Speaking to Specialist Lending Solutions, Mike Cook (pictured), chief mortgage officer, said the lender was “seeing tremendous growth” and was “hiring constantly”, both to its business development and administration team where he sits and underwrites.
He added: “We are trying to grow, we have a cycle of distribution and we have a solid proposition and that’s going to expand.”
Cook joined MFS last year to lead its buy-to-let proposition. It piloted it to select brokers in October with a full product launch slated for this year.
He said that it currently had 16 employees who were focused on buy-to-let and then it had access to around nine business development managers, nearly five marketers and then loan servicing and compliance.
Cook added that overall, it was aiming to get to a 40-strong team in the medium term, but there was “no hard and fast rule”.
He added that if there was someone that they liked who might not be for the role they were recruiting for, then they would integrate them.
On the recruiting side he said he did not really have any interest in recruiting from a specialist or prime peer.
“Even if we do recruit someone with a pure buy-to-let background, we put them in with bridging. The reason being is that it is just a completely different mentality, you’re really looking at ‘how does a loan fit’ or ‘how can I compromise and get a quick credit decision’.”
He explained that a lot of the lender’s cases were more complex, with many different elements, that he wanted to “expose” an underwriter to and then “bring the buy-to-let angle”.
Cook said this also meant underwriters could work across bridging and buy-to-let and gave them “optionality” as underwriters would be able to recommend the most appropriate solution.
‘Year of the refinance’
He said MFS had a “pretty good mix” of buy-to-let business, which included property developers looking for a development exit or letting something out on a buy-to-let basis.
Cook added that high net worth foreign nationals were also a key area of business, as they were keen to purchase city properties around the UK, citing areas like Manchester.
He said international borrowers could come through with various company structures, whether that is onshore or offshore company, or on an individual basis.
Cook added that it did do more standard buy-to-let where someone wanted to grow their portfolio with a £200,000 loan, for instance.
Cook noted that limited company structures were a “key bit of business and that there was a definite shift to refinance” this year compared to the “purchase bonanza” that occurred last year.
“You’d be amazed the amount of people that buy a bridge, they convert, they improve, they make money in it so quickly and they refinance it and then move on to new things.”
Underwriting has a ‘typical bridging approach’
He said MFS had a “completely flexible view on affordability” and that its decision in principle was fully underwritten, which was a “typical bridging approach” as it was more “front-loaded”.
Cook said: “That means it is not instant, its not keyed in, but we will try and get back within four hours. We make various credit committee decisions every day, which you can’t do at a big institution.”
He explained that it gets the assets and liabilities statement, as well as a credit report so that it can give a firm indication to brokers. After this, all a borrower is subject to is the valuation as well as further Know Your Customer and anti-money laundering checks.
He said the bridging market was quite “buoyant” and strategically it made sense for MFS to do both bridging and buy-to-let.
He said buy-to-let had lower profitability but over a longer period of time while bridging was more short-term and the firm had to work hard to replace the book.
He said MFS had not marketed buy-to-let to its bridging customers, but that this was something it might explore in the future if appropriate.
Cook added that bridging was more “rate sensitive” and there was more competition but it was not their business model to “chase the market down” and it was “using your risk appetite and going after the deal that makes sense”.
“We don’t want to be fight on very low rates and [be] flying through it.”
Growing distribution, new products and technology investment next big priorities
Cook said the firm was “still very much broker based” and it would like to expand its distribution further.
“We are recruiting quite heavily in the business development area, but I think over time, it would be nice to do more with a wider variety of packages or master brokers and then eventually sort of clubs and network and things like that, but we just will carry on at the pace we are at the moment.”
He said the “next big deliverable” for the firm was to invest in technology so data from more sources could be gathered internally to make them more “scalable”.
“It is nothing too groundbreaking, but what we’re looking at is how that [data collection] really helps the underwriting generally even quicker decision or more certain decision, but also not have to ask the broker for mostly anything as, we can obtain that from other sources.”
Cook said it would consider long-term products but that was dependent on expanding funding, and it wanted to extend to more customer groups.
“It’s one of the strengths that we have various funders, but we would like some more additional capacity, because it’s always about looking at the next step… can your funding handle that particular product.”
The lender secured around £250m in funding earlier this week.
He added that it would was a £1bn loan book for buy to let and a £500m loan book for bridging, but he wanted to see more growth in bridging.
“[Bridging] in the two years to come is going to be quite different business is really sort of ramped up and focused.”