"Loans which are properly considered, well underwritten and well documented, face few problems that cannot be overcome. "
FR: As a senior partner, what does your day-to-day role involve and what trends are Brightstone Law seeing in the market at the moment?
I enjoy being at the coal face. It gives me real authority to speak on issues which are current and real and allows me to speak from personal experience. In basic terms, I get my hands dirty every day. With the support of an experienced and reliable team behind me, I am also able to devote a proportion of my time to engaging with industry professionals, presenting education pieces to interested stakeholders on legal issues in print and at appearances, as well as contributing to the short-term lending space by participating in regular round tables and the recently formed NACFB bridging subcommittee.
FR: What legal challenges are lenders facing in the current environment?
We deal with a myriad of legal challenges facing lenders, ranging from ensuring that developments are feasible from a legal perspective; to identifying issues pre-lend and offering sensible solutions to facilitate lending, to combating cyber crime and mortgage fraud; to dealing with issues arising from complex and extensive regulation; to responding to third party occupational rights, unknown to lenders at the date of advance; and whatever the challenge applying a pragmatic approach. Difficult cases have their own legal challenges, but we enjoy the challenge!
Loans which are properly considered, well underwritten and well documented, face few problems that cannot be overcome. The law is continually developing, and the challenges which lenders face can vary, so it’s absolutely key to have an experienced professional team behind the lender; experience is often as valuable as technical knowledge.
FR: Brightstone Law is seeing an increase in claims for both development finance and valuations – why is this and how will these markets continue to change?
Valuation issues are masked by a rising property market, so it’s no surprise that we are now seeing a rise in negligence claims on valuations carried out in the last few years, which no longer appear to be supportable when the security is tested in the market.
At the same time, we are seeing issues arising in development lending, again indicative of a stagnant or falling property market. Some years ago, there was a rush to lend development finance. Here was an opportunity for specialist finance to compete and succeed against the traditional funding sources. Many lenders began trading in this specialist area. Some, not all, did so without first hand experience and before recruiting inhouse specialist expertise. Layered on top of that, some lenders only now appreciate how important continuous close monitoring of developments, as they progress, is for successful finance provision.
FR: How will technology continue to affect the lending market?
As technology continues to increase its role in the lending process, one of the major issues lenders will continue to face is an increase in mortgage fraud. There seems to be a political ambition to digitise the conveyancing process, which can reap great rewards on time, costs and functionality. But on the other hand, this presents a huge opportunity for fraudsters to circumvent and breach a sophisticated conveyancing structure that has worked reliably on the whole, for a number of years. I am working on an actual case where it is alleged that a prior mortgage was removed fraudulently, without the previous lender’s consent or knowledge.
I believe the industry needs to come together to find better solutions to tackle cyber crime generally. At our firm, we are constantly innovating measures to tackle fraud and offer lenders support in this area, as well as others, such as anti-money laundering compliance.
One potential mortgage fraud application was caught recently when carrying out enhanced due diligence on a third party. Why enhanced due diligence? Because a number of flags were identified and the application failed the Brightstone sniff test. Failure to identify that mortgage fraud, would have left the lender without security for a facility in excess of £250,000.
FR: If you could see one headline about financial services in 2018, what would it be?
I would love to see a headline showing that alternative finance is the new mainstream.
I believe strongly that the institutions have fallen so far behind alternative finance providers in terms of commerciality, process, execution and delivery, that borrowers now see them as more reliable and a first port of call, before well-known traditional High Street names. The price differential between the two is no longer prohibitive.
