Wayne's world: Picking up the pieces when a complex case has gone wrong
TFC's founding Director, Wayne Smethurst, has launched a new blog on Mortgage Introducer where each month he will discuss how he has structured a recent complex case.
Read Wayne's first blog post below where he demonstrates how he solved a case for a couple who were about to lose a massive chunk of money on their home because a potential mistake had been made by their initial advisor.
We don’t deal with vanilla mortgage deals in specialist lending, and no two cases are the same.
Nevertheless we notice trends, and one is cases that come to us after they have gone wrong, or stalled elsewhere.
It’s not necessarily the previous adviser’s, or distributor’s fault. Sometimes it’s outside their area of expertise, or the lender has thrown in a curveball. Sometimes it is their fault, and someone has simply made a mistake.
When an application goes wrong it can have a huge impact on the borrower as it could mean they lose out on a property they want to buy, lose a buyer of their own home, or stand to lose a considerable sum of money.
I had one such case last month where a couple were about to lose a massive chunk of money on their home because a potential mistake had been made by their initial adviser – and it needed to be rectified quickly.
The couple had a property which was held in a limited company. They owned the limited company but they also resided in the property – it’s their home.
They had a mortgage with a building society and got into arrears, missing three payments. The receivers had been brought in and were planning to sell the property for £1.1m, a massive £250k less than £1.35m the couple believe they can reasonably get for the house.
They wanted a bridging loan to allow them the time and space to sell the property themselves. This in itself is not too unusual.The problem arose because their initial broker had told them that an unregulated bridging loan would be suitable and went ahead with the application.
At the 11th hour, literally on the day of completion, the lender’s solicitor rightly pointed out that this was open to legal challenge, since the lender wasn’t regulated to lend to consumers. In this case it didn’t matter that the property was technically owned by a limited company owned by the couple. In fact, because they resided in the property, their home, they were the beneficial owners and the loan they needed was likely to have been a regulated one.
It wasn’t a black and white case but that broker made a mistake in simply assuming it was out of scope of regulation. Ultimately that would be in the hands of the courts but it is down to a lender’s policy whether or not they are prepared to accept a legal challenge – in this case they were not. A safer option would have been a regulated deal.
At this point the receiver was very close to selling their home, meaning they were set to lose out massively.
Putting it right
The clients came to our London office with their financial adviser, and we agreed it had to be a regulated bridging deal, arranged quickly to save their home from being sold off on the cheap.
Within 24 hours we had arranged a regulated bridging loan with Masthaven, on a nine month term at 0.99% a month with no monthly payments required. The quicker the couple sell their home the cheaper the loan will be, but crucially they now have some breathing space to get the best price for their property.
We agreed the loan in principle with Masthaven within the hour, and I literally walked the documents and details around to their office in person. The clients were delighted that we had managed to stave off the sale and given them terms to review at their leisure.
Of course, when you rectify a mistake, that client is extremely grateful and usually extremely loyal. So if something does go wrong, seek out a specialist, as you might be surprised at how quickly we can put things back on track.