11. Checking The Applicant's Credit Status Flashcards
What do bank searches not reveal?
- pending court hearings
- action for maintenance/child support
- borrowing yet to be drawn down
- cash transactions
What should a lender do for customers who have lived abroad recently with regards to credit searches?
They may not show up on credit searches - lenders should just use whatever evidence is available
How many missed payments must you have for defaults to show up on credit searches? How long do they last for?
1+ missed payment where you did not respond satisfactorily to rectify
last for 6 years, even if resolved
What is a pay day loan? What do they indicate?
Short term very high interest loan, designed to be paid next pay day
Indicate you cannot manage finances & resort to last minute borrowing
Do pay day loans show up on credit searches? How long do they last?
Yes, but sometimes they get missed due to their short term. lenders can use other sources to find them
Last 6 years
What factors are taken into account when credit scoring? (6)
- Age
- Income
- Occupation
- Existing Commitments
- Credit searches
- Conduct
What are borderline applications?
Applications which score ‘borderline acceptable’ with credit scoring.
Lenders have discretion whether to lend or not. Scoring is not universal and differs between lenders
Is credit scoring best used when dealing with high volumes of business or low?
High - bigger sample size
True or false, lenders are usually willing to offer larger amounts to customers with guarantors than they would without them?
True
What do we mean by the following?
1. Fill liability guarantee
2. Limited liability guarantee
- Guarantor is liable for entire debt and must demonstrate they can afford 100% of mortgage payments
- Guarantor is liable for proportion of debt, usually the difference between what the lender would normally lend and the amount needed. Must show they can afford this proportion of repayment
What must lenders always advise guarantors to do?
Seek independent legal advice
What are the 4 issues that can render a guarantee invalid?
- Lack of capacity to contract - minor/someone without power
- Undue influence - persuasion
- Misrepresentation - of terms
- Misapprehension - misunderstanding
What does it mean if a guarantor has been forced into a contract under duress?
They were forced to sign or threatened
Are borrowers required to disclose all information to their guarantors?
No - not unless they ask for specific info
Do guarantors have an interest in the property?
No
Do guarantors have the right to inspect the mortgage document?
No
Do guarantors have the right to be informed if the borrower misses payments?
No - they often first hear about this when payment from them is demanded
Do guarantors have the right to be informed if the borrower requests a FA or term extension?
Yes - they are able to refuse consent
Can guarantors make a request to be released from the guarantee?
Yes - but lenders usually only agree if the borrower can support the mortgage on their own
According to MCOB 11 - Responsible lending, what checks should be made on guarantors?
Exactly the same as those made on borrowers
What is a joint borrower, sole proprietor mortgage? How many incomes need to be assessed? Who is liable to pay?
Joint mortgage but only one name on land reg (they have no rights to property)
Both jointly and severally liable & two incomes must be checked
What is the main advantage of taking out a joint borrower, sole proprietor mortgage? (2)
- SDLT - Avoids a joint owner surcharge’
- SDLT - If one is 1st time buyer and other isnt they wouldn’t quality for 1st time buyer exemption if both names put on land reg
What is a County Court Judgement? (CCJ)
Court ruling of how debt should be repaid, e.g lump sum or instalments
What happens if terms of a CCJ are not met?
Creditor can go back to court and request an ATTACHMENT OF EARNINGS ORDER
This is when employer deducts debt directly from earnings (this can only be passed for employees, doesnt work for self employed)
