A game of two halves – managing the lender-broker relationship
By Laura Miller -
Behind the curtain of tech-powered Covid-19 communication adaptations, brokers and lenders reveal problems in trying to maintain already strained human working relationships.
Coronavirus has hit bridging lending two ways. Bridging Trends reported a 45pc fall in gross loan volumes in the first half of the year, but demand for regulated business has surged to a record high average of 55.6pc of all lending in Q2, up from 37.5pc a year ago.
Against this slow/fast backdrop, brokers and lenders have been grappling with new ways of working to complete what business has been possible. Bridging Loan Directory spoke to some in each camp and found tensions, amid opportunities.
“Communication has not been some lenders forte recently and it has really shown,” says Kim McGinley, director at broker Vibe Finance. Sarah Fisher, director at broker Kensington Shorre, agrees. “Overall I have been disappointed with the quality and level of response from many lenders,” she says.
Covid-19 has meant fewer staff working and often from home. As all the indicators suggest this will become the new normal, lenders are expected to adapt. Instead some are failing in basic courtesies, say brokers, with most unable to return emails and calls in a timely manner.
“You end up in a cycle of chasing funders to do business or to even understand if your case has been picked up or not,” says Fisher, “and unable to manage client expectations”.
Fisher and McGinley have each previously worked for lenders, giving them insight into the other side of the deal. Reflecting on her time as a business development manager, Fisher says she gave feedback even when a case was rejected, out of respect for the relationship and to gain future proposals.
But she says she commonly receives just “a short email advising a deal isn’t for them, full stop”.
In EY’s bridging market survey 2020, 60pc of respondents cited “strong relationships with brokers” as the most important capability to remain successful in the market. Almost half (46pc) said “high quality service from the lender” is a very important consideration, up from 37pc last year.
“Being an adviser at the moment and staying on top of ever changing criteria, products and appetite is hard to say the least,” says McGinley, “having lenders that recognise this goes a long way,”
Curt and brief declines at least save time. Worse for brokers are lenders who create delays. “Lenders that demand details already comprehensively provided leave brokers repeatedly asking for the lender’s appetite, which is not forthcoming, or pointing them to sections in a case that answers their questions, slowing the entire process down,” says Fisher.
Delays caused by a lender looking at cases haphazardly are a huge turn-off for brokers. In the EY study 58pc of respondents cited “speed of execution” as very important for a broker when choosing a lender, consistent with the prior year survey results.
“Many funders are simply firefighting email flow at present rather than taking the opportunity to build new pipelines, fully read a case presentation or build new introducer relationships,” says Fisher. “We are all working with staffing issues and remote working problems, however I feel brokers need more contact overall,” she adds.
McGinley agrees: “Many brokers have lost contact with BDMs who have been furloughed and relationships fell away without knowing who to contact in times of need,” she says.
Better communication would also help solve another perennial problem; pushback from higher-ups that mean “terms often differ negatively to the client’s end position after offer – a hard pill to swallow for the client when an application is fully packaged and full details disclosed,” says Fisher.
Proactive lenders have seen in Covid-19 an opportunity to bolster broker relations, by “accepting responsibility, communicating effectively and with an empathetic and supportive approach to our role”, says McGinley.
Fisher praises The Bridging Group, which “has really shone” throughout the pandemic. “They stepped up and funded deals when many were unfortunately on hold. They were very accommodating and moved mountains to get deals over the line when we were in the start of lockdown,” she says.
Mint and MT Finance provided fast and clear communication, she adds. “They are speedy, transparent and do what they say they are going to do, all while keeping you updated with the current changes in criteria,” says Fisher, “you always know what is achievable rather than guessing, which is a pleasure”.
To improve broker-lender relations, McGinley and Fisher want weekly communications from lenders, including on changes to policies, criteria, updated adverts on their websites, and reasons cases are declined.
“It always comes down to two things, communication and trust,” says McGinley, “without these a broker lender partnership can fall away quite quickly”.
Fisher adds: “We need more honesty and transparency from lenders when they are stepping out of markets, have reduced staff and reduced BDMs, and new service level agreements.
“Those lenders who are visible on our radar in a regular manner are the ones we will give business to,” she says, “help us help you.”
“The ideal relationship with brokers is a true partnership, not just the broker sending us a name and contact details,” says Mark Harrison, director of business development, lender Stretton Capital.
In his experience, “those brokers that get close to their borrowers are the ones that complete the most deals with us”.
Brokers’ scattergun approach of sending the same enquiry to 10 different lenders to see which one will do the deal based on their publicly available product guide doesn’t work, he says, “because there is so much more a lender can actually do” if a broker asked.
Michael Strange, managing director at lender Funding 365 says he only wants to work with brokers who put in the leg work upfront.
“Those who complete thorough research of their cases before packaging the deals up for us, have a high standard of communication and ensure their clients’ needs are met,” he says.
“We’ve encountered a few who don’t do this,” he adds.
Red flags for both Harrison and Strange are multiple applications of the same case from different brokers.
“When a borrower engages lots of brokers, the brokers typically have a less thorough understanding of the client and their needs and this can cause issues,” says Strange.
Harrison agrees: “Lots of lenders have this problem. The borrower probably tells the broker, “I am only speaking to you about this loan”, only for the borrower to have had the same conversation with four other brokers. It’s frustrating for everyone, including the broker.”
Stretton Capital typically does little business with the larger packagers, distributors, and aggregators, says Harrison, preferring to work with smaller specialists, “usually ex-banking, mortgage or lending personnel who now run their own businesses”, he says.
Stretton’s focus on specialist brokers – in line with a large part of its business being in complex loans such as commercial and industrial development, holiday homes and lending in the Channel Islands – mean it tends to have a core of brokers it uses frequently.
For brokers thinking of using Stretton, Harrison pledges the lender’s availability to discuss a deal, and to “tell you quickly if we can or cannot do it”.
“We can’t and won’t do every enquiry that comes our way but we will be quick to tell you either way,” says Harrison, “I think that is key as it allows the broker to source other lending options without too much of a delay.”
Strange says the ideal lender and broker relationship is “professional, collaborative and transparent”.
He says brokers including Adapt Finance, LDN, SPF Private Clients, Target Capital, Mantra Capital, Clever Lending, LSH, Arc & Co, and Black Book Finance, “all consistently demonstrate a high level of professionalism, with in-depth understanding of the changing market and a drive to deliver the best deals for their clients”.
He admits for the working relationship between brokers and lenders to improve, some lenders need to change.
“Some bridging lenders still add uncommon fees like application fees, title insurance fees, CHAPS payment fees, correspondence fees, and more, which make it harder for brokers to compare different lenders’ terms,” he says.
“Ideally we’d like to see them get rid of these unnecessary fees, or for all lenders to add an annual percentage rate of charge to their terms.”
Overall, the lenders echo calls from the brokers about the need for better communication: “Where brokers and lenders have a close working relationship,” Harrison says, “there is a greater chance of getting the deal done.”
Laura Miller is a freelance journalist who writes about money and business. She regularly appears in UK national and trade newspapers and magazines, and has previously worked for ITV News and the Telegraph among others. Find her on twitter @thatlaurawrites