but was declared bankrupt in 2009 after amassing debts of £21 million.
The entrepreneur was previously a director at New Bond Street-based property companies Feversham Developments and the Helmsley Property Trading Company.
His property investment portfolio included shares in two Helmsley luxury hotels, the Feversham Arms and the Black Swan.
Brudenell will now appear before Teesside Crown Court to answer for all outstanding charges against at a date to be determined.
Last week, the London Property Professionals (LPP) Meet the Money event took place in London and was a great success, setting a strong foundation for future funding forums.
LPP is London’s recently-launched, deal-focused property networking group and is part of the fast-growing UK Property Professionals (UKPP) network.
UKPP, an Edinburgh-based company, specialises in the development of city-specific property networking groups to increase communication and collaboration between all property professionals throughout the UK.
GVA, the main sponsors of the last week’s forum, hosted the event at its offices in Mayfair, London, on Wednesday 28th November 2012, with around 60 people in attendance.
The forum was an exclusive platform for developers and agents to meet the Funding Panel, share opportunities and nurture relationships.
The Funding Panel
(From left to right: James Bloom, Regentsmead Limited; Daniel Norman,Davon Ltd; Steven McColl, Soho Corporate; Noel Meredith, United Trust Bank; Andrew Bloom, Masthaven Bridging Finance; Elliot Hyames, Dragonfly Property Finance; Mark Antscherl, UK Property Professionals)
Opening the session Mark Antscherl, Founder and Chief Executive of UKPP,described how the group started as a modest group of likeminded individuals in Edinburgh which has since rapidly grown to include Glasgow, Aberdeen and London, with plans to launch in a further five cities.
He explained that as development funding continues to be a key area of frustration and concern for developers working in London’s commercial and residential property sectors, the unique Expert Forum was set up to bring together a selection of active funders and investors looking for opportunities.
After Mark’s introduction, each member of the Funding Panel presented a brief introduction to their respective businesses along with a recent case study. After the presentations, there was a networking opportunity which gave the audience the chance to engage and talk directly with the Funding Panel members. Guests discussed their funding requirements, enquiring about development funding and JV development partnerships.
Mark Antscherl told B&C: “We differentiate ourselves by being the only networking and deal-focused property group covering the UK. Membership of a city group not only offers the benefit of networking events and expert forums in the selected city, but also gives access to other city groups and the extended network of members.
“Since launching in April 2010, we have attracted well over 300 subscribed members from over 250 leading companies. We have run over 80 successful and extremely well attended events and have over 8,500 online members, making us the fastest-growing property network in the UK.
“The most important element of our activities is that individuals and companies are connecting and doing business, which is extremely positive and the ultimate gauge of any networking initiative. Launched at an extremely difficult time, UKPP is relevant and beneficial, reflected in the encouraging membership support and sponsorship support.”
Members are invited to all future events. Previous London events have included an evening with serial entrepreneur James Caan, with an insight into his investment plans within the real estate sector, expert forums and ‘Property Question Time’ with leading professionals about areas such as the London residential property market, private and institutional investments, commercial property, senior debt and property fund management.
To find out more about UK Property Professionals, the different cities linked to the network, its membership and future events, click here.
A pair who owned a multi-million property portfolio, including a Hyde Park apartment and tower blocks in Dubai, have had their legal bills – totalling more than £100,000 – paid by the taxpayer because of a controversial government rule, the Evening Standard reported.
Syed Ahmed and Shakeel Ahmad were tried for an elaborate fraud – from which they both made £16 million – and were subsequently found guilty, yet allegedly made “ludicrous” claims of poverty in order to receive legal aid.
The title reported that the pair owned more than 20 properties, in both the UK and the Gulf, and that their other assets included a company valued at £40 million, two further companies with £25 million of profits and a Jersey-based trust fund.
According to the Evening Standard, the property portfolio included: a £2.2 million home in Middlesex, a £4.5 million apartment overlooking Hyde Park, a £1.5 million home in Buckinghamshire, a number of other British homes and two tower blocks in Dubai.
The fraud involved a complex VAT scam and, in one particular instance, Ahmed and Ahmad fraudulently traded computer chips to make £12.6 million in just 18 days.
However, the pair were awarded legal aid – the exact sum of which cannot be disclosed as it is deemed “sensitive personal data” – after they claimed they did not own any assets, instead insisting that they were owned by a network of trusts and other companies.
A controversial rule means that the frozen assets of individuals on trial cannot be used to pay defence bills, intended to ensure that if the accused are convicted the full proceeds of any criminal activity can be confiscated, the title further reported.
Commenting on the pair’s trial, a crown court judge said: “Both defendants are articulate, intelligent and educated. It is clear that they were and are financially sophisticated… they amassed a fortune over a relatively short period of time.
“They are both unscrupulous and deeply mendacious, particularly about their assets. The suggestion advanced by both of them that they are now penniless is frankly ludicrous.
“The truth is that, on any view, there are other hidden assets which they have failed to disclose. I should add that I formed my firm view that they were both complete liars when it came to revealing their assets from my observation of them throughout the confiscation hearing (including during their evidence), quite independently of the fact that they were convicted fraudsters.”
The pair have failed to repay any of their gains and have been given an extra ten-year ‘default’ sentence on top of their seven year jail term issued in 2007.
Masthaven Bridging Finance on Friday night won the NACFB award for Short Term Funder of the Year at the association’s 20th anniversary Gala Dinner.
Held at the prestigious Park Plaza at Westminster Bridge, Masthaven scooped the award for the 2nd time in 3 years in front of over 600 of the industry’s finest brokers, lenders and intermediaries.
Masthaven were presented the award by ex England cricketer Phil Tufnell and beat off stiff competition from what was referred to as one of the financial services biggest growing sectors.
Richard Deacon Sales and Marketing Director said about the award:
“Masthaven have been supporting the NACFB for a number of years now, and to win this award for a second time is a truly great achievement. Adam Tyler has done such a great job with the association bringing it to the forefront of everyone’s mind and really making a difference in helping fund UK business. Unfortunately I was unable to attend the event due to the timing being so close to the birth of my second child, but when I got the texts and tweets I was thrilled to bits. Everyone works so hard at the office to bring the best products at the best prices with the best service, that it is testament to the whole team that we have won this award”
A frank discussion at yesterday’s Council of Mortgage Lenders (CML) conference examined exactly how regulation may affect the intermediary market and what the future holds for distribution channels.
The panel suggested that intermediaries have come out of the MMR fairly well, with the biggest change affecting the market surrounding advised sales proposals, which can only help to improve practices.
Advice is the key commodity of intermediaries; the quality of this advice has been worked upon over the past two to three years and means that any focus is now on quality applications, which are more complete and cohesive, and not just quality applicants.
Intermediaries’ relationship with customers is unlikely to fundamentally change, as most professional brokers these days would say that they already carry out a full fact-find with their client; most facets of the consultations have already been taken into account, so there will be few reactive measures to the MMR.
By making advice central to the MMR, intermediaries can benefit as lenders will be more inclined to outsource expertise to distribution firms rather than taking on this burden themselves.
The quality intermediaries that remain in the industry – some 30,000 mortgage intermediaries in 2010 have streamlined to 10,000 – will be there to pick up this business.
There is, however, further work to be done in terms of case submission and intermediaries need to be better equipped to deal with lenders’ requests at an application stage.
In the spirit of regulation, a ‘know your broker’ ethos will be a focus for lenders, who will be closely looking at exactly who is distributing their products and how they are doing so.
Interest only products were another key theme of the discussions; despite their negative press, they have provided valuable niche solutions.
The regulator has obviously attempted to curb the over-selling of such products, which, according to the panel, has resulted in ‘over-reactionary’ measures to stem their widespread use. This may result in a ‘swing-back’ effect – whereby a small growth of sales is seen after such a strong regulatory focus – but this is merely speculative.
But where is the intermediary market heading?
Panellists did not expect a significant uplift in the number of intermediaries entering the market but, in terms of where intermediaries are positioned, there is a move towards larger-sized firms who have their own compliance departments to shoulder some of the regulatory burden.
Ultimately, consumer choice will drive the market and this is exactly what intermediaries can help to facilitate by allowing individuals to access more firms.
In terms of the intermediary demographic, firms are on the look-out for ‘young-blood’ graduates to drive the market forward.
The market is likely to remain strong in the coming years as mortgages are now a commodity; advice is needed because the vast majority are unable to self-select the most relevant product.
Despite the advent of the digital age, consumers aren’t yet ready to complete an end-to-end mortgage transaction online and personal contact is still in demand. There may, however, be a place for such ‘virtual’ deals in the future.
A further part of the ‘know your broker’ ethos is likely to include a bespoke approach to procuration fee pricing; some lenders have already adopted a quality-based commission, but there is yet to be any real consistency in this practice.
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- Masthaven launches first online training sessions for brokers
- Masthaven launches hybrid bridging and secured loan product
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- Masthaven completes regulated deal in 4 days
- Masthaven slashes rates
- Paul Brett joins Masthaven Secured Loans
- Masthaven expand Scottish proposition
- Masthaven completes 400m London move
- Masthaven scoops two more prestigious awards
- Masthaven win Business Moneyfacts Award for service excellence
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