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Certainty In Uncertain Times

Certainty in Uncertain Times

By Brian Rubins, Executive Chairman


Brian Rubins

Saying what you do and then doing what you say should be fundamental, but following the events of the past few years- BREXIT, Elections and COVID, it is now critically important if valuable opportunities are not to be wasted.

This is not the time for smoke and mirrors; borrowers must know they can rely upon promises being fulfilled, whether they are made by a broker or the lender.

Experienced executives in the industry should always be able to accurately predict likely terms and the outcome of a proposal unless something quite unexpected occurs.

Accordingly, there should be no last minute surprises.

Yes, credit committee members’ views are not always identical, but based on the stated facts, this difference of opinion will not happen very often and should be predictable, in which case a warning that it could occur can be given. Responsible lenders know where there is room to manoeuvre, and when this will not be possible. There is no justification in terms being offered and then renegotiated unless something previously unknown is learned.

Disappointment occurs where heads of terms are based on a 70% or 75% LTV (loan-to value),  when the broker or BDM knows full well, that this will switch back to 65% when it is too late for the borrower to go elsewhere. They have used the bait and landed the fish – beware of this tactic!

However, the problems are not always of the lender’s or broker’s making with property values being over-estimated by the borrower in the hope the valuer will be encouraged to confirm the suggested figure. Where there are multiple comparables, Rightmove, Zoopla and Prime Location have useful programmes where estimated values can be checked. While not always conclusive, they are a valuable guide,  albeit of little help when you are reviewing a rambling, country pile.

After a lifetime in the industry, I remain appalled at the woefully inadequate information presented to lenders, against which they are asked to make an early (and urgent) decision. It is not difficult to put together a cohesive story with all the arguments supported by evidence. How much easier it is for the lender to make a decision armed with valuation comparables, photographs and a description of the property, and evidence of the borrower’s income to support debt service and achieve refinance.

Although many lenders offer non-status bridging loans, which we can easily do if interest is retained, that short cut does not exist when the borrower wishes to refinance with a building society or high street bank. What value is a DIP to the bridging loan lender if it has been issued without any reference to proof of income. A DIP is not a binding offer but a Decision in Principle, freely available to brokers and of little value to lenders.

Certainty of delivery is the number one criteria by which lenders are ranked. Hold them to account but help them with factual, detailed information to enable them to provide certainty in these uncertain times.


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Click here to read the article in Bridging Introducer.

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