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A bridge too far

Paul Thomas reports on why mortgage distributors are increasingly shying away from unregulated bridging loan providers

AMI director Robert Sinclair (pictured, left) says: “I have said before that any regulated intermediary who places bridging loans with an unregulated lender should be careful. In my opinion, all bridging should be treated as though it is a regulated product.”

Distributors have also expressed concerns about the potential for fraud in the sector. PMS executive chairman John Malone says: “We have looked at a number of these lenders and we think working with regulated lenders gives us a high degree of comfort because one of the big areas where I see fraud growing is in the bridging market.”

Malone adds PMS is in talks with a second regulated bridging lender about joining its panel.

Personal Touch Financial Services sales and marketing director Dev Malle says: “We make no bones about the fact we want our advisers to work with regulated lenders.”

SimplyBiz Mortgages managing director Martin Reynolds says increased scrutiny from the regulator influenced the firm’s decision. He says: “We only have one lender on our panel. Bridging is an area very much under the spotlight, so we have decided we want to work only with regulated lenders.

“A shift to using regulated lenders will raise standards in the bridging sector. It is an evolving sector and moves such as this will improve its reputation.”

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Dragonfly Property Finance chief executive Jonathan Samuels (pictured, right), whose firm is working through the application process to become a regulated lender, believes networks should instead conduct due diligence on firms individually to determine whether or not they are suitable to deal with.

He says: “You could have a regulated lender offering a product in a case where a product from a non-regulated lender would be more appropriate.

“Rather than making a decision to deal only with regulated lenders, networks should look beyond that and make a decision on an individual basis to see if a firm is suitable.

“Regulation is a positive thing, which is why we are becoming regulated, but, that said, it could be unfair on customers when dealing with a non-regulated case to deal only with regulated lenders.”

Montlake argues that the added protection of working with regulated firms outweighs the added choice of dealing with unregulated firms. He says: “It will be more beneficial for the consumer. It will obviously mean less choice but at least they are more protected because they are dealing with regulated firms.”

However, another approach, which Pink Home Loans has taken, is to insist unregulated firms act in the same way as regulated entities when dealing with the network.

He says: “We are going to implore all our lenders to show transparency in their fees and charges and how they allow customers to exit the loan. We will ask non-regulated firms to act like regulated firms when they deal with us.”

Money Marketing understands that a number of unregulated bridging lenders are currently applying for FSA permission.

John Charcol senior technical manager Ray Boulger says: “It can take the FSA well over a year in some cases to determine an application. In a sector that is experiencing increased activity, it would be beneficial to consumers to speed this process up and it would allow distributors to pick from a larger pool of lenders if they are moving in that direction.”

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