As a lot of followers of this Blog tend to know, I tend to blog about the challenges our clients are going through in the current credit climate and the antics of the various lenders and I must admit we have never been busier with enquiries, but getting them across the line remains a continual challenge and that seems to come down in both the lender and borrower camps, so here are just a few of them.
Not giving us the full picture
We always set ourselves out as effective underwriters of new borrowing proposals, because if we can’t underwrite and support a deal, how can we ever persuade a bank to do likewise, but we seem to be plagued by clients telling us one thing that we subsequently find to be different when drilling down into the facts. At least it gives us an opportunity to pose any questions, the lender doesn’t give anyone that chance preferring to say ‘No’ and to move on to more vanilla lending.
We do need to know ‘who’ owns the properties, ‘where’ all the income comes from, ‘what’ do they need the money for, ‘how’ they are going to repay it (especially if they have just got started or the property isn’t let yet), and above all ‘why’ they are doing it.
The credit histories seem to rear their heads too, when we find out that the ‘Why’, is often a push from the existing lender
Not declaring all the income
Borrowers can’t have it all ways, if they don’t declare the incomes, they may well have a lower tax bill, and even be receiving ‘Working Family Tax Credits’, but if this is not the true picture this is Money laundering – short and sweet – it is evading the system.
I have even been asked by clients ….”How much income do I need to declare then to get this funding?…… my reply is as always, “All of it”. Lenders will only lend when they feel the applicant is being truthful, any doubts anywhere and the deal will die, we will kill it long before it gets to a lender as we have our own reputation to consider.
Not being realistic
From the lenders prospective just setting the rate too high and the amount advanced too low (Because the former causes serviceability issues and results in the latter), may look good if the lender reports that they have issued an offer, but they can’t then say that the borrowers are not taking them up, because they have made it difficult for the borrower to do so in the first place.
If as a lender you don’t like one specific sector, just tell us clearly at the outside not hiding behind uncompetitive terms that won’t be taken up
Taking your time
We can’t put a full proposition to a lender without everything we have asked for, I liken it to dialling a telephone number and missing out some or most of the numbers, you will never get through to the person you want, we need it all.
Lenders too, if you have to farm our enquiries around the country to your ‘local’ representative, please do it quickly because 7 – 10 days can disappear very quickly if nobody picks it up and runs with it. A quick ‘No’ is a result; at least we know where we stand
Finally, we have those that are living in the past
It reminds me of my youth and the music I liked back then (Living in the past – Jethro Tull Album), the Credit Crunch has been with us for over 5 yrs, as at the time of this blog post the base rates have been at 0.5% for 44 mths, but we still need to emphasise to our borrowers that before, as long as you were ‘Warm and breathing’ you could get 85% LTV, 30 yr repayments, interest only and the ability to self certify your income – they are ALL gone.
Banks are looking for lending between 5 and 10 yrs maximum, some secondary banks will do longer I know, but they do need to confirm and substantiate incomes, an accountant’s reference is NOT enough, anything above 70 – 75% LTV is wishful thinking unless you are a doctor, and expect to be paying 100bps more for you money, and that is even with the various government schemes in place. And as for interest only, this is as rare as rocking horse manure.
The banks are both having to comply with major banking directives that force them to hold more capital but also act more responsibly in their lending approach and their own attitudes to risk, so it is not all their fault, we perhaps have just moved back to what was realistic in the mid 90’s and before the floodgates opened.