Spray foam insulation manufacturer Huntsman Building Solutions (HBS) held a roundtable discussion with stakeholders in the mortgage and property sectors to find out what was causing barriers to lending.
Earlier this year, the Residential Property Surveyors Association (RPSA) retracted guidance that 250,000 homes could be “unmortgageable” because of the insulation and HBS later worked with the Property Care Association (PCA) to develop guidance for surveyors on how to inspect properties with it.
Stewart McKenzie, regional valuation manager at Nationwide, said lenders wanted “certainty that what we were lending on was fit for purpose” and if spray foam had been incorrectly installed “then there is a recourse on that basis. It’s no different to anything else we would do.”
McKenzie said like the concern around Japanese knotweed, a lender would want the confidence that if any issues arose down the line there would be a way of resolving it and covering that cost.
“Lenders won’t lend unless they’ve got that certainty. We don’t have the certainty at the moment – not because of the industry – I just think we’re in that phase… where a lot of different lenders are in a position where they don’t know enough about it and they’re looking to try and get more information,” he added.
He said with this knowledge, panel surveyors would also have confidence.
Andrew Roddis, technical surveying manager at E.surv, said this was particularly true for equity release, as all properties needed to be saleable.
One participant said people were looking for confirmation that there was “no risk at all” with spray foam but said that was often not feasible and the best they could do was say no problem had materialised.
They said this was harder to do with spray foam as there was not enough data to determine how it would hold up in the future.
More education on spray foam
It was asked if it would be helpful for there to be a resource for homeowners to get independent information on spray foam insulation and the contractors authorised by reputable manufacturers.
McKenzie said this would be a viable solution, adding that the lack of documentation was something that could probably be dealt with quickly. He said to satisfy lenders, this could include certificates and insurance warranties as this was a typical expectation during the transaction process.
Regarding the guidance from PCA, Roddis said the information needed to reach lending decision makers, including lenders and funders, to “change their perspective”.
He said some lenders and funders may not know the updated guidance exists.
McKenzie said there was nothing wrong with the information in the PCA protocol, but it was a “document for guidance” which was “not prescriptive”.
He said one lender lending on a home with spray foam did not mean another would, as many still needed assurance on the manufacturer, installation and possible remediation. “Until you get that bit, most lenders won’t lend on it,” he added.
McKenzie said there had been a similar attitude towards solar panels and lending used to be restrictive until more information became available.
Roddis said advisers also needed to be aware of the updated protocol so they would know what lenders might ask for and why an application might be slowed down.
Simon Baker, global president of HBS, said although spray foam was an effective method of insulation which could save up to 55 per cent off an energy bill, it was being judged on its past when it was incorrectly used to repair roofs.
He said this perception could be remedied by “education, not just to homeowners” but to “surveyors, valuers, mortgage underwriters and mortgage companies”.
Baker added: “That’s what we’re trying to do. We’re trying to compress that [confidence] in a relatively short period of time… because we all face a huge issue when it comes to energy [and net zero].”
He said spray foam was so effective that it was often a selling point used by developers when building homes.
Elizabeth Lalli-Reese, EMEA and global VP of HBS, said the problem was not always with spray foam itself, but the sales technique.
Pressure selling
Paula Higgins, chief executive of the HomeOwners Alliance said the organisation was contacted every week by people who had been cold called and “bullied” into getting spray foam installed. She noted older and vulnerable people were being targeted.
For those who already had spray foam installed, they were being targetted to remove it after being told it was toxic. Higgins said the removal of spray foam often costs more than its installation.
She said there was a stigma around spray foam and the good guys needed to call out the bad players in the sector.
One participant raised concerns around the speed from sale to installation. Another participant agreed, saying reputable firms needed to distance themselves from the bad ones, adding: “I can’t understand why a product of this quality is being sold like a toilet brush. Why have this rush-in technique?”
Higgins said homeowners needed the confidence to check that the firms they were dealing with were certified, had checks and balances in place in case things went wrong, and a process for removal if needed.
Baker said cold calling was not illegal but the publicity around spray foam had “created a space for charlatans to scare people”.
Spray foam reputation
Roddis said there were worries with spray foam before the RPSA’s warning.
He said many lenders did not have a policy for it and in the absence of criteria, surveyors and valuers referred to the overarching sentiment that a property must be readily saleable and marketable.
Another participant said the RPSA’s article reflected what was already happening regarding mortgage availability and spray foam, but after the story, the sector was “up in arms”.
McKenzie said Nationwide “put its head above the parapet” by lending on spray foam and had since issued guidance to E.surv.
He said each lender’s appetite determined its approach and because Nationwide wanted to protect both itself and the customer, the lender required sufficient information to make a balanced decision.
McKenzie said there were more cases coming to Nationwide, but suggested the apparent rise could be because the issue was not being flagged before.
He also referred to an article where a home with spray foam was given a £0 value. McKenzie said this did not happen because lenders believed a home had no value, but to interrupt the automated process and get the case referred for manual underwriting.
McKenzie added: “It doesn’t have to be spray foam, it could be anything structural. That’s why we do the zero valuation. It spits it out of the automated system. It then gets looked at on a manual basis.
“Once we’ve got all information that we need and we’re comfortable that we can lend on that, then it goes back into the system.”
Simon Storer, chief executive of the Insulation Manufacturers Association, said manufacturers wanted a level playing field so documentation attached to spray foam installation was not treated differently to other potentially risky elements of a property.
McKenzie said sufficient information and documentation was not always supplied. He said the lack of an insurance-backed guarantee was also creating uncertainty.
Higgins said the paper of some of these guarantees “were not worth the paper they were on”, as was the case with some new-build properties where the terms were limited in scope and did not meet the purchaser’s expectations.
One participant said this had also happened with cavity wall insulation, a government-backed scheme that “fell apart” and “put surveyors in the firing line” to make a decision following a visual inspection that took less than an hour.
“We cannot be seen as the warranty holders,” they added.
Brewer said the industry was “playing catch-up” because paperwork for spray foam was not previously needed, but this was now being provided to homeowners.
“But that doesn’t deal with the legacy that the requirement wasn’t there,” he said, adding: “All new installations will have that.”
Professional liability
One participant said some surveyors may be “cynical” over what they were being asked to believe without any more detail or science to back it up. They said spray foam was mostly assessed through observation, looking at the moisture levels, then making a decision.
They said there was no building pathology or practice to follow, meaning this could put surveyors at professional risk.
They added that it may be possible to rule spray foam as safe by “drawing a line in the sand” and basing the decision on whether problems had manifested or not, but said “there is no protocol at the moment”. Another said they did not want the risk of deciding on too many properties against industry guidance.
One participant said spray foam was a specific product so should be easy to regulate, adding: “It’s such a unified thing. It’s not a composite that can be built in 90,000 ways. In that respect, it’s very straightforward.”
They said this should make it easier to come up with an industry-wide principle for spray foam.
Huntsman Building Solutions said it would continue to work with lenders, equity release providers and surveyors to address their concerns and instill confidence in their ability to make informed decisions for lending.
Key points in summary:
- A report by the Residential Property Surveyors Association helped spark the fear about spray foam, even though it was misinformed.
- Various attempts have been made to redress this issue, including by RICS, but even these new protocols and guidance included errors.
- In the last two years specifically, there’s been a rise in cold calling and people being encouraged to install/remove it. Vulnerable people and the elderly are being targeted.
- A surveyors’ job is to implement the lender’s criteria, not to dictate to the market.
- The industry is small, with a small pot of surveyors working for many lenders – not all of whom have coherent policies on spray foam, leaving the surveyors vulnerable.
- Overall, there’s a general lack of understanding about the issues – among lenders, surveyors, homeowners and installers.
- The spray foam industry would benefit from a centralised, non-partisan, register where all installations are logged.
- There is a lack of understanding about what a good spray foam installation looks like.
- Spray foam has a big role to play in insulating homes and countering climate change.
