Nervousness in the US and European money markets is causing reticence among would-be mortgage fund investors, leaving securitisation markets effectively closed.
Little meaningful action has been taken to ease the concerns of investors although lenders have reacted quickly by constructively reducing LTVs and tightening criteria. This is partly to generate high quality mortgage books that will attract investors when confidence returns but also a way of controlling the amount of business they receive.
But this change in approach to commercial lending is little use to lenders that are looking to securitise their books now. Prior to the recent announcement by one of the UK’s largest self-cert lenders that it was suspending originations, we had already seen two other big name commercial lenders stop advancing monies this year.
In the current financial environment, just a handful of commercial lenders are still willing to consider business from clients unable to provide meaningful trading accounts or those with credit problems such as missed mortgage payments, credit card defaults and County Court judgements. In fact, it has been impossible to obtain a commercial self-cert mortgage beyond 75% LTV for borrowers with ad-verse credit for some time.
Although commercial lenders have respon-ded to the anticipated demands of investors, the sector has been caught short. Lenders solely reliant on securitisation have been left without contingency monies or assets to support them through the present problems.
Nobody can predict how long this difficult andy young is chief executive of The Business Mortgage Companyperiod will last but survival tactics are already in evidence. And where streamlining is necessary, there is often an impact on one of the lar-gest overheads for firms – staff. Reduced business appetite and lower attainment means re-dundancies and it’s possible we will see a significant headcount crunch.
Most commercial and bridging lenders are scrutinising their debt exposure, assets and liquidity and deciding to restrict market share. Rather than trying to service the entire broker network, strategic planning dictates that preferred introducers are selected to help lenders manage the business they receive. For those new to the market, it would be advisable to get support from specialist commercial brokers to determine what deals are available.