A period of reflection

From Alfred Lord Tennyson’s poem In Memoriam: 27, 1850:

“I hold it true, whate’er befall;
I feel it, when I sorrow most;
Tis better to have loved and lost;
Than never to have loved at all.”

This week has been a time for reflection. It is often said that we work in an incestuous business, where paths have crossed many times and therefore it’s likely that you know someone who has been directly or indirectly affected by the apparent disheartened investors of mortgage bonds.

The fact is we have an incredible ability as a nation to innovate and write mortgages and loans, and that is down to everyone that reads this. We have exceeded all records with Council of Mortgage Lenders, quoting an unprecedented £34.2 billion written in first charge alone in June.

But the downturn in the US, perhaps more poignantly the US companies that have been stung there but operate globally, are no longer willing purchasers of mortgage assets. Currently we have a butter mountain of loans sitting in our sheds.

I return to the words of Tennyson and try here to extol the virtues of the lenders that have currently decided not to lend in this current climate.

Looking at brands

Investec brought us four UK brands, including Infinity Mortgages and UX Mortgages, and it would be the first to admit it is not providing cutting edge technological solutions like many of the new breed of lender, but has concentrated its heart and soul on providing criteria solutions. It is famed for its willingness to lend in the new build arena and accept the recent remortgage of bridging finance and builder gifted deposits.

It’s true that in recent weeks this criteria had been paired back as all lenders took stock of their policies, limiting the initiative to a single property – a sensible move, which probably eroded the chances of exploitation by professionals who could have left it exposed. In addition its birth saw the addition of super large loan self-certs.

Distinguishing areas

Prior to the Lehman purchase we accounted for 10 per cent of London Mortgage Company’s (LMC) overall lending. The original management team consisted of a hardcore of Kensington Mortgages staff that had left the non-conforming godfather having learnt their trade along the way. There were few areas here which distinguished LMC from the rest of the pack.

The first was that it underwrote a deal on its merits with a basic credit search rather than a full CAIS search. Its underwriters became some of the most revered in the industry. Another angle was empowering the FPC or CEFA broker to fill in the affordability certificate, whereas most lenders would have insisted on an accountant. However, perhaps the most utilised element of criteria was its willingness to accept a letting agent to confirm the rental on a buy-to-let. This local knowledge and partial vested interest often produced a more favourable outcome than a surveyor.

A fresh outlook

Despite being the pioneer of non-conforming first charge, Kensington Mortgages entered the secured loans market relatively late. It had a fresh outlook on the market and geared its proposition to where it assumed the future would be from a regulatory perspective.

In particular, the early repayment charges of one month plus one’s actuarial for loans of all sizes did a lot to improve the creditability of the sector and indeed teased out a new breed of distributor which had previously shied away from selling products with long tie-ins.

Borrowing some of its renowned features from first charge, such as one day’s trading for self cert, it also embarked on new ideas for the sector for the employed by not benchmarking against a matrix of occupations, preferring instead to verify part of the income and allow a tolerance for other income whether requiring proof.

Will be missed

Southern Pacific Personal Loans was the eventual chosen conduit for secured loans by Lehman Brothers. It had also acquired London Personal Loans an established player and indeed had a launch party for the ill-fated Preferred Personal Loans that never managed to get pass the embryonic stage. Sitting in the light to medium adverse arena, it captured a very good market share with generous category rules such as all satisfied CCJs being ignored. It would also allow self-certs up to £250,000, and for applicants to take out a loan on a recent acquired council property.

At this stage it is too early to say whether these lenders will return, but they will be missed and it’s better to have been loved and lost than not at all.

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