Bridging finance lender responsibility

Dave-o

Hi All, 
Hoping someone knowledgeable can help me here. 
I am helping out some friends who secured 12-month bridging finance over a barn (single bed dwelling) next to their home. 
They have been in financial difficulty for nearly ten years now and the loan was to buy them some time to get their property sold. The property hasn't sold and the lender is now gunning for repossession. 
What I'm finding hard to research is the obligations on a bridging lender to do even the most cursory of background checks on a borrower. These are elderly people who already had serious debt, had not repaid their main mortgage for six years prior to taking out the bridging finance. I am astonished that there's no requirement to look further than "yep, they'll sell the house to repay the loan". 

I'm not looking for judgement of my friends for their financial choices, nor a lecture on the wisdom of bridging finance, I just want to know what the lender should have done before offering them money which it knew they could never repay if the house didn't sell in time. 
Many thanks!

MattMattMattUK

Dave-o said:

Hi All, 
Hoping someone knowledgeable can help me here. 
I am helping out some friends who secured 12-month bridging finance over a barn (single bed dwelling) next to their home. 
They have been in financial difficulty for nearly ten years now and the loan was to buy them some time to get their property sold. The property hasn't sold and the lender is now gunning for repossession. 
What I'm finding hard to research is the obligations on a bridging lender to do even the most cursory of background checks on a borrower. These are elderly people who already had serious debt, had not repaid their main mortgage for six years prior to taking out the bridging finance. I am astonished that there's no requirement to look further than "yep, they'll sell the house to repay the loan". 

I'm not looking for judgement of my friends for their financial choices, nor a lecture on the wisdom of bridging finance, I just want to know what the lender should have done before offering them money which it knew they could never repay if the house didn't sell in time. 
Many thanks!

A bridging loan secured against a property is a mortgage/second mortgage. Your home is at risk of repossession if you do not keep up payments secured against it.

The answer is almost certainly that the relevant checks were done, the failure to sell the property is almost certainly because they were overpricing the property, they need to lower the price and sell it at a price that means someone will actually buy it. If they choose not to it will cost them vastly more if it is repossessed. 

Dave-o

Thanks very much for this. No checks were done, as far as I am aware, other than to ask them to confirm their exit strategy (which was sale of the property). 
Do you know what checks a bridging lender is required to do on a lay customer? 

TheSpectator

Was there enough equity to cover the bridging loan?

Hoenir

Dave-o said:

Do you know what checks a bridging lender is required to do on a lay customer? 

None. The borrowers willingly entered into a short term lending agreement secured against their property. Having given the lender assurances it was their intention to market and sell the property. The terms on which the advance was made would have been clearly spelt out before hand. With the consequences if the money wasn't repaid within a given timescale. 

Dave-o

Hoenir said:

Dave-o said:

Do you know what checks a bridging lender is required to do on a lay customer? 

None. The borrowers willingly entered into a short term lending agreement secured against their property. Having given the lender assurances it was their intention to market and sell the property. The terms on which the advance was made would have been clearly spelt out before hand. With the consequences if the money wasn't repaid within a given timescale. 

This is interesting - thank you. It just seems odd that a lender can lend significant sums of money to a member of the public who, with respect to them, have little education and even less financial knowledge. I was sure there must be some code of conduct for responsible lending or similar, but it seems you are right (which is why I can't find one!). 
Many thanks all for the help which, sadly, confirms what I thought might be the case. 

Dave-o

TheSpectator said:

Was there enough equity to cover the bridging loan?

Yes there was - thanks.

Hoenir

Dave-o said:

Hoenir said:

Dave-o said:

Do you know what checks a bridging lender is required to do on a lay customer? 

None. The borrowers willingly entered into a short term lending agreement secured against their property. Having given the lender assurances it was their intention to market and sell the property. The terms on which the advance was made would have been clearly spelt out before hand. With the consequences if the money wasn't repaid within a given timescale. 

This is interesting - thank you. It just seems odd that a lender can lend significant sums of money to a member of the public who, with respect to them, have little education and even less financial knowledge. I was sure there must be some code of conduct for responsible lending or similar, but it seems you are right (which is why I can't find one!). 
Many thanks all for the help which, sadly, confirms what I thought might be the case. 

Why do consider the lending irresponsible?  

How is a lender going to determine the extent of every member of public's standard of education and financial knowledge prior to making them an official financial offer?  

sheramber

Dave-o said:

Hoenir said:

Dave-o said:

Do you know what checks a bridging lender is required to do on a lay customer? 

None. The borrowers willingly entered into a short term lending agreement secured against their property. Having given the lender assurances it was their intention to market and sell the property. The terms on which the advance was made would have been clearly spelt out before hand. With the consequences if the money wasn't repaid within a given timescale. 

This is interesting - thank you. It just seems odd that a lender can lend significant sums of money to a member of the public who, with respect to them, have little education and even less financial knowledge. I was sure there must be some code of conduct for responsible lending or similar, but it seems you are right (which is why I can't find one!). 
Many thanks all for the help which, sadly, confirms what I thought might be the case. 

They knew enough to get a bridging loan or somebody advised them. 

 

MEM62

Hoenir said:

Dave-o said:

Hoenir said:

Dave-o said:

Do you know what checks a bridging lender is required to do on a lay customer? 

None. The borrowers willingly entered into a short term lending agreement secured against their property. Having given the lender assurances it was their intention to market and sell the property. The terms on which the advance was made would have been clearly spelt out before hand. With the consequences if the money wasn't repaid within a given timescale. 

This is interesting - thank you. It just seems odd that a lender can lend significant sums of money to a member of the public who, with respect to them, have little education and even less financial knowledge. I was sure there must be some code of conduct for responsible lending or similar, but it seems you are right (which is why I can't find one!). 
Many thanks all for the help which, sadly, confirms what I thought might be the case. 

  
How is a lender going to determine the extent of every member of public's standard of education and financial knowledge prior to making them an official financial offer?  

Great point.  I have never been asked for my educational qualifications or what level of financial understanding I have before being lent money.  The basis behind a bridging loan is easy enough to understand.  

silvercar

The bridging loan got them out of the hole they were in. I don't see any grounds for complaint. 

I'm surprised that the bridging company isn't prepared to extend the loan term. Have they asked? Does the company have an assisted sale team. Assisted sale would mean they offer help in getting the place sold, the most obvious thing would be to check it is priced correctly and the estate agent is promoting it properly.