Chairman's Foreword

Adam Tyler, Executive Chairman, FIBA

There are always a number of elements that compete for importance in the successful funding of a property. But in today’s climate what is it that really makes a difference to the assessment of the final lending decision?

I am a great believer in getting the fundamentals right and nowhere is that more true than in property funding. We have lived through times when the basic tenets of successful underwriting had been abandoned or at the least selectively ignored usually in the pursuit of new business volumes and have then had to live with the consequences. However, while we should not dwell on historical events, it is wise to keep in mind that our future success as an industry relies in part on not repeating the mistakes of the past!

To that end, I wanted to reiterate the elements that lead to successful property funding which do not change, regardless of ‘new’ thinking or technological wizardry.

For advisers, our purpose is to find the most effective means of funding our customers’ requirements. For lenders, their role is to lend within their risk model and harvest as much intermediary business as they feel comfortable completing.

For lenders, regardless of any credit scoring that might or might not be part of their profiling, the following should be at the heart of their process in reaching the right lending decisions and for advisers these points are equally relevant.

• The quality of the security – Does the property offer sufficient collateral for lenders?
• The business plan – Is it robust enough to stand up to scrutiny and make sense?
• Ability to repay – Does the customer have the means?
• Intent to repay – Is there anything in the applicant’s past history or current financial activity which would cast doubt on being inclined to keep up repayments?
• Exit plan – Does the story stack up and is it achievable within the right timescales?

For those of you as long on the tooth as I, you might think this is really basic stuff, it is amazing how many times one or more of these most basic of underwriting rules have been found to have lapsed for a variety of reasons. I am not suggesting that today’s lenders do not have the mechanisms in place to ensure that risk assessment is not compromised, but it only takes one example of ‘making an exception’ to open the door to more of the same.

A point I would like to make is the importance of the relationship between lender and broker. Of course, lenders need to satisfy themselves as to the suitability of the customer and the soundness of the proposition, but the process is made much smoother if trust has been built by the introducing broker. While an adviser’s role is to work for their customer, the reality is that advisers who work closely with their lenders in a mutually respectful partnership are the more likely to see their business complete more often and more quickly.

From the adviser’s side, we should be looking for:-

• Certainty of funding – How certain are the resources in the lender’s background?
• Reasonable fee structure – Are the fees transparent and in line with market practice?
• Communication – Has the lender made 2 way communication easy?
• Pipeline issues - Turnaround times can be critical to being able to complete on time
• Cascading – Product cascading can be detrimental to customers, if on examination, a lender decides that the application does not fit the headline product, leaving you with less time to source a suitable alternative.

There are other points that could be included, but lending decisions are not the sole province of the lender in today’s market. Good lending decisions depend on introducer, customer and lender working together. Lenders are not there to deal with incomplete forms or lack of supporting evidence to back the application. It should come as no surprise why lenders are keen to be in receipt of all the evidence before making a decision.

Transparency on both sides is the key to better and faster decisioning.