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p>Last Thursday I attended the AOBP’s April Forum, held in the private cinema screening room at London’s Soho Hotel. With a twist on the previous year’s events, Rob Jupp (Chairman) hosted an Old School vs New School debate with business leaders from eight of the industry’s leading lenders.
Leading the ‘Old School’ team was industry veteran Marc Goldberg, MD of Blemain Group and Lancashire Mortgage Corporation, with team members; Andrew Bloom – MD of Masthaven, Gavin Diamond – Head of Underwriting at United Trust Bank and Duncan Kreeger – Director of West One Loans.
Leading the ‘New School’ lenders was Amicus (formerly Capital Bridging) Managing Director Keith Aldridge and his team made up of Richard Beenstock – MD of Ortus Secured Funding, Jonathan Sealey – MD of Hope Capital and Michael Strange – MD of Funding 365.
A total of eight questions were put to both teams, who could select either their team captain or one of the team members to answer, with one team member from each side battling it out against the opposing side.
Once both sides had given their answer, the audience members (made up of other bridging industry professionals) were able to vote by a show of either blue cards (Old School) or green cards (New School) and the team with the most votes won that round’s point.
Topics covered were all very current and included questions surrounding peer to peer lending and the potential risk it poses to the sector, the effect the general election could have on the sector and whether new entrants to the market place were under pressure and responsible for pushing-up LTV limits, amongst other things.
I will not go in to detail surrounding the outcome or which side won the event, as I am sure those lovely people at Bridging and Commercial will do a far better job than I will on their write-up of the event and who am I to give the game away anyway?
The important thing for me was that well-rounded responses were provided by lenders who have been around for 40 years and new lenders that have only been in the sector for a couple of years and in the main, there was a lot of common ground between Old-School and New-School.
One area that I did pick-up on, which I do believe is worthy of a mention is the term ‘gaming’ which like many in the room, I had not come across before.
Not sure if that is a term Rob Jupp came up with or whether kudos goes to Mo Mulki for that one, but either way, what it refers to is the concept of a borrower applying for a non-regulated / BTL bridging loan, with the intention of living in it as their main residential property – thus committing mortgage fraud and to hone the term ‘gaming’ – I have heard mortgage brokers refer to this practice as ‘back-door resi’ – meaning the same thing (i.e. a borrower applies for a BTL mortgage with the intention of living in it as their main home – usually because they do not meet the lender’s affordability requirements for a residential mortgage scheme).
Interestingly enough, Jonathan Sealey of Hope Capital said that he had seen an increase of this practice since the MMR had come in, which makes sense, as by using bridging finance to purchase a property, where generally speaking interest payments are not serviced monthly and tend to be interest retained, therefore far less checks are made, as affordability does not need to be considered.
The idea then, I suppose is to buy with a bridge and then refinance as a remortgage, where they are hoping by already owning the property, that the refinance checks will too be less stringent. In contrast, Gavin Diamond – Head of Underwriting at United Trust Bank commented that he too had not heard this phrase before, but did not feel he had seen an increase in this practice.
The main reason being that UTB are able to offer both regulated and non-regulated bridging loans, so it makes sense that if a deal turned out to be regulated, they would simply take the borrower down the regulated route, with no differential on pricing of their interest rates and fees for reg vs non-reg business. It therefore follows that it would be the non-FCA regulated lenders that would be far more likely to witness this type of fraud going on.
The responsibility to police this practise must start with the introducing broker, the lender and the solicitor with a number of checks along the way to make sure that this is not going on, including standard KYC and AML checks, both electronically and by physically meeting the borrowers face to face at an interview, if not directly with the lender, then at very least with the solicitor.
Like all types of fraud it is not just the lender that needs to be vigilant.
Attributed to Kit Thompson Director of Bridging Loans at Brightstar
Last Thursday I attended the AOBP's April Forum, held in the private cinema screening room at London's Soho Hotel. With a twist on the previous year's events....
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