The sourcing system has been in development for four years by founder Marc Bertola and aims to speed up mortgage transaction times.   

The firms says advisers will only need to complete one fact find to connect to over 70 lenders, with additional details requested if the chosen lender requires it.  

Features of the platform include sourcing, AI underwriting, automated processing, compliance, accounting, dashboards and reports. It also has optional credit search and land registry data abilities. 

Once a fact find has been entered, On The Money will return decisions in principle based on the lenders a broker or network has on their panel. However, users will have the option to be shown lenders who are not on their panel to see what other products their client would be eligible for. 

The platform is also open to clients so they can be introduced to advisers, and if an adviser or network decide to use this function there will be a commission split fee. Otherwise, advisers can process their existing clients for free. 

Bertola (pictured) said: “We started building this solution four years ago and it has been developed to not only meet but exceed the expectations of the intermediary industry.  

“We felt that the only way to make it truly accessible to everyone was to make it free, so that’s what we have done.” 

Bertola is also the CEO of Vanquish Group, a venture capital and private equity firm and was previously the CEO of financial services advice company Vantage Group. 

“Our experience of constructing platforms in the financial sector has enabled us to build the entire On The Money platform ourselves, from start to end. All the code is proprietary and owned by us which means we have full control of the functionality and are able to adapt and enhance our solution to meet market demands,” he added. 

This week’s top comment came from John Azopardi, who reacted to the story: Mortgage prisoners talking directly with lenders to find solutions.

He said: “There must be a way of saying if customers have a satisfactory record of payment for so many months, maybe 12 or 18, then they can afford a mortgage irrespective of their income – particularly if they are paying a rip-off rate.  

“This mortgage prisoner situation is a complete injustice. Shame on the lenders who are taking advantage of these circumstances – and shame on the regulators who have failed to come up with a sensible work-around. 

More factors driving age up

Kirstie Caneparo also had something to say this week, as she responded to the article: Underwriting must become more flexible to deal with older borrowers – Cleary.

She said: “I agree there is a need for more later life lending, willingness and underwriting capability to look at what older customers can afford based on a realistic projection of how their earned income and retirement/savings income will interact over time. 

“The additional driver you didn’t mention for more later life lending is people joining the housing ladder later in life and potentially with a smaller percentage deposit.”  

She added: “These factors result in the average age of customers at maturity of mortgages increasing.”

Free right to extend

Lastly, Trevor Barnett replied to the article: Brokers must emphasise overpayments as longer terms become the new normal – analysis. 

He said: “In my experience, it is the lenders forcing the longer terms for ‘affordability reasons’ because of having to take into account future interest rate rises.  

“The client can often afford the higher payment now and should be paying it. With overpayments, it is only ever an option and in most cases they spend their money elsewhere.” 

He continued: “Clients should be motivated to have the shorter term now and if – and when – interest rates do go up, there should be a right to extend the mortgage term then, for no admin fee.”

Tipton & Coseley Building Society last week adjusted lending criteria to consider applications from newly-qualified teachers declaring that prospective borrowers on their first 12-month contract often find it difficult to access finance.

Richard Groom, head of sales at the Tipton, said such applicants “can often be frozen out because many lenders apply standard criteria for newly-qualified teachers”.

And brokers have argued that borrowers in other less straightforward jobs may also suffer from lenders employing overly rigid lending criteria.

Keeping it sustainable

Carmen Green, mortgage and protection adviser at Xpress Mortgages, said it all comes down to sustainability. Lenders want to know how likely the borrower is to maintain their occupation and income for the mortgage term.

She noted that newly-qualified teachers fall into the category of contractor. With most lenders looking for a track record in order to prove sustainability, this presents a problem. 

Green said: “As the academic year is not a full calendar year, the salary is often split between the months worked, rather than an annualised salary paid monthly, so there are some months, usually over summer, where there is no salary credit; this in itself is enough for some lenders not to consider the income as they need you to prove regular, consistent income.”

Seeing the funny side

David Sheppard, managing director of Perception Finance, said that too often city workers in London suffer because their bonuses surpass their basic salary. Yet some lenders ignore bonuses above basic element.

Sheppard spoke of issues with professional comedians, particularly if their latest year figures are higher due to touring because that’s unlikely to be a regular annual occurrence.

He said: “Thankfully with comedians a lot of the income now derives from television work, which is year round, so that has relaxed the problems for most lenders. But once they start to get this work the incomes naturally do rise fast, and that can bring about questions regarding the likelihood that the higher income is sustainable. 

“This can normally be overcome due to the higher profile of the client and common-sense underwriting,” Sheppard added.

In part one, Coombs looked at applications which cite divorce or sale at undervalue and when it is prudent to lend and to politely decline.

Here, the scenarios take a more exotic twist.

Foreign governments

Lending on properties owned by foreign governments is fascinating stuff.

In the last 10 years there have been a couple of notable cases where bridging lenders lent to foreign governments.

In two such cases – one where the loan was to Kosovo and another where it was to the Democratic Republic of Congo – the lenders have been severely burnt.

The reality is that nations typically have significant sources of credit so the real question is who actually needs this money?

Often the reality is that the person purporting to act for the government is not authorised to do so and actually is committing a fraud.

Putting this aside however, the legal position of the lender on the face of it can often appear sound. If the property is not an embassy then it is not subject to immunity and if the charge is registered what could go wrong?

The answer is everything.

The bottom line is when attempting to repossess the property of a sovereign nation you essentially are undertaking a declaration of war to get control of it.

This is a route that has, in the cases noted above, already proven to be beyond the means of even the largest of specialist lenders.

Bankruptcy

If no petition for bankruptcy has been lodged, but one is still only potential, then it is safe from a legal – if not necessarily an underwriting perspective – to refinance the borrower out of trouble.

However, once the petition is lodged there is only one way to do it and this itself is not a process without risk.

The lender’s solicitors must attend the hearing thus ensuring that all pre-existing creditors who have a prior claim have come out of the woodwork, and use a series of undertakings to essentially complete the refinance there-and-then to enable the claimants to be satisfied and the petition dismissed.

Any other route risks the charge not being registered ahead of prior claimants.

After the client has been declared bankrupt any attempt to provide funding becomes much harder still and it would be wise to avoid.

An automatic discharge occurs after six months but this is really meaningless and any funding would need to be arranged with the full consent and knowledge of the administrators of the bankruptcy and supported by any necessary court orders.

Foreign companies

As with the other scenarios there is no quick yes or no answer.

The main challenge is determining that your borrower is the person that owns the company and its legal status and asset position is suitable.

It also primarily depends on the quality of information in the country in question.

In short with the right solicitors and authorised agents it is doable in such places as the British Virgin Islands and Panama.

But countries like Sierra Leone – where their version of Companies House was burnt down in the civil war – are naturally best avoided.

This has been a light-hearted look at what is and is not doable in bridging, but the applications covering these areas are relatively commonplace.

When looking for the right bridging lender it pays to approach those with a wealth of experience with a track record in dealing with complex cases, otherwise it may leave the applicant high and dry.

Bridging finance is a problem solver.

Although in recent years the scope of the sector has widened and become more vanilla, bridging has always had grey areas and it’s here that specialist lenders need to excel.

Let’s look at five very different situations that will ultimately affect a lending decision and what they mean for an application.

We focus on deals that are doable. If they’re not, we tell the client why not within the first five minutes.

Most of the time this comes down to affordability, loan-to-value or troublesome financial backgrounds.

But some very interesting applications cross our path, and here’s where true expertise needs to rise to the top.

To be clear, I am not a lawyer and this does not constitute legal or financial advice, but here are some left-field scenarios with examples of when a lender can and cannot lend.

1. Divorce

If a client is undergoing a divorce the underwriter should take care to understand that the divorce is settled, either in or out of court, or that both parties in the marriage have received independent legal advice and consent to the loan. This is regardless of in whose name the property may be.

If one party is trying to pull funds out of the property quickly before a claim is made of an interest in the property, the underwriter must avoid facilitating this or the lender may become exposed.

2. Sale at undervalue

Sales at undervalue are commonly banded about in the market, but there are some that are satisfactory and others that are insupportable.

When a client gets an option to purchase a site and then adds value through works or planning this, in our view, is fine – the real value of the site ought to be higher than the purchase price and this should be accounted for as long as the developer has adequate ‘skin in the game’.

When a family member gifts equity this is also acceptable to us – people have given property away to their children since time immemorial – and clearing the mortgage through a purchase is acceptable. A deed of gift and correct tax treatment is needed but this is, in Aspen’s view, acceptable.

“I bought it at auction”, “I am buying in bulk” and “the client is a good negotiator” are obviously terrible reasons.

The market is not as strong as it was in 2016 in some areas and people think things are worth more than they are – buying in bulk almost invariably leads to selling in bulk in a difficult situation and underwriters should anticipate this.

“The seller is desperate for a quick sale” is an interesting one. The lender must establish that the seller is of sound mind and is not a vulnerable person. They should also look at whether the numbers make sense – does moving country or fear of repossession merit the level of discount?

At Aspen we steer clear of these because nine times out of 10 something awful such as intimidation or fraud is happening in the background.

The worst one is “the receiver is flogging it cheap”. If correct, this is a criminal action and a major breach of the duty of care to the current owner’s equity position. An absolute ‘no’ and probably a note to self to avoid the receiver is needed here.

The second part of Jack Combs’ article will appear on Specialist Lending Solutions shortly.

They offer users mobile payments, access to investment accounts, savings accounts, mortgage advice and energy switching all at the tap of the app.

They’ll sweep up extra pennies on expenditure and deposit them into a savings account without you even noticing that you’ve started a savings habit.

They’ve driven large numbers of customers who previously banked solely with one provider to open new accounts that effectively function as a place for discretionary spending.

And offerings such as Zipcar have understood that not everyone, particularly not younger people, wants to buy and own a car; they still want to drive, but would rather enjoy flexible access to a car as and when they need it than take on the financial responsibility of fixed costs.

Renting for flexibility

The same argument is applied to younger people renting for longer. In some ways, and for some people, I buy it.

Renting as a social choice, offering often better-quality and larger accommodation in more convenient locations which can be handed back after a year makes a lot of sense for many people. Particularly when their employment is flexible and or/liable to move location.

But I think the majority of younger people in this country still aspire to own their own homes. Property remains one of those assets that, given time, has appreciated in value fairly reliably.

There is also the psychological and emotional need that most people have for the stability of a roof over their heads that no landlord can unsettle.

Avoid complacency

This is why we chose to support the government’s Help to Buy scheme three years ago and it’s why we have recently broadened our service to those buying in Scotland, as well as those who took their initial loan five years ago and are now needing to remortgage.

Part of our role as a lender in this ever-evolving economy is to support first-time buyers who decide they do want to get a step onto the property ladder.

This scheme has done this, with government statistics showing that of the almost half a million completions made using one or more of the Help to Buy schemes since 2013, nearly 90 per cent have been by first-time buyers.

But it would be complacent simply to sign up to offer this scheme and ignore the changes that our society is going through.

Realities of a modern borrower

How first-time buyers save, what they spend their money on and how they live before they make that first jump into homeownership is changing rapidly – and yet many lenders rely on old-fashioned precepts of what a good mortgage borrower looks like.

We’re living in a world where customers are encouraged to embrace a culture of switching – our car insurance, energy supplier, TV and broadband, mobile phone service, even our house when we’re renters – and it means we have an increasing array of accounts to manage.

The result can often be late payments, especially where first-time buyers are concerned.

They’re more likely to have moved home frequently, running a much higher risk that some accounts will slip through the address change net.

This does not make them a bad lending prospect – it makes them a modern one, which is why we do not rule out borrowers who have suffered a blip in their credit history. It is often just that.

In a world that is so full of change, we need to be constantly reassessing how we look at borrowers.

They join practicing accountants, doctors, dentist and lawyers. Applicants should be over 21 and registered with the appropriate governing body. Vets and pharmacists must also be partners or practice owners.  

In total there are three three-year fixed and four three-year variable rate options available with rates of 1.89 per cent, 1.99 per cent, 2.94 per cent and 3.14 per cent among the variable options, and rates of 2.74 per cent, 2.84 per cent and 3.49 percent among the fixed.

The mortgages will also be available through intermediaries.

Paul Alexander (pictured), head of business development and sales strategy, said: “We have offered professional mortgages for a number of years and have a strong track record in this area. Our underwriting approach allows us to consider every application individually and we are pleased to be able to offer these products to a wider range of professions.

“Following feedback from our brokers, we have reviewed and extended the eligibility. We will continue to listen to feedback and adjust our product offering to meet the demand of an ever changing market.” 

The professional mortgages are available on properties across Scotland, with loans from £50,000 to £500,000. The society will consider loans up to 95 per cent and also offers guarantor options for students and trainees. 

The bridging lender said it will require “a solid exit route to pay the loan back on or before the due date” and that each loan of this type will need to be repaid with the sale of the property.

It added that it was providing these loans to meet a need, but would be doing so cautiously.

“Hope Capital will want to explore the reasons for the bad credit happening in the first place and how it has been overcome,” the lender said, adding that it wanted to be sure the cycle of poor credit has been broken and will not continue into future borrowing.

Hope Capital added that providing these assurances are received it will accept borrowers with county court judgments (CCJs), a settled bankruptcy, IVA or Company Voluntary Arrangement.

And it will also review applications from potential borrowers with outstanding or ‘rolling’ arrears.

Considered on own merits

The lender will continue to accept “less-regular cases” and those with unusual and complicated ownership structures as well as individuals, partnerships and companies on these loans.

There will be no credit scoring with each application considered on its own merits with underwriting dependent on a clear and feasible exit strategy to pay the loan back by the due date.

Gary Bailey, managing director of Hope Capital said: “We have always looked at every application on its own merits and weighed up each loan individually.

“Some of the applications we have received in the past have been from people who might have a somewhat tarnished credit history but who have a very strong business case and a clear exit route. At low loan-to-values (LTVs) it makes perfect sense to grant a short-term loan when the case warrants it, with the condition that each loan is paid back with the sale of the property.

“This is particularly the case when someone has had credit problems in the past but these are now resolved, as long as we understand the reasons for this and we are confident this is not ongoing.”

The loans

The loans will be available across England and Wales for light, moderate and heavy refurbishment as well as for property portfolios and for businesses.

• For a residential purchase, rates will start from 0.69 per cent per month up to 75 per cent LTV, including to borrowers with under £5,000 of CCJs that have been settled at least 24 months ago. Other LTVs will vary according to the severity of impaired credit and whether any CCJs and arrears are current or settled. For borrowers with outstanding mortgage arrears the maximum LTV will be 40 per cent.
• For semi-commercial loans, rates will start at 0.85 per cent per month. A maximum LTV of 70 per cent will be available for a borrower with no bankruptcies, IVAs or CVAs and with settled CCJs of less than £5,000, down to 40 per cent for borrowers with rolling arrears.
• For commercial property the maximum LTV is 65 per cent with rates from 0.89 per cent.

The mutuals have impressed brokers with flexibility on criteria and attention to customers’ specific circumstances, whether they fall foul of mainstream lenders’ criteria by age, employment status, deposit size or property type. 

The upside for the mutuals is that margins have remained relatively robust.

 “Customers’ circumstances and product requirements are increasingly complex and diverse, requiring a more individually-tailored approach, which large high street brands are unable and unwilling to offer,” said Peter Brodnicki, co-founder and chief executive of the stock market-listed network and advice group Mortgage Advice Bureau.

He noted mutuals’ approaches to “complex income, including shorter periods of self-employment, a more pragmatic approach to assessing affordability, interest-only, minor credit issues, holiday buy-to-let, ex-pat buy-to-let, self build, custom build and complex buy-to-let including refurbishment,” as examples of where they are outpacing mainstream mortgage providers.

The specialism mutuals can wield include flexing criteria and offering a bespoke underwriting service to win business. 

David Hollingworth, London and Country Mortgages, associate director, communications, noted Darlington Building Society for “offering enhanced multiples for people in specified professions”, Family Building Society and Loughborough Building Society for their “family-assist structures for first-time buyers”, and Loughborough BS and Bath Building Society for their buy for university solutions.

Leeds Building Society won plaudits for having “championed retirement interest only (RIO) products” and the mutual sector in general was acknowledged for leading the way on older borrowers, with deals for customers of 80 or 85 years old and above. 

Coventry Building Society, Skipton Building Society and Tipton & Coseley Building Society all won mentions for their healthy appetite for mortgage lending and ability to take cases on their merit.

Conversations with underwriters

“The big players are very competitive, but the mutual lenders have been emphasising how they can underwrite on a more individual basis to deal with cases that are not quite straightforward, even if pricing of products is increasingly challenging,” Hollingworth said.

Such a bespoke approach “could mean higher rates and help from a margin point of view,” he added.

Jane King, mortgage and equity release adviser at Ash-Ridge Private Finance, commented that “often a smaller lender will ‘take a view’ on a case that’s slightly outside of criteria and, because a lot of the underwriting is done manually, it is often possible to chat to underwriters directly about a case that a larger lender would probably decline.”

King mentioned Ipswich Building Society, Newbury Building Society and Melton Mowbray Building Society as lenders where her company has been placing business.

The downside to the mutual sector was that they are “not keen on stretching income, have hellishly slow administration, require mountains of paperwork and have a limited choice of rates,” King added.

Big lenders lag behind

However, Dominik Lipnicki, director, Your Mortgage Decisions agreed that “they often have a solution when the big boys are not interested.”

“Some are very strong in interest-only, self employed and older borrowers, with a few not having an upper age limit. They look at cases for what they are and make their decision accordingly.

“Many of the big lenders are still behind where they should be in accepting how people work and get paid,” Lipnicki added.

He said that Hinckley & Rugby Building Society “now has no upper age limit and its board meets each day to discuss cases put to them and if it makes sense, they agree them.” Chorley Building Society was also noted as a flexible lender by Lipnicki.

“Flexibility is where, in a competitive marketplace, the smaller lenders can win. It is not all about a race to the bottom in terms of rates,” he said.

The biggest misconception we encounter is faith in the inscrutable power of the modern lending market — the credit score.

Some brokers we speak to believe it will remain the biggest consideration, even when dealing directly with a human underwriter. Most believe it will always count against their client to some extent.

In fact, it’s not the ball and chain many assume it to be.

Done properly, underwriting finance on a case-by-case basis gives providers the power to adopt different strategies that benefit borrowers, including:

• Setting the credit score aside entirely and focusing on the realities of a customer’s real financial situation;
• Taking into account rental top-ups, so the expected income generated by a property is reflected in the landlord’s affordability calculations;
• Considering various types of income;
• No arbitrary limits on how many rental top-ups should be considered.

What brokers should do

And that’s the way it should be. Human underwriting suggests a degree of common sense and flexibility applies — and that’s absolutely essential.

It is not a box-ticking exercise and should not just be a computer-based scoring system by another name. This is especially important for customers with slightly unusual circumstances.

So how do you get the most out of human underwriting?

Brokers should:

• Get on the front foot and speak to a business development manager (BDM) before submitting an application. You will be told what really matters in each case, allowing you to make the time spent compiling evidence really count.
• Don’t assume a single issue will sink an application and focus on the positives. Providers using human underwriting are doing so because they want to say ‘yes’. They’re willing to invest more time and resources identifying the valuable customers that more rigid companies allow to slip through their fingers. Be transparent and build a case for approval.
• Move early. Difficult cases are often on a deadline. Give yourself and the BDMs as much time as you can to find a solution.

Put common sense back in

A good example was a customer who accidentally missed a credit agreement payment, after mistakenly believing he had set up a direct debit. This had badly affected his credit score.

Other providers had already turned him away on that basis alone. We took a different view and simply asked for evidence that he had been in possession of the funds needed to make the payment when it was missed.

A second customer — a portfolio landlord — had bridging finance to fund a new project that was secured across six properties. This was proving costly and she wanted to refinance those loans.

Many lenders do not want to lend against a portfolio exceeding three or four properties. We looked at the whole portfolio and were able to take all the rental income and the individual finance to value ratios into account.

This is how human underwriting can put common sense back into affordability checks.

Access to underwriters should be the norm because plenty of credible customers end up in unusual situations. It’s only good service to see an opportunity where others see a nuisance.