In the first three months of the year, 13 repossessions occurred.

In the previous quarter 26 properties were repossessed by second charge mortgage lenders, and 101 homes were foreclosed in total during 2019.

The rate of second charge mortgage repossessions, as a percentage of outstanding agreements, was 0.06 per cent in the twelve months to March 2020.

Fiona Hoyle, head of consumer and mortgage finance at the FLA, said: “The rate of second charge repossessions remains very low and in line with Financial Conduct Authority (FCA) guidance, repossessions have not been taking place during the coronavirus period.

“Any customer worried about meeting payments should contact their lender as help is available.”

In its latest statement, the Finance and Leasing Association (FLA) has emphasised that the sector will not be able to support the recovery without government or Bank of England help.

The non-bank sector has been especially hard hit during the coronavirus crisis as capital markets have almost completely closed down and lenders are denied access to the term funding support schemes, while also needing to grant payment holidays to their borrowers.

Last month a coalition of trade bodies, including the FLA, UK Finance and the Intermediary Mortgage Lenders Association (IMLA) presented a trio of schemes to Treasury and Bank of England officials.

The bodies said the schemes would be particularly targeted to support lenders offering payment holidays and other forbearance measures.

HM Treasury responded by saying it was continuing discussions with the sector and that it was “keen to understand the issues that non-bank lenders are experiencing”.

However, there has been no action yet.

‘No-one’s interests’

In a statement issued today FLA director general Stephen Haddrill, highlighted that its lenders had been hit hard by the measures taken to deal with the coronavirus crisis.

There was a 20 per cent fall in new business in March while its members have received almost 1.2 million Covid-19 related requests for forbearance, with 75 granted.

“The industry is committed to supporting their customers during these exceptional times,” he said.

“Urgent action is needed – in days, not weeks – to deliver financial support to the non-bank lending sector to ensure that we maintain a financial services sector that is diverse, innovative and competitive.”

The FLA told Specialist Lending Solutions that without help they would not be able to support the economy as lockdown measures were eased.

“Non-bank lenders are supporting customers with unprecedented levels of forbearance, but with very little new business coming in due to the ongoing lockdown, these firms won’t be in a position to lend as we emerge from the current phase,” the spokesperson said.

“That is in no one’s interests. The industry needs a prompt decision on funding so that they can plan how to resume normal business.”

ASTL

The Association of Short Term Lenders (ASTL) has also added its weight to the cause of specialist lenders.

In a letter to the Treasury, it highlighted that members would be needed to provide liquidity to fund the recovery and growth in the SME community as the economy is rebuilt.

“With this in mind, we would like to discuss with you how the broad approach to the current moratorium affects short-term mortgage lenders and, as we move forward, how provision can be made to re-enforce the ability of our members to advance new loans and provide SMEs with the liquidity they will need to rebuild their businesses,” it said.

Vic Jannels, CEO of the ASTL, added: “We have endeavoured to encourage HM Treasury that it really would help if we are able to engage in a collaborative approach, which would put public health first, protect homeowners and small businesses, and also acknowledge the vital role that the short-term mortgage lending community can play in the UK’s economic recovery.

“It is important that we work together on an effective and diverse financial response to the current situation in a way that protects consumers and supports businesses.”

The industry still managed to complete 2,050 deals during the month worth £93m, but these totals were down by 14 per cent compared to the same month a year earlier, according to figures from the Finance and Leasing Association (FLA).

The fall did not impact annual lending totals too significantly. The 28,172 transactions worth £1.26bn in the 12 months to March remained 14 per cent higher than in the year to March 2019.

Fiona Hoyle, head of consumer and mortgage finance at the FLA said: “The disruption caused by the lockdown in March led to falls in second charge mortgage new business of 14 per cent by both value and volume compared with March 2019.

“New business volumes in Q1 2020 as a whole increased by two per cent compared with the same quarter in 2019.

“Lenders are continuing to do all they can to support customers during this challenging period and customers experiencing payment difficulties should contact their lender as soon as possible.”

New business in the overall consumer finance space fell by 16 per cent in March 2020 compared with the same month in 2019, and contracted by four per cent in Q1 2020 as a whole.

Car finance was worst hit, down by 24 per cent in terms of transaction numbers to 3,750 in the month, and this dragged the running 12-month total down by one per cent to 36,840.

Each range is available up to 50 per cent loan to value (LTV).

In a message posted on its website today, Precise said: “Following government restrictions introduced to prevent the spread of Covid-19, we’ve been busy working on solutions for you and your customers while physical property inspections remain unavailable.

“We’re pleased to launch a set of products using AVMs for bridging finance and second charge loan applications.”

It asked brokers to understand that the lengthier process may result in cases taking longer to progress than normal.

Once the valuation has been reviewed by the underwriter and they are happy to proceed the case will be processed in the usual manner.

Valuation challenges cannot be accepted and the underwriter’s decision will be final, Precise added.

Last month Precise and its sister lender Kent Reliance recommenced residential and buy-to-let lending.

The pair stopped accepting new applications and put all cases which had not yet progressed to offer on hold at the end of March as a result of the coronavirus crisis.

Bridging

The bridging products are available for regulated and non-regulated applications in England, Wales and Scotland, for standard bridging only, not refurbishments.

The minimum loan size is £50,000 with the maximum at £375,000, while the minimum property value is £75,000 and the maximum is £750,000.

Rates are 0.54 per cent per month for net loan size less than £200,000, and 0.49 per cent for net loan size of £200,000 or more. A facility fee of two per cent applies to all transactions.

For already submitted applications at pre-offer stage, if the property is eligible for an AVM Precise will run the AVM to see if it is successful to enable the application to proceed.

Brokers should contact the lender if they have a pre-offer pipeline application over 50 per cent LTV and their client would like to reduce the loan amount to enable switching onto a new product.

All paperwork will need to be received before the AVM can be conducted.

Due to the unavailability of physical valuations, several property types are excluded. They are:

• New build property or recently converted in the last 24 months,
• Properties that have never been occupied
• Houses of multiple occupation (HMOs), including student lets
• Multi-unit freehold blocks
• Flats
• Holiday lets
• Properties with more than two acres of land
• Listed buildings
• Modern methods of construction
• Leases of less than 85 years
• Commercial or semi-commercial properties
• Properties adjacent to or above commercial premises
• Properties subject to renovation or refurbishment
• Development exits
• Further advances, retentions or stage releases
• Cross collateral charges

Second charge

Second charge loans are available for any purpose in England and Wales, with a minimum loan size of £10,000 and maximum of £200,000. Properties must be worth at least £75,000 and up to £750,000.

A two-year fix is available at 4.25 per cent and the five-year fix is 4.65 per cent – both have a £300 product fee, no early repayment charge and a 4.35 per cent reversion rate.

No defaults, county court judgements, mortgage or secured arrears are permitted in the last 12 months.

Unsecured arrears are not counted but may affect the borrower’s credit score, Precise noted, but bankruptcies, individual voluntary arrangements (IVAs) and debt management plans (DMPs) are not accepted.

It added that it may be possible to switch submitted applications at pre-offer stage with eligible properties to a new product and continue processing.

“If, after you’ve discussed suitability with your customer, you consider the product is appropriate, we’ll switch your application to a new product and request any outstanding documentation which you should provide as soon as possible,” Precise said.

Brokers should contact the lender if they have a pre-offer pipeline application over 50 per cent LTV and their client would like to reduce the loan amount to enable switching onto a new product.

Again, due to the unavailability of physical valuations, applications for some properties are excluded. These are:

• New build property or recently converted in the last 24 months
• Properties that have never been occupied
• Flats
• Properties with more than two acres of land
• Listed buildings
• Modern methods of construction
• Leases of less than 85 years
• Properties adjacent to or above commercial premises
• Properties subject to renovation or refurbishment

The new buy-to-let range is available to capital and interest and interest-only borrowers, with rates starting from 6.49 per cent and a maximum loan to value of 65 per cent.

Loans are available from £10,000 to £250,000, but are only for individual landlords.

It is also increasing its support for self-employed borrowers by lifting the maximum LTV to 75 per cent, and AVMs will be available up to 65 per cent LTV on Apex 1 plans.

Restrictions on acceptable loan purposes have also been removed with products to repay current performing individual voluntary agreements (IVA) and debt management plans (DMPs) available.

West One said the changes aimed to make lending more accessible and support brokers when the market has seen a shift in access to lending and an increased feeling of uncertainty about the future.

Commitment to brokers

Marie Grundy (pictured), sales director for West One, said she was pleased West One had continued to support the second charge market during the turbulent times.

“This latest set of changes validates our commitment to our broker partners seeking to support those customers who are able to demonstrate long term affordability,” she said.

“We have always looked for opportunities to provide access to products for underserved borrowers, with our buy-to-let second charge range being a great example of this, but this takes on increased significance at a time when product options across the sector are in shorter supply.”

CSC Loans managing director Mark Fry added: “The changes West One have made are extremely positive which will create more opportunities for homeowners and landlords to access second charge finance at a time when product availability is restricted.

“It is even more impressive that as a non-bank lender West One have been at the forefront of specialist lending during these exceptional times, and continue to deliver innovative and well-designed products to meet the needs of a wider range of borrowers.”

The lender is using a combination of drive-by valuations and automated valuation models (AVMs) to support its offering during the coronavirus restrictions.

Drive by valuations are available up to a maximum net loan amount of £300,000 up to 75 per cent LTV.

For properties in England and Wales, AVMs are available up to 65 per cent LTV to a maximum net loan of £300,000, and up to 75 per cent LTV for maximum net loans up to £100,000.

In mainland Scotland AVMs will cover a maximum net loan of £100,000 up to 65 per cent LTV, with maximum net loans up to £50,000 permitted to 75 per cent LTV.

Properties purchased within the last 12 months where the loan is for home improvement and a maximum of £100,000 and 75 per cent LTV can use the purchase price for valuation.

AVMs are subject to a minimum confidence score of five.

Rates and loans

Variable rates on the products begin at four per cent, a two-year fix at 65 per cent LTV with £300 lender fee starts at 4.4 per cent, while a five-year fix with no fee at 75 per cent LTV is 5.3 per cent.

The maximum loan to income allowed is six times, there are no early repayment charges (ERCs) and no charges for overpayments, with loans allowed between £10,000 to £500,000.

The minimum standard credit score is 350 with the minimum debt consolidation credit score at 375 with one unsecured arrears allowed in the last 12 months, providing the borrower is currently up to date.

A maximum broker fee of 12.5 per cent is capped at £7,500.

Commission levels are two per cent for master brokers and 1.5 per cent through networks and mortgage clubs.

Shawbrook Bank head of sales Gavin Seaholme said: “Shawbrook continues to support the funding needs of brokers and clients in these challenging times.

“This new range of products, that will continue to evolve over time, ensures that we can support the second charge market in both the short and the long term.”

New lending is being severely restricted by the practicalities of a country in lockdown while significant resource is being channeled away from new business teams to help handle payment holiday enquiries.

The Ministry of Justice and Financial Conduct Authority (FCA) have published unambiguous guidance of their expectations regarding the enforcement of loans and mortgages, and the progress of possession proceedings during this period, which is further limiting collections activity and cashflow.

Then, of course, there is the potential reputational harm to consider for lenders carrying out any sort of recovery activity in the current environment.

However, it is worth remembering that the mortgage market has always adapted to the toughest of lending environments.

Auctions performing above expectations

Now is not the time for sitting on one’s hands and there is much that can be done, to improve prospects of recovery, and position businesses for the exit of restrictions.

Some liquidity remains in the market, as both refinance and sales are taking place. I am seeing that first-hand.

Auctions, given the climate and lockdown, have performed remarkably better than expected.

If there are buyers now, there are likely to be more the further we go down the Covid-19 path.

So, collection departments should also be pushing on, within restrictions.

Now more than ever before, however, this requires intelligently crafted recovery strategy and implementation, carefully designed to avoid any breach of guidance.

Engage with borrowers

It is vitally important to engage with borrowers now, and in a collaborative way, as this will stand lenders in good stead for the future.

Indeed, rather than being anxious of this approach, lenders can take some comfort from the fact that the government has made it clear that constructive negotiations should take place in all scenarios to reach a solution on payment.

Positioning is of particular importance for second charge lenders, where being first out of the blocks ahead of prior registered chargees will be crucial.

Proper planning and execution of these strategies is needed.

For example, issuing a formal demand for repayment is specifically excluded from current guidance and, while the appointment of receivers is still possible, their activities will be limited by the moratorium on repossessions.

However, they will have an important role to play in the here and now.

Consensual agreements between lenders and debtors do remain possible and can include payment arrangements and, in some cases, voluntary sales and delivery up of possession agreements.

The same with pre-enforcement agreements, which have contractual force, and will facilitate and accelerate enforcement post-moratorium, if necessary.

Proactive lenders put themselves in a stronger position

By operating proactively, lenders gain realistic visibility of their book and their futures.

This can be particularly important for short-term lenders reliant on exit arrangements or a borrower’s plans to extend their facility, many of which will have been impacted and/or lost.

Lenders that take this approach put themselves in a far stronger position to manage collection and recovery strategy during and post-moratorium.

Importantly, from the FCA perspective, they also meet core principles by having made debtors aware of where they sit, where they may sit post-moratorium, and by offering options to them which can mitigate against increasing indebtedness, against a potentially reducing property asset, and the dilution of their equity.

That is surely acting in the customer’s best interest.

The current environment is undoubtedly difficult for lenders, but by taking a properly planned and proactive approach to working with borrowers, and getting creative, they put their business in a far stronger position for the future.

The body now has 43 member banks, building societies and specialist lenders, with Legal & General Home Finance the last institution to join earlier this year.

Last week IMLA warned that non-bank lenders, who are highly active in the specialist lending sector, needed government support or were at risk of being unable to support forbearance schemes such as mortgage payment holidays.

It is one of a group of trade bodies to have proposed various solutions to the government and Bank of England to support non-bank funding as the capital markets have all but closed.

Working through this difficult time

West One Loans managing director for buy to let Andrew Ferguson (pictured) will represent the lender at IMLA’s executive committee meetings. He said the firm was very pleased to be joining the association.

“As new members of IMLA we look forward to working alongside the IMLA team, its members and partners through a very difficult time and into the years beyond,” he said.

“We are excited to share knowledge and expertise and are totally committed to supporting the mortgage intermediary market across our varied product range.”

IMLA executive director Kate Davies, said the body was pleased to be adding West One to its membership.

“These are certainly highly unusual times for the mortgage market in light of the disruption caused by coronavirus, but IMLA is continuing to grow and now represents 43 lenders from across the sector,” she said.

“From second charge mortgages to development finance and buy-to-let, West One Loans will bring a wealth of experience and knowledge to the association as our members work together through the current crisis and beyond.”

There were 28,512 new second charge mortgages agreed in the 12 months to February 2020, and some 2,435 of these were approved in the month. During February last year, there were 2,163 agreements. 

The three months to February also saw a 13 per cent increase in second charge volume, with 6,670 agreements completed in the quarter. 

The value of new second charge business reached £107m in February, nine per cent up from last year’s £98m. 

For the 12 months to February 2020, the value of new second charge mortgages amounted to £1.3bn, 18 per cent higher than the £1.1bn seen last year. 

The three months to February saw £305m worth of new second charges completed, 16 per cent more than the same period the year before. 

Fiona Hoyle, head of consumer and mortgage finance at the FLA, said: “The second charge mortgage market made a positive start to 2020, but the mortgage market faces serve disruption from the impact of the coronavirus on the economy.  

“Lenders are doing their best to support customers during these unprecedented times, and any customer facing repayment difficulties due to the coronavirus should contact their lender as soon as possible.”    

The trade body has urged government to take action to allow the industry to support its customers with new lending mechanisms and forbearance or arrears.

Non-bank lenders in the specialist property lending markets have been particularly badly hit with Together, Vida and Foundation already closed to new applications and others drastically cutting back.

Early on in the crisis Landbay co-founder and CEO John Goodall warned there would need to be some intervention for non-bank lenders.

Now the FLA, which represents the second charge sector along with wider consumer, asset and motor finance, is adding its voice, calling for government and the Bank of England to take “urgent action”.

‘Urgent help needed’

FLA director general Stephen Haddrill highlighted that those markets played a significant role in supporting businesses and households across all sectors of the economy.

“We have welcomed the financial support schemes that the government and Bank of England have put in place so far, but urgent action is now needed to ensure that non-bank lenders are able to continue to serve customers, both through new lending and forbearance.

“Non-bank lenders rely heavily on the capital markets and bank funding, which are essentially closed to them.

“Support needs to be provided to non-bank lenders to help them deal with the huge cashflow drain from forbearance, with Covid-related requests growing by more than 1,000 per cent in the week commencing 16 March, followed by a further 249 per cent increase the following week.

“This sector needs urgent government help to ensure it is still in a position to lend to individuals and businesses when the current market disruption ends, because without their input, the UK’s economic recovery will be much slower,” he added.

The FLA said its members provided almost £141bn of new business in the twelve months to February 2020, two per cent higher than in the same period in 2019, £46bn was provided by non-bank lenders.