I like to keep things simple in business as in life. However, ever more regulation with increased checks and balances will not necessarily provide greater client protection. This is particularly true in the case of the commercial bridging market.
Before we see more regulation, surely taking the time to study the effect of recent regulatory changes, is the right recipe before adding layers of paperwork without the evidence to back up their implementation.
I have been a long-time advocate of regulation as an important provider of customer protection and also as a means to improve professionalism throughout the bridging market. My reason for suggesting the need for a hiatus from further immediate regulation is to give the market time to implement, and also to have time to assess its impact.
In the case of bridging, particularly for commercial funding use, I am concerned that further immediate regulatory moves could compromise the speed with which deals can be financed without any discernible improvement in customer protection.
The most immediate effect on the consumer bridging market has seen processing times extended. The commercial sector could become the next area where regulators feel they need to equalise the compliance structure.
The strong growth in the sector is based principally on professional investors needing to complete property deals quickly and bridging allows them to do that.
Generally speaking, no two bridging loans are identical, and in many cases speed is vitally important, if not more so, than just obtaining the cheapest rate. In many cases, if deals are time sensitive and not completed quickly, clients can lose money and have to pay penalties for non-completion in time.
When the case needs to be done, brokers naturally want the best for their clients. There may well be an element of both speed and rate but sometimes just concentrating on rate can actually result in more expense as the money ‘saved’ in application is wasted if the client misses the deal they were after because the process takes too long. More clients and their brokers, who have gone for a conventional bridging solution, are finding that the process is not as fast as they were led to believe and are coming to us.
Underwriting a case for short term funding is based on the quality of the asset (property), the case for borrowing (ability and intent to repay) and the exit (is the client’s plan for refinancing or selling the asset to repay our loan viable). Provided we can assess those quickly and effectively, we will write the business and clients will continue to benefit.
However, I am hopeful that common sense will prevail. Our trade bodies are working very hard to put the case as strongly as possible that the protection needs of a consumer and for a professional buyer are very different. It is time to reflect and assess before we see any more changes.