August 2019
By Adrian Bloomfield, CEO at NCI Resources
This time last year I wrote an article for FIBA explaining the advantages and valuable precautions which competent lenders may take by engaging third party field agents to meet and interview applicants for short term loans.
On a similar theme, there has been a notable increase in the number of short term lenders who are curious about the progress of the project their loan was used to finance. Typically, applicants say they intend to re-furbish property and often cite a kitchen makeover or a re-fitting/redecoration of the bathroom. There is an increasing tendency for lenders to engage field agents to visit the property security and report back as to whether or not the purpose of the loan is being fulfilled. In the event that there is no obvious sign of the appropriate use of the funds, then this will naturally cause alarm bells to ring and lead to a discussion between the borrower and the lender.
The type of interim visits to which I refer can either bring comfort or cause concern. For example, in a situation where the proposed use of the funds is expected to start with the demolition of part of the property and other such works, there can be an anxiety for the lenders as a result of the value of their security being diminished. It is understandable that where the loan to value is fairly high at the time the loan is approved, it can easily result in a negative equity in the initial period of the loan. Competent lenders are concerned about this prospect although there is not much that can be done within the terms of a typical loan agreement. Nevertheless, it is sensible for lenders to be curious.
Another good use of the interim visit is to monitor and record whether or not an owner and previous occupier who moved out before the loan completed has not moved back in or allowed his family into the property. This is a valuable check in respect of regulation and can certainly draw attention to issues which could cause concern and potential difficulties in the event that the loan defaults and the borrower raises a defence in respect of an alleged breach of regulation. As with most aspects of banking, the lender is advised to collect as much relevant data as possible and monitor the transactions to prevent surprises.
The article last year and this article covers two of the aspects of the engagement of field agencies to obtain data and provide reports. There is a third tier of activity when field agents are engaged to meet borrowers shortly before the anticipated expiry and repayment date. I will deal with this issue and certain post-completion matters in future articles.
NCI has a national network of FCA approved Field Agents and can visit any address in the UK within a few days.
Find out more: https://www.nciuk.com/short-term-loan-application-reviews/