The FSA has been told that some people may be employing bridging finance when other loans, such as regulated mortgage contracts, may be more appropriate.
Some firms consider there is enough of an issue to start thinking of restricting who they will do business with.
In addition to situations where a few brokers may be turning to bridging as the customer is not currently able to meet more stringent affordability rules, there are other concerns.
AMI has been made aware that some unregulated bridging lenders have been encouraging regulated brokers to pass non-advised introductions to them. This, they infer, keeps the transaction unregulated.
Unfortunately, whilst it insulates the lender, it leaves the customer and the broker exposed.
As the broker is regulated, if a regulated contract would have provided better protection the broker is likely to fall foul in any court action, lose at the Ombudsman, risk FSA action against their firm and void any professional indemnity insurance they hold.
Bridging is, in many situations, a legitimate product, used responsibly on both a closed and open basis. There are some excellent regulated bridging lenders and also a number of very good unregulated firms.
The FSA has applied its usual early warning system to express concerns so that responsible firms can make sure they are not transgressing, and will now be looking to see if market behaviour has improved enough. Or, are there those who might merit closer investigation?
This could be an area where the regulator might undertake specific themed reviews. The MMR has made it clear to all in the market where the FSA sees the future limits for bridging.
Bridging works in property development, renovation, home moves, auction finance to name the usual suspects, but it is not a substitute for proper, affordable, mortgage finance.
The FSA has put the industry on notice and we need to be listening.
Robert Sinclair is director of the Association of Mortgage Intermediaries
