1. Who are you?
I am Mike Healy, head of commercial at CHL Mortgages or alternatively you can say I’m head of CHL Commercial. CHL Commercial launched to the entire broker market in the middle of last year following a successful pilot project earlier in 2007. At present we remain one of the few non-high street commercial lenders still lending in the current climate and continue to have an appetite for intermediary-placed commercial lending.
2. What is your background and what do you feel made you suitable for your current role?
I’m currently aged 52 and have had a lifetime’s experience working in the banking and financial services sectors. I originally worked for Allied Irish Bank before setting up as a broker in the early 1990s – I can honestly say I’ve seen this market from both sides of the fence.
Bringing everything right up to date I was head of sales for CHL Mortgages between 2003 and 2006 before moving across to set up the commercial lending division 18 months ago. My suitability for this role stems from the overall wide-ranging experience I’ve gained as a banker, broker, sales team manager and commercial head. I’ve also picked up my fair share of underwriting and marketing knowledge – in this market it is all about understanding the various roles and responsibilities within an organisation plus the wants and needs of your customers, in our case, the intermediary. Having said that, I’m still learning every day.
3. What do you do on a day-to-day basis?
Essentially I manage the CHL commercial division. This means I’m liaising with our underwriters, working with the credit risk department and speaking to all departments to ensure we are on track to achieve our objectives.
I also speak regularly with CHL’s broker partners making sure the lines of communication are always open. As a lender which only distributes through intermediaries it is vitally important that our partners are aware of what we are doing and vice versa. I will also liaise with brokers and agree deals in principle. The important point to remember with the commercial lending sector is that there is no such thing as a ‘standard’ deal – commercial is particularly varied and we look at all cases on their individual merits. Without a tick-box mentality we are looking at all aspects of the case and work on the basis that no two cases are the same.
4. What did you do at the weekend and what other hobbies do you have?
With grown-up children I am no longer needed as an unpaid taxi driver so I tend to make the most of my garden at the weekend. Apart from pottering out there my two favourite sports are both horse racing and rugby, which can both get the heart racing. To calm myself down and pick up a bit of extra knowledge I’ve normally got my head in a book.
5. Where do you think interest rates and the housing/mortgage market will go in 2008?
I certainly don’t see myself as a pessimist, however, I’m afraid I don’t envisage any dramatic improvement for the housing and mortgage market in 2008. The Credit Crunch is over a year old and there appears to be no further improvement in terms of liquidity. We are effectively treading water here, if not sinking further. The Government looks unwilling at present to push forward some of the recommendations coming from the industry and it looks like there will be no decisive action (if any) until October/November.
In terms of interest rates, the Bank of England’s Monetary Policy Committee (MPC) is afraid to reduce Bank Base Rate because of inflationary fears while the UK economy in all other respects is crying out for a reduction. In this sense we are definitely stuck between a rock and a hard place.
6. Who do you think is to blame for the recent problems in the mortgage market? Did providers, brokers and consumers get the support they needed?
Our recent problems appear to have their origin in the USA where the sub-prime market in particular got out of control. The knock-on effect to the UK has been considerable particularly for those sub-prime/specialist lenders who have US investment bank parents – many have disappeared from the market.
I’m not one, however, to put the blame for all the market’s woes on the doorstep of the US. Everyone in the mortgage market shares some of the blame as in the past three to four years in particular everybody seemed to take their eye off the ‘risk’ ball. The quest for volume in a highly competitive market meant that in large numbers of cases the borrower’s actual ability to repay the mortgage became only a minor consideration. The industry seemed to be falling over itself to lend to those who had bigger and bigger credit issues without looking at the risk they posed. It would seem that this situation is unlikely to happen again give the recent fallout.
The other factor of course is the demand for all things property in the UK at a time when supply of new homes remains low. House price inflation, which in the past few years was running at 20 per cent per annum, was simply unsustainable - it just so happens that the healthy dose of reality the housing market was waiting for came at a time when credit was drying up. I think they refer to this as ‘a perfect storm’.
7. What is the history of your company?
CHL (Capital Home Loans) has been in existence since 1986 when it was part owned by a French bank and provided self cert loans to the self-employed. It has been offering specialist mortgage solutions in its present guise since 1992 and was bought by Irish Life & Permanent in 1996. Historically, it has focused on both the buy-to-let and self-certification mortgage sectors growing to be a leading player in these fields. As at the end of 2007, according to the Council of Mortgage Lenders’ (CML) statistics, CHL were the seventh largest buy-to-let provider in terms of balances outstanding and the eighth largest in terms of gross advances.
CHL Mortgages is based in Fleet, Hampshire and only offers its products through the intermediary marketplace. We design those products to meet the needs of various customers ensuring we lend both responsibly and meeting our commitment to treat customers fairly.
8. What is your company’s philosophy?
Our customers are truly at the heart of our operation and, as an intermediary lender, our customers are both our broker partners and their clients. We look after our introducers and borrowers and in turn they look after us. While the current market conditions are testing all relationships to the limit, it is the close contact and communication we have with our customers that sets our proposition apart.
9. What advice would you give to intermediaries looking to enter the market?
Firstly, I would say that the commercial finance market is definitely one that traditional residential mortgage brokers should be involved in and it is not that great a step to offer advisory services in this sector. However, neither should it be approached as easy pickings and brokers should be prepared to put in the leg work to gain the dividends.
Therefore, intermediaries need to conduct their research about the commercial market and work out what services they want to provide. Contacting the National Association of Commercial Finance Brokers (NACFB) should be a must as they will be able to provide valuable information. Intermediaries should also consider linking-up with a local commercial broker, at least initially, so they can learn from them.
Qualifications are always important and provide both lender and customer with a degree of confidence about the adviser’s level of competence. Brokers have the option of completing the Certificate in Commercial Mortgages (CeCM) from the ifs to ensure they’re up to speed with the market. Finally, I would say don’t shy away from the market; it is huge with lots of opportunities and you can be guaranteed that if you don’t do it, someone else will.
10. How high would you say intermediary confidence is in the current market?
It’s fair to say that intermediaries in the main are feeling pretty bruised at the moment. And, let’s be honest, who can blame them? There have been a number of hits to the solar plexus and with issues like dual pricing causing great concern they are wondering what may be coming next. However, we should not underestimate the intermediary community, they are a hardy breed and are truly entrepreneurial in their approach. They are the first to seek out and find the opportunities in the market and at a time when financial services have never been so complicated, they will continue to be in demand. The intermediary channel has been changed by present conditions, but it will bounce back.
11. Does the market need more brokers in it – if so, how can the industry attract more?
I honestly don’t think it’s a numbers game now. It’s more about identifying what benefits brokers can bring and making sure the client recognises the worth of those benefits. Once upon a time there were almost too many products on the market, now it’s too few, so customers are still going to need a broker’s skill and expertise to get the appropriate deal.
12. If there was one aspect of the current market you could improve, what would it be?
In one word, liquidity.
13. Where do you think the market will be in 2010?
I think we will see a much improved situation however this does not mean a return to a pre-2007 market. Those expecting those days to return need a reality check. The market is what it is and we must all work with what we have.
