Bridging transparency: 'the industry as a whole could still do better'
The comment follows recent research by mtf, which found that none of the broker respondents to its sentiment survey felt the need for lower rates or further transparency in the bridging market.
Is the bridging industry transparent?
Trade bodies, such as the Association of Short Term Lenders (ASTL) and the Financial Intermediary & Broker Association (FIBA), have worked hard to improve transparency within the bridging sector.
“The ASTL expects its members to be fully transparent in all their documentation,” said Benson Hersch, CEO at the ASTL.
Last year, the ASTL toughened up its code of conduct to ensure that the customers of its members were not treated unfairly.
Meanwhile, FIBA – which was born out of the Association of Bridging Professionals (AOBP) – has a code of ethics and professional conduct which outlines what is expected of all members.
Lenders themselves have also worked on improving transparency within the industry.
Vishal Dixit, head of business development at Pivot, explained that transparency formed one of its core values.
“Complete clarity in explaining how the risk structure of the deal impacts our pricing; showing all fees upfront; not charging any exit fees or early redemption fees and, finally, communicating with speed, not only when we can do a deal, but also when we cannot facilitate and why.
“But this is a relationship based on symbiosis and we need full transparency from our intermediaries and borrowers upfront as well.
“Having all information to hand is crucial in getting a deal to fruition.”
Jo Breeden, managing director at Crystal Specialist Finance, added: “The market has improved substantially over the last few years with both lenders, industry bodies and key packagers working together to drive transparency and quality.
“The majority of lenders are fully transparent, but we need to continue this push forward and ensure that standards don’t slip.”
Is there still more to be done?
“I think we have come an awful long way in terms of transparency, but I think the industry as a whole could still do better,” said Chris Whitney, head of specialist lending at Enness Commercial.
Chris called for greater transparency earlier on in a transaction, so that borrowers had a true handle on the total cost of funds at the outset.
“For example, I have a detailed facility letter with 19 additional lender-related costs that were not in the initial terms.
“Admittedly, many of these are fairly nominal sums, but they do add up and borrowers (and more inexperienced brokers) should be aware sooner in my view.”
Chris Fairfax, managing director at Positive Lending, added: “The market has progressed significantly over the last five years, but to say no further improvements in transparency are required is wrong in my opinion.”
Jonathan Sealey, CEO at Hope Capital, felt bridging lenders should work in the most ethical way possible, which meant being completely transparent with both brokers and borrowers.
“Lenders need to be clear about their charges, interest and any penalties, and if they don't pay the loan back in time, they need to be clear about what their options will be.
“Equally, brokers need to ensure they are then transparent with their clients.”
Whitney added that the industry could go further and not just be transparent, but also realistic.
“Specifically, we should be realistic about timescales; I think we still see too many lenders proclaiming to be able to deliver finance in record-breaking times.
“They might well have done it on at least one case, but that doesn’t mean they (or their valuer or solicitor) has the capability to do it on the next transaction.
“Lots of brokers and borrowers are getting caught by this trap, which often results in additional costs for the borrower or them losing the opportunity completely.”