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Supporting the market in uncertain times ASTL CEO Vic Jannels gives his take on the COVID crisis
Some things never change Today’s market is unpredictable, but some things don’t change. We’re still here to help you and your clients. We’re working with our existing customers to support them throughout these tough times. Whether it’s extending maturities or arranging payment holidays, you can count on us to treat your customers right.
Castle Trust | Belvedere House, Basing View, Basingstoke RG21 4HG | Tel: 0345 241 3079 | www.castletrust.co.uk Castle Trust is the trading name of both Castle Trust Capital plc (company number 07454474) and Castle Trust Capital Management Limited (company number 07504954) both registered in England and Wales with registered oﬃces at 10 Norwich Street, London, EC4A 1BD. Castle Trust Capital plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, under reference number 541910. Castle Trust Capital Management Limited is authorised and regulated by the Financial Conduct Authority, under reference number 541893. Buy to Let is not regulated by the Financial Conduct Authority or the Prudential Regulation Authority
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Looking at the positives
here to start? For the sake of sanity let’s stick to some of the good news that has come out of late rather than dwell on negatives. Pent up demand from the lockdown and the partial suspension of the market due to coronavirus crisis looks to have caused a spike in activity in the housing market. Brokers are reporting strong business levels. One example is the Brightstar Group which recorded a significant increase in new business volumes after the easing of lockdown restrictions, with new cases up by more than 35%. The Group, which includes Brightstar Financial and Sirius Property Finance, re-opened its offices on June 1 and has returned a number of people from furlough in recent weeks to handle the growing demand. On the first charge side lenders are having to restrict products as they cannot maintain service levels in the face of demand. Bridging lenders have also been active with a number announcing large deals - the hope is that they are also completing the smaller ones. Businesses are adapting and surveyors are back to an extent - and the pieces are in place to get back to business. The market booms during times of adversity and let’s be frank banks are going to do their usual trick and stay away from specialist deals now more than ever. Speaking in a recent Mortgage Market Alliance podcast Jonathan Newman, managing partner at Brightstone Law, summed it up: “Bridging finance is short-term borrowing to get over short-term problems and there is never going to be a better justification for what we do.” There is definitely a bright light at the end of the tunnel so to speak. Have we seen the back of the coronavirus crisis? No. But let’s keep positive. B I
Contents 5 Jonathan Newman Why it’s all about timing 7 Kevin Thomson Commercial offices post COVID-19 9 Jo Logan and Kit Thompson Partnerships are key in the current environment 11 Bret Jackson Now is the time for a proactive approach 12 Terry Pritchard No certainties in the short-term (or are there?) 13 Steve Swyny Seeking out the opportunities 15 Cover – Changing the guard in changing times Jessica Bird caught up with Association of Short Term Lenders CEO Vic Jannels to reflect on an unexpected start to his tenure and get his take on the market 22 ASTL The latest from the Association of Short Term Lenders
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It’s all about timing Jonathan Newman senior partner, Brightstone Law
ittle is certain in the current environment, but the UK economy shrank by 2% in the first three months of this year and all (including the Chancellor) have predicted a further increased drop when the figures for Q2 are published, confirming that we are in the middle of a significant recession. The last time the UK entered a technical recession was Q3 2008. In that quarter, the number of repossessions, as recorded by the CML, was 11,300. By Q1 2009, the number of repossessions had leapt by more than 12% to 12,700. We should assume then that, as and when regulation, guidance and changes to Civil Procedure Rules allow, the number of possessions will likely increase, accentuated by a backlog created by the enforcement moratorium. POWERS OF SALE
As an industry, we therefore need to begin thinking about how lenders and receivers will be affected when exercising powers of sale by the exceptional set of circumstances that COVID-19 creates. The default position for lenders taking property into possession is that they must take reasonable steps to obtain the best achievable price for that property. It is within a lender’s judgement as to how long it should market the property. Sell now? Or await the upturn, whether it takes the form of a ‘U’ or ‘V’ shape? This can be a very difficult decision to make, but it will be made even more so, particularly in a property market that is near impossible to forecast and present transactions are down and made vulnerable by restriction. www.mortgageintroducer.com 10:56
Whilst a lender realising its security is not necessarily required to factor time into its decision making, and so could in circumstances justify awaiting an upturn in market conditions, or be expected to do so by its borrower, a receiver does not enjoy the same “luxury”. Receivers are equally tasked with a duty to repay their appointor, and of course, they take responsibility for the sales arranged by them. So, a receiver will give due regard to the effect of an extended marketing period on the accrual of interest and the increase in debt – which is an
“The unprecedented nature of the lockdown has left everyone scratching their heads with regards to getting a sale across the line, and the impact on house prices. How then can a lender provide the same level of visibility to evidence that it has fulﬁlled its duty?” additional dynamic that can result in a different decision being made when an offer is received. The vast majority of analysis points to this being a buyer’s market and, for lenders that do choose to sell in a buyer’s market and for less than their customer might believe to be market value in a different part of the cycle, there can be implications should that borrower or another interested party choose to litigate by claim of sale at undervalue. I have worked on these cases in the past, from both claimant and defendant. These claims can be extremely difficult evidentially, complex and costly. Whilst the legal onus lies with the claimant, best practice requires every lender to have thoroughly evidenced the market, the marketing process,
and their underlying valuation to best placed to warn off or defend their actions. In the current environment, physical viewings have now recently been made possible, but are practically discouraged because of the risk to social distancing. The unprecedented nature of the lockdown has left everyone scratching their heads with regards to getting a sale across the line, and the impact on house prices. How then can a lender provide the same level of visibility to evidence that it has fulfilled its duty? Remember, the duty is not to get best price, but to take reasonable steps to obtain best achievable. HALF THE BATTLE
So, a well-reasoned, well-documented plan making use of appropriate property professionals and explanation of rationale and decision making made contemporaneously is half the battle. And how best to market? Auctions, during COVID-19, may now reach a wider and expanded audience than previously as buyers increasingly look for properties online. By their very nature, auctions are deemed to have evidenced that the public market has been adequately tested. However, auctions are not always appropriate to the character of property, and have a reputation for featuring tarnished, or problematic properties. So, how do lenders test the market and what steps can they take to mitigate against the threat of litigation for selling a property at below value? The devil is in the detail of course but the best way for lenders to ensure they are taking the right steps to guard against such litigation is choosing to work with the right partners, with the right experience and in the right way. With so much to consider, it is this choice, taking advice before sale, not after, that will prove the most important step that lenders can take when deciding how and when to realise their security. B I JUNE 2020
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Commercial oﬃces post COVID-19 Kevin Thomson sales director, Connect for Intermediaries.
he way we work has determined the demand for office space, but now small, medium and large businesses have had to operate with their workforce at home. Will that change how we work in the post COVID-19 era? Commercial landlords have had to deal with large numbers of businesses being unable to pay their rents. This, together with the government introducing a temporary ban on winding up petitions and evictions, has led to calls for a Code of Conduct. Any such Code of Conduct could well be similar to the one recently developed in Germany which states, “through fair and co-operative dealings on an equal footing, balanced sharing of burdens should always be pursued”. The challenge is, if this is brought in but is not legal binding then how will it impact on the loans provided by our commercial lenders as their appetite for risk may change considerably? THE FUTURE OF WORK AFTER COVID-19
Gazing into the future, will five days in the office be gone to be replaced by the possibility of working from home forever? Or maybe three days in the office and two days home working could become commonplace? Will we see staggered shifts of, say, three shifts per day? Certainly, business and government should be looking “outside the box” and not just trying to go back to “how it always has been”. All these possibilities will have an impact on the commercial property market and the obvious starting point to look at is the shared office environments. When they emerged, they were www.mortgageintroducer.com
regarded as the future of the working environment with their “trendy” communal spaces. These flexible office providers now face an uncertain future ahead with any sort of communal space a no-no for the foreseeable future. Clearly, they have had a loss of revenue, reported to be up to 50%, as many of the small enterprises who use them were able to smoothly convert to working from home. We must now ask, will they return? Why would they put that rental cost back into their business if they have been as productive working from home? There was a notion that clients liked to see an office address to give some stature to the business, however, if they have now got used to businesses working from home, that will be no longer be a factor in the future. Moreover, there could also be a positive outcome for these types of office space. Larger businesses may well start to downsize their operations and replace working in large offices with small groups of personnel working in a shared office environment. This would alleviate some of the less positive aspects of working from home for some personnel as permanent home working clearly won’t be an appropriate solution for everyone. Some of the factors to consider are: is someone’s home and life stage convivial to home working? Do they have the self-discipline to work as productively if they are not in an office? Does the employer feel they are in control of the productivity and output of all of their staff? What about
the human touch of working with other people, for example, does the employee feel isolated and miss contact with colleagues in the office environment? These small “hubs” could potentially be cheaper for the large employer than their current premises but provide the office environment and control sought by both employer and employee. I am sure we will see some downsizing across different sectors as firms look to save costs. Whether that will then drive down the cost of renting properties to make them more affordable and attractive we have yet to see. For example, in the retail sector it has been the cost of leases that has been prohibitive to the small bespoke individual retailer, but shopping centre landlords have reportedly only received one third of their rental income for Q1 and it is inevitable that Q2 will be lower so they may well look to lower lease costs and rent to a different business mix going forwards. The ultimate question which dictates the future of the retail sector is, will the customer want to return for the shopping experience or are they now more content with online shopping? Will landlords reduce the rent which would then make them more affordable to those small individual retailers that would make each and every town’s High Street different? All in all, it is not surprising that commercial lenders will be cautious until the future working environment is clearer and they can see what returns they may receive. For now, the future is hard to predict as there are just too many unknowns. B I
Will businesses return to traditional oﬃce space?
Partnerships are key Jo Logan and Kit Thompson short term lending and development finance specialists, Brightstar
ridging enquiries have picked up in recent weeks, so what are the areas of demand and do lenders have an appetite
to lend? Whereas the first couple of weeks of lockdown were relatively quiet, we have received a steady flow of enquiries in recent weeks as people seek alternative funding solutions for a range of uses. Loan purposes have included auction purchases, chain breaks and development, and we have seen a significant increase in enquiries from other divisions within Brightstar where traditional routes have failed in the current environment. FUNDING SOLUTION
These include residential mortgage, buy to let or commercial deals that would have otherwise been placed with term lenders, but now fall outside of lending criteria and still require a funding solution. We are seeing an increase in bridging enquiries in all of these areas and, in many cases we have been able to offer a suitable funding solution, albeit at slightly lower LTVs than the original requirements for a term loan. For example, on one such case a 75% LTV buy-to-let application was able to be funded by a bridge, but only up to 70% LTV gross. A message for brokers here is, if you have term deals that are failing to find a home because of recent criteria changes, it might be worth considering a short-term solution to see through this period of uncertainty. www.mortgageintroducer.com
And, if you are not experienced in working in the short-term lending market, think about partnering with an expert by speaking to a specialist distributor. This approach can help you to add value to you clients, particularly on cases that have been withdrawn by buy to let or residential lenders, where completion needs to take place quickly.
“Lenders are being cautious, choosing the right deals upon which they will lend, and maintaining a sensible approach to LTVs. Prior to the lockdown we worked with lenders that we able to offer up to 80% LTV on market value, whereas now this is capped at 70% LTV” Most bridging lenders are still very willing to lend and there is plenty of appetite out there. However, lenders are taking a slightly more cautious approach when it comes to criteria, LTVs and exit routes. VALUATION OBSTACLE
One of the biggest obstacles to overcome in the lockdown has been valuations. While some lenders have been proactive in amending policy to enable AVMs and drive-bys and some lenders were able to send valuers out in exceptional circumstances ahead of mid-May when restrictions were lifted, there has been a backlog of cases and lenders have maintained a cautious approach to LTVs, particularly on remote valuations. Lenders are certainly being fussier about underwriting and taking a robust approach to exit routes, but liquidity is not an issue. There is still more capital ready to be deployed by lenders than available deals. Understandably, however, in an uncertain market, lenders are being
cautious, choosing the right deals upon which they will lend, and maintaining a sensible approach to LTVs. Prior to the lockdown we worked with lenders that we able to offer up to 80% LTV on market value, whereas now this is capped at 70% LTV – some lenders cap at 65% LTV and some at 60% LTV. Some lenders were quick to withdraw from the market at the beginning of lockdown and have ceased all new applications. Some returned in early May, but others remain on the sidelines when it comes to new business. Consequently, the panel of lenders with whom we have worked on cases has a slightly different look than prior to lockdown and we have forged stronger relationships with lenders that have remained committed to the market during this period. These relationships will last well into the future as we will support those businesses that have supported us throughout a very challenging time. Some of the areas that are now more difficult to secure funding than the beginning of the year. For example, lenders are taking a more cautious approach to heavy refurbishment lending, tending to favour light refurbishment deals, and they are being more selective when it comes to rebridging. EXIT ROUTE
However, it is clear that, on sensible deals where clients have enough ‘skin in the game’ and a realistically achievable exit route, there are plenty of opportunities. The key for brokers to make the most of these opportunities is to ensure that the right cases are presented in the right way, to the right lenders. And the easiest way for brokers to achieve this is by partnering with a business that has a combination of strong experience, expertise and relationships in this sector and can enable them to make the most of the available opportunities. B I JUNE 2020 BRIDGING INTRODUCER
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Adopting a proactive approach Bret Jackson head of marketing & communications, BWD
o ensure that it is reality, I gave myself a pinch and a punch for the first day of the month. It turns out it is reality and for the majority of us, returning to a full-time office environment is not happening anytime soon. Whilst some of us have entered a ‘soft’ return to work, with a limited number of staff being in the office, there has been very little guidance on how or if a full return can happen. Matt Tristram, director of The Loans Warehouse, provided an excellent update on LinkedIn of his offices and what had been conducted to allow staff to return. The work undertaken by his team and landlord is fantastic. Utilising safety, distancing, cleansing and a dash of common sense, has certainly produced a suitable way to get business up and running properly. BRINGING IT BACK
During the month of May, we started to see providers who had halted lending, announce their return to the market. LTV’s were being increased back or close to pre-pandemic levels, new products being launched, press releases on deals completed, bringing back the feel-good factor. As I started writing this article, the good news was continuing to flow. Hope Capital had launched a discounted rate product, HTB with a new BTL product, Landbay introduces 75% LTVs and Atelier Capital Partners announcing a trio of additional hires, to name but a few. Continuing from a recruitment perspective, there are signs of the green shoots of recovery, but it is still very much the proactive firms still at the forefront, with some firms re-engaging to start back their search. It is certainly going to be sometime before we reach www.mortgageintroducer.com
the levels seen in the first quarter of the year, if at all, but maintaining communication with our clients on a regular basis, ensures we are ready for when the time arrives. The art of communication is something I preach. Granted, it comes with my role, but feel that it is even more essential during these times. I chair divisional roundtables, discussing topics pertinent to the sector and plans for the future. As these are not currently possible, these have moved to being conducted online.
them, are now back in the market. One of the government’s first announcements on relaxing the lockdown rules, was the opening up of the property market. Some 450,000 buyers and renters were left stranded, worth an estimated £80bn in transactional value. I am sure many of us know people who were in the process of moving, when their move was halted as the lockdown was brought in, can now get back on track and hopefully solicitors and lenders can pick up quickly and efficiently.
Whilst I prefer face-to-face, online does have one distinct advantage. You can get a virtual audience. This allows interaction with existing and potentially new clients. It is great to see this esteemed publication’s sister title, Mortgage Introducer, also hosting seminars with some excellent guests. These leading senior industry figures can provide advisers and brokers with vital information and hopefully take away some useful snippets for their business. In addition, some lenders have been taking to social media, in particularly LinkedIn, to communicate with customers and engage with their customers via Zoom and other videobased tools. As a firm that works across many financial sectors, evidence has shown this is not the norm. Having already stated, I believe firms that adopt a proactive approach is the way forward during this time. These firms will come out stronger and benefit immensely in both the short and long term. I don’t need to tell you the bridging and the broader specialist lending sector, is a heavily competitive market, therefore adopting this approach will resonate with your target audience. It is great to see that the ‘we are still lending’ approach has only been adopted by a very small number of lenders. It was unfortunate that some lenders had to cease new business on a temporary basis, but most, if not all of
“Developers and investors can now look at getting back on track with their plans” Whilst this news is excellent for the market, I still find it very strange that I can go look around a stranger’s house but can’t pop round friends or family for a brew or glass of something stronger. Anyway, not going to go deviate into a rant, but it is now clear that developers and investors can now look at getting back on track with their plans. Rightmove announced 5.2 million visits to their site on the announcement of the property market reopening. This was a 10% increase on the same time last year. This is excellent news for the industry. People still have the appetite to look at moving, or certainly seeing what is available. Kent Reliance, Interbay and Precise will consider furloughed applicants, with additional underwriting measures. I think this is a fabulous move to ensure that many deals do not collapse. I am unsure of other lenders that have adopted this, but credit to them for announcing they have. Now that we are seeing light at the end of a very long tunnel, lets hope the market continues to show positive signs, grow in stature, lend and get the sector back to pre-pandemic levels. B I JUNE 2020
No certainties in the short-term Terry Pritchard director, Charter HCP
hen so much has been written over the past few months about COVID-19, the market, the economy and everything else by our group of industry spokesmen (self-appointed) who have a view on everything, it is hard to write about things from a new angle. But the fact is that we have no real idea of anything coming out of lockdown, other than the following There will almost certainly be a spike in new cases and possibly deaths as the numbers suggest we are four weeks too early coming out of lockdown. Hospitals will need to get ready for an increase of births (maybe convert the Nightingale to a maternity hospital). The divorce process needs to brace itself for a massive increase in cases. A return of engagement rings to jewellers so dump your stock now. There are obviously other things I have not touched on but these cover the immediate ISSUES
On a note closer to home, and as an indulgence on my part, I thought it a good idea (I would) to explain more
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about the area of business we (Charter HCP) work in so that you can better understand some of the opportunities that may pass by you on a regular basis, and that maybe in the coming months you could look to develop further. Basically Charter are a business that operates in the corporate finance and due diligence arena, meaning we look at all types of specialist funding from the provision of credit lines to individual loans to clients for development finance, asset finance and trade finance, at which point we provide to the ultimate funders the completed oven ready due diligence pack allowing them to make a decision on if they are to transact. As an example we recently received an enquiry from an overseas insurance company to provide them with replacement regulatory capital along with business expansion funding. Other examples include offering on a government backed development project in Africa and we have had a number of large bridging projects both in the UK and abroad (£15m plus). Now the reason I am telling you this is that virtually every broker, packager and financial adviser comes across something they have no expertise in on a regular basis. Given the environment we are currently in it is time to take off the blinkers and look at what you could achieve by striking up a relationship with other businesses who offer those skills with a healthy introductory fee on completion. Increased revenue streams is something we all need to explore as the
damage to business in general means things will take an awful long time to get back to anywhere near normal. Now is time for you to pick the phone up and see what can be easily added to your arsenal (sorry to Spurs fans for using the A word). I often hear stories, especially from mortgage advisers, who rightly stay focussed on their core business, but this is also more often than not at the exclusion of any other business line. Now that works when you can transact mortgage loans easily but what happens when the market changes. I have even sat with those that refuse to add second charge loans to their portfolio, something in my mind that detracts from the ability to offer best advice to a client. Another area often missed or certainly not offered as a solution are equity release loans, surely that’s another product line so closely linked you should at least be able to introduce to an outfit that will look after your client and pay you on the way. You will note that I started to climb onto the soapbox and I am sure many of you are already doing the things I have suggested, however, for those of you that don’t then explore further and look at increasing your business proposition for your clients. Make yourself their first call for advice on ALL things financial and have a contact list built of suppliers that covers the full spectrum from car finance, equity release, commercial finance, corporate finance through to bridging loans over £100m and even the provision of funding lines , I really do believe that to survive any crisis you need to have a big black book of contacts and be prepared to be flexible on what you are doing. There are plenty of good packagers etc out there who can help you with all of this and we are not the only people doing our job (Arc and Co being a good alternative). Have a good exit from lockdown but most of all please be safe and keep your families safe as well. B I www.mortgageintroducer.com
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Finding the opportunities Steve Swyny head of sales, First 4 Bridging
enerally speaking, I’m not a massive fan of the motivation quote. Having said that, one that springs to mind certainly rings true amidst the current crisis. It was Benjamin Franklin who once said: ‘Out of adversity comes opportunity’ and this is a phrase which has proved itself time and time again throughout history. Even a matter of a few weeks ago, it might have felt a little premature – not to mention a little insensitive in light of the widespread grief and panic which consumed the nation – to talk about opportunities. However, from a business, personal and mental health perspective, it’s vital that we look forward during any challenging times. The return of physical valuations has provided a real shot in the arm for the industry and in many ways has helped us transition into a much more positive mindset. This signifies an especially important juncture for specialist lending as physical valuations have long been a key element in supporting the vast majority of applications through to completion. Although the lack of physical valuations has proved to be a major barrier in recent week, this remains one link in a larger chain which all need to be working in harmony to keep the wheels of the specialist markets moving and creating those all-important opportunities. I mean - what good is a specialist valuation in the hands of lender which doesn’t possess an underwriting process which can analyse an individual case and apply some common-sense methodology within responsible lending boundaries? What good is sending an incorrectly
Teaming up with specialists will open doors
packaged case to a lender who is already struggling to deal with a backlog of pipeline cases? What good is referring a specialist case directly to a lender which doesn’t have the appetite or capability to service a particular type of lending scenario in the current economic climate? And with activity levels rising, the level of expertise required across the specialist mortgage market is reaching new heights. In recent days we’ve seen Masthaven expand its use of desktop valuations for bridging cases to increase the maximum loan to value (LTV) levels and loan amounts it will consider. EVER-CHANGING
The lender will now allow a maximum LTV of 60%, up from 50%, while loans of up to £1m will be considered on single or multiple properties – up from £500,000. Roma Finance has just launched a bridge-to-term product following its recent return to the market. The maximum LTV on the term product is 75%, there is no minimum income requirement and top slicing is considered. This positive news is great for the intermediary market but, in what was already a complex area for the majority of brokers, an influx of returning lenders, product launches, criteria tweaks and ever-changing market conditions will make it even more so. As stated in a recent article on the Mortgage Introducer website, here at
F4B, we have seen many lenders react to recent events in some good, bad and ugly ways. It has not been easy for any of them and whilst many have emerged with their reputations enhanced, some have been tarnished. However, for those brokers who have extremely limited experience of these lenders, how are they expected to know which ones have coped well, and which ones have struggled? Herein lies the beauty of working closely with a specialist distribution partner who not only has the answers to all these questions but can also provide all the heavy lifting for such cases, whilst the broker retains the full ownership of their client. We are entering a time when good, professional advice will prove more valuable than ever. In order to successfully navigate this tricky period, brokers are being urged to get closer to clients to better understand their ever-changing financial concerns and property-related needs. This is salient advice, and further opportunities will arise when teaming up with specialists in their field who have access to the right level of lender knowledge, relationships and solutions which some brokers may not. Now is not the time for brokers to be jack of all trades, it’s time to build a network of strategic affiliations which can better support clients through the good, bad and ugly times. And a good specialist distribution partner should be the first port of call. B I JUNE 2020 BRIDGING INTRODUCER
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Changing the guard in changing times Jessica Bird caught up with Association of Short Term Lenders CEO Vic Jannels to reflect on an unexpected start to his tenure and get his take on the market
hen Vic Jannels was appointed as CEO of the Association of Short Term Lenders (ASTL) in January 2020, the mortgage industry and housing market looked vastly different even compared to now, a few short months later. After the introduction of lockdown restrictions, the housing market risked grinding to a halt, with property chains stalled in the face of social distancing and businesses scrambling to find digital alternatives to traditionally face-to-face processes. Other factors, such as the three-month moratorium on collections, activities and the sheer logistical challenges of moving entire workforces remote, might have spelled disaster for short-term lenders. At the very least, for an incoming chief executive to be faced with the challenge of navigating a global and largely unprecedented crisis in their first months of tenure is hardly ideal. However, with 50 years in the secured lending industry under his belt, including several years on the board of the Association of Mortgage Intermediaries (AMI), Jannels is well placed to steer the ship. Indeed, during the upheaval, the ASTL has remained a clear and audible voice, reflecting its primary goal of representing the interests of its members, as well as reminding the rest of the market of the resilience and innovation of the short- â†’
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ASTL term lending sector. In early May, this exercise of the ASTL’s influence came in the form of an open letter to HM Treasury, requesting the opportunity to contribute to discussions about future options for when Section 82 of the Coronavirus Act 2020 comes to an end. This precludes business tenants from being forced out of their premises if they miss rent or lease payments. The letter said: “We believe that our members will be an important part of the solution as and when we exit this pandemic and rebuild our economy. “Certainly, they will be called upon to provide muchneeded liquidity to fund recovery and growth in the [small to medium enterprise (SME)] community as alternative and specialist providers of finance.” The letter pushed for a collaborative approach, which puts public health at the forefront, while continuing to protect homeowners and small businesses, taking into account the vital role played by the short-term lending industry in doing so. In the meantime, Jannels has called for businesses in the short-term lending industry to use this time to implement the ASTL’s Code of Conduct and ensure they are in the strongest position to help clients when the market does return to some semblance of normal. In addition to providing a voice for the shortterm lending market, and despite the current crisis, ASTL has also continued to build and grow during Jannels’ tenure, adding member firms, such as Colliers International towards the end of March, as well as directors Alan Margolis and Scott Marshall to its board. Nevertheless, this continued progress does not mean plans have not had to be put on hold while the world, and the short-term lending market, adjusts to a new and indefinite normal. With this in mind, Bridging Introducer caught up with Jannels, to take a look at his original objectives when taking on the role of CEO, how these have changed in the months that followed, and how the short-term lending market has weathered the storm of the ongoing COVID-19 crisis.
“I joined the mortgage world way back in 1972, so I have the best part of 50 years’ experience in the secured lending industry, holding senior management positions in the lender, packager and broker sectors, as well as spending several years co-opted onto the board of AMI” So, it was an exciting opportunity, and very much an honour, to be invited to take the helm and help shape the course of this fantastic industry. This is very much a ‘people’ business and, as much as anything, my decision was made easier given the make-up of the executive board, members and associates alongside the opportunity of working alongside some of the most well regarded people in the sector. You have a great deal of experience in financial services. For those who don’t know can you tell us some more about your background? I joined the mortgage world way back in 1972, so I have the best part of 50 years’ experience in the secured lending industry, holding senior management positions in the lender, packager and broker sectors, as well as spending several years co-opted onto the board of AMI. During that time, appointments included National & Provincial Building Society, Citibank, Unity Homeloans. I was also privileged to chair the Professional Mortgage Packagers Alliance (PMPA) for a number of years. In addition to my position at the ASTL, I continue to hold the role of Executive Chairman at Impact Specialist Finance and am a founder director of the technology company, One Mortgage System (OMS).
You took up the role on 1 January. What attracted you to the position?
Obviously, the market has changed a great deal since January, but what were your initial objectives for the association under your leadership?
Even before this current crisis, it was clear that the bridging industry was at a critical point in its history. The market has delivered significant growth in recent years, but increased competition and economic uncertainty meant that it was more important than ever for lenders to maintain high standards of governance. Thanks to the magnificent efforts of Benson Hersch over the previous seven years, the ASTL had become a prominent and well-respected organisation in this space, with an opportunity to unite the market and lead the way into a successful and sustainable future.
As a trade association, our primary objective is to represent the interests, and amplify the voice, of our members, and we do this by encouraging members to demonstrate high operational standards and deliver sustainable growth in the market. If we are able to grow the reputation of the bridging and development lending sector, by promoting good practice, identifying and discouraging bad, and by communicating the value our market provides to customers, then we will deliver tangible commercial benefits to our members. My objective, when I joined the ASTL in January, was to continue to strive towards the association’s →
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ASTL primary objective and to support the success of this objective by growing our membership, adding likeminded lenders and associated business that share our values and commitment to quality. Growing our membership, increases our voice and influence, and this benefits not only our members – but the wider market too.
important for individuals, businesses and developers to help them to get back onto the front foot and short-term lending will prove an important tool for an increasing number of customers. The market is not without its challenges, but there are plenty of opportunities to look forward to. How diﬃcult is it to find exit routes at the moment?
What are the greatest strengths/weaknesses of the ASTL? One of the great strengths of the ASTL is the detailed assessment process we go through before accepting new members aligned with our encouragement to all members’ continual commitment to adherence of our Code of Conduct. This means that membership of our association remains very much a kitemark of quality that provides reassurance for brokers and their clients. One of the biggest challenges is maintaining this commitment to quality, whilst also seeking to grow our membership – and to provide members with greater influence and a bigger voice. Notice that I haven’t called this a weakness – it’s not. But it is an opportunity requiring a balanced approach and attention to detail. How has the bridging market changed following the coronavirus outbreak? In some ways it hasn’t. One of the great things about the bridging market is that it is possibly the most resilient and adaptable sector in secured lending, and lenders have been incredibly quick to respond to the changing environment and evolve their processes accordingly. Consequently, we have seen lending continue right through the lockdown, with lenders demonstrating a can-do, yet responsible, approach to meeting the needs of their customers. There has, of course, been greater emphasis on lenders working with existing customers, and for their brokers to understand their position, product options and their plans and work together towards suitable solutions on mortgage loans where the planned exit may no longer be viable. Again, most lenders have adapted to doing this, building greater engagement with their existing book of customers. Those lenders that have been less proactive are likely to have struggled more and this demonstrates that a customer-focused approach to lending is not just responsible and good for reputation. Ultimately, it’s commercially beneficial as well.
It will be easier, now that the sales market has been reopened and surveyors are able to carry out physical valuations. Realistically, however, the property market is going to take a while to get up to speed and refinancing options may be limited by LTVs. So, lenders, brokers and customers will need to continue to work together to come up with solutions – but we are headed in the right direction. Often, this type of market adjustment throws up the need to innovate and we have seen lenders move much more rapidly towards the use of AVMs where loan to value levels allow. This saves both time and cost and can help to make the overall proposition more viable. How does this compare to other market crises you have experienced? Every market goes through regular cycles and I have seen my fair share of downturns, but this is unlike anything I have experienced previously. To begin with, it has impacted everybody, not just in this country, but globally. It has not been the result of an imbalance in the market, capital issues or structural problems – the current economic crisis has been self-imposed globally, to tackle the health crisis. So, I think there is reason to be positive about how quickly the market can and should return. It won’t be the burgeoning market we knew in January and February of this year, but it will be a market that we can work with and hopefully one that we can build in a sustainable way. What are the biggest challenges facing ASTL members during the pandemic? The blanket imposition of a three-month moratorium on collections activities at a time when planned exit routes have been closed off has certainly given lenders something to think about. But our members have been proactive in engaging with brokers and clients, and on the whole, they have been creative in identifying solutions. What advice would you give businesses in regards to surviving, or indeed thriving, during the pandemic?
What is the current demand for bridging finance? We’ve seen for demand for bridging continue throughout the lockdown and, as we exit this situation, it is only likely to grow. Cashflow is going to be so www.sfintroducer.com
In many ways we have all been forced to go revert back to basics and this is an approach which has helped our members through this diﬃcult period. Sticking to the basics of pricing for risk, proper → JUNE 2020
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ASTL engagement with customers and making sensible lending decisions, enables all participants to remain in a stronger position. How can the ASTL support its members during this period? So far, we have provided a collective voice for the industry across a number of issues, including the importance for customers to recognise their responsibilities regarding their loan commitments. We have monitored potential opportunities for members and brokers as we start to exit this situation and, of course, have corresponded with the Treasury on the potential for future engagement. We provide a platform for our members to share experiences and best practice, which is hugely important at times like this and, where there is consensus that the industry needs to move on a specific issue, we can provide a collective voice, as was the case with our recent letter to the Treasury. The ASTL delivered a letter to HM Treasury requesting the opportunity to contribute to discussions on how short-term lenders can help the market bounce back. How has that been received? We have received excellent feedback and support from within the industry. At the time of writing, we await a response from HM Treasury. We will continue to suggest open and constructive dialogue to ensure that the important part played in the short term lending sector is recognised as cognisant to the success of the wider mortgage sector. Do you think the government recognises the role short-term finance plays in the economy? I think there is generally a need for greater education about the contribution our sector makes to the economy. At the ASTL, we are in a good position to both encourage and engage in regular dialogue with government to do this. How do you anticipate the market will recover from the COVID-19 crisis? The market will recover, it may take some time, but where there is demand from customers and an appetite to meet that demand, then there are the ingredients for a healthy market. That is not to say we won’t lose some businesses on the way. It is possible that, if some lenders have not taken appropriate precautions in their lending and become over exposed they may need to revisit their position. This can happen in any downturn and demonstrates the importance of a robust and sustainable approach to lending as is promoted by, and within, our Code of Conduct. www.sfintroducer.com
“With the increase in homeworking, for example, we may see a contraction in demand for large commercial oﬃce space and, consequently, an increase in opportunities for commercial to residential permitted developments” How can ASTL members help borrowers and brokers once the market starts to recover? By providing a trusted, transparent source of shortterm lending, whether that is bridging or development finance. My message for brokers is to look to work with lenders who are members of the ASTL, as a kitemark of quality. With changes to workplace patterns, travel, technology will the market have changed forever? There is a well worn saying in that the only constant in life is change. Out of this pandemic, some things will change and we should not be afraid of them. With the increase in homeworking, for example, we may see a contraction in demand for large commercial oﬃce space and, consequently, an increase in opportunities for commercial to residential permitted developments. Change is not new, the market is always changing. But situations like the present one are likely to accelerate that change. What are your future plans for the ASTL? It is probably too early for me to make a bold and dynamic statement at this early stage given the influence of the COVID-19 pandemic. My immediate priorities are to continue to support both members and associates whilst seeking to grow the membership. To use, to the best of our ability, whatever influence we might be privileged to enjoy and continue to support the sustainable growth of the bridging and development finance market. Do you have a message for the market? Stay positive, stick to the basic principles of lending and lets all work more closely together. We enjoy close working relationships with our colleague associations and, through working together we can, and will, emerge from this strange time stronger if we accept the necessity of change and use new knowledge to ensure the best sustainable outcome for all parties. Most importantly, the end customer. B I JUNE 2020
Through the eyes of a lender some members of the ASTL Executive Committee for their experiences of operating throughout the COVID-19 pandemic and their expectations for the future. Here’s what they had to say:
Vic Jannels CEO, ASTL
ne of the fantastic things about the bridging market is the resilience of the sector and how quickly short-term lenders are able to adapt to meet the changing funding requirements of borrowers. We saw this in the fallout of the global financial crisis, and we have already seen the bridging industry rise to the current challenges, present by the COVID-19 pandemic. COVID-19 will of course create changes to the economy and the market, but change is a constant that we should not fear. With the increase in homeworking, for example, we may see a contraction in demand for large commercial oﬃce space, but on the other side of this, there are likely to be increased opportunities for commercial to residential permitted developments. It is my firm belief that there will be continued demand from customers and an appetite from lenders to meet that demand, and that this will provide the ingredients for a healthy market. But what do lenders think? I asked
STEPHEN BARBER, DIRECTOR, BRIDGING FINANCE SOLUTIONS: This is a pause, not a crash in respect of residential property. With ultra-low interest rates, the government underpinning wages and employment, high liquidity, strong bank balance sheets through capital adequacy legislation, a housing shortage, and four years of pent up demand since the EU referendum, this is not the credit crunch of 2008, in any shape or form. Yes, we have some tough times in certain sectors ahead, but consumer sentiment will be the key factor in a ‘V’ shaped recovery. With a paradigm shift in working practices I expect a more significant impact on capital values of commercial property. SARAH JACKSON, HEAD OF UNDERWRITING, PIVOT: There is a role for bridging in the post pandemic-world. We have already seen large high street lenders scale back their product ranges, which means there is a niche for bridging finance to fill, similar to what was seen in 2008. Whilst a lot of bridging lenders have also scaled back their products, they can still act quicker and more eﬃciently than
There will be appetite from lenders to meet customer demand
the high street. Within the sector we are likely to see a conversion from it being a broker led market to a lender led market in the short term whilst we understand the impact of the pandemic on property prices. GAVIN DIAMOND, COMMERCIAL DIRECTOR FOR BRIDGING, UNITED TRUST BANK: Technology has been vital in enabling UTB, and many other participants in the specialist finance industry, to continue to function during the pandemic. Our original rationale for investment was to use technology to strengthen our operational resilience and make it quicker, cheaper and easier for borrowers to transact with us. However, the improvements have been key to enabling our teams to work eﬀectively from home during the lockdown. At UTB we’re fortunate that many of the fintech enhancements we’ve developed and introduced to improve our Bridging service have been crucial not just in making applications quicker or easier but, in some cases, they have enabled us to continue lending at all. It has not been ‘business as usual’ by any means but we have continued to support brokers and customers without interruption despite the many diﬃculties. It seems somehow wrong to consider there being any positives of COVID-19 with so many lives lost and businesses ruined, but when we do return to a ‘new normal’ we will have learned a lot, we will have developed yet more helpful fintech and our service and resilience will be better than ever.
Gavin makes a good point that, while it seems wrong to consider the positives of COVID-19, we must all take what learnings we can from this experience. If we accept the necessity of change and use new knowledge to guide us in the future, we can ensure good outcomes for our customers and this will provide this sustain the ongoing development of our industry. So, stay positive, stick to the basic principles of lending and lets all work more closely together. B I www.mortgageintroducer.com
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