The FCA representative thought that it was likely that second charge mortgages would be brought under the same regulatory framework as first charges under the European Directive and that lenders would need to “assist the credit worthiness of the borrower” in a way similar to that which will occur under the MMR, and confirmed that all offers would be binding and subject to a seven day cooling off period. While there would be exemptions for some bridging loans the FCA did not reveal which ones, although they did say that the Directive will not include commercial loans or buy-to-let. There were no indications at present that loans secured by non-owner occupied residential property would be subject to regulation in the near future.
High Court judge, Stephen Gerlis expounded on what “reasonable time” was in the repossession of a bridging loan citing the example of a precedent setting case where a property was repossessed within three months on a nine month bridging loan term. Property secured by all-moneys charges, could also be repossessed within a short period in the event of default. He said that all possession hearings have to be heard within 28 days so they often take priority over other court cases which hold no time limit. In the case of more complex cases, hearings would then be suspended to a later date. He revealed that as long as a lender is seen to have acted fairly, and not given advice that would prejudice the position, then the court would usually rule in the lender’s favour.
Other highlights of the day included Metro Bank founder Anthony Thomson who looked at the role of excellent customer service and said that profit should not be a goal in itself but rather “profit is a result of doing something great for the customer” and “creating fans rather than customers”.
Savills’ economist Lucian Cook said that he thought that the risks of a housing boom due to the Help to Buy scheme were overrated as he said that we are still in a “partially functioning market” which is missing about 3.5 million housing transactions compared to the boom and where 95% LTV lending is down by 97% compare to in 2007.
He said that the mortgage book is only growing to a very small degree with net lending almost flat so with larger loans being taken out that we are actually experiencing a loss in the number of purchasers. He did reveal that one in three of all housing transactions are for cash however and that cash or equity is driving about 67% of property prices. He also expounded on the fact that London and South East England property market conditions were different to those in the rest of the country.
Finally, the panel discussion looked at what could be done to increase the reputation of the bridging market, with solutions including fraud prevention and an increasing number of lenders to subscribe to the ASTL Code of Conduct and values charter, to act as a kite mark for an ethical code of conduct. It was said that “the Code of Conduct is a protection against complaints if a lender can say that they follow that set of rules.”
Benson Hersch, chief executive of the ASTL says:
“The conference went better than I could have imagined with representatives from all the trade bodies involved in bridging and some excellent speakers. There was a very high attendance and feedback was excellent. We are already starting to think about next year’s conference and will look to book a larger venue so that we can accommodate everybody who wants to attend.”
