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Cemap 2&3 Self Testing > 11. Checking The Applicant's Credit Status > Flashcards

11. Checking The Applicant's Credit Status Flashcards

1
Q

What do bank searches not reveal?

A
  1. pending court hearings
  2. action for maintenance/child support
  3. borrowing yet to be drawn down
  4. cash transactions
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2
Q

What should a lender do for customers who have lived abroad recently with regards to credit searches?

A

They may not show up on credit searches - lenders should just use whatever evidence is available

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3
Q

How many missed payments must you have for defaults to show up on credit searches? How long do they last for?

A

1+ missed payment where you did not respond satisfactorily to rectify

last for 6 years, even if resolved

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4
Q

What is a pay day loan? What do they indicate?

A

Short term very high interest loan, designed to be paid next pay day

Indicate you cannot manage finances & resort to last minute borrowing

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5
Q

Do pay day loans show up on credit searches? How long do they last?

A

Yes, but sometimes they get missed due to their short term. lenders can use other sources to find them

Last 6 years

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6
Q

What factors are taken into account when credit scoring? (6)

A
  1. Age
  2. Income
  3. Occupation
  4. Existing Commitments
  5. Credit searches
  6. Conduct
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7
Q

What are borderline applications?

A

Applications which score ‘borderline acceptable’ with credit scoring.

Lenders have discretion whether to lend or not. Scoring is not universal and differs between lenders

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8
Q

Is credit scoring best used when dealing with high volumes of business or low?

A

High - bigger sample size

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9
Q

True or false, lenders are usually willing to offer larger amounts to customers with guarantors than they would without them?

A

True

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10
Q

What do we mean by the following?
1. Fill liability guarantee
2. Limited liability guarantee

A
  1. Guarantor is liable for entire debt and must demonstrate they can afford 100% of mortgage payments
  2. 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
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11
Q

What must lenders always advise guarantors to do?

A

Seek independent legal advice

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12
Q

What are the 4 issues that can render a guarantee invalid?

A
  1. Lack of capacity to contract - minor/someone without power
  2. Undue influence - persuasion
  3. Misrepresentation - of terms
  4. Misapprehension - misunderstanding
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13
Q

What does it mean if a guarantor has been forced into a contract under duress?

A

They were forced to sign or threatened

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14
Q

Are borrowers required to disclose all information to their guarantors?

A

No - not unless they ask for specific info

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15
Q

Do guarantors have an interest in the property?

A

No

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16
Q

Do guarantors have the right to inspect the mortgage document?

A

No

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17
Q

Do guarantors have the right to be informed if the borrower misses payments?

A

No - they often first hear about this when payment from them is demanded

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18
Q

Do guarantors have the right to be informed if the borrower requests a FA or term extension?

A

Yes - they are able to refuse consent

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19
Q

Can guarantors make a request to be released from the guarantee?

A

Yes - but lenders usually only agree if the borrower can support the mortgage on their own

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20
Q

According to MCOB 11 - Responsible lending, what checks should be made on guarantors?

A

Exactly the same as those made on borrowers

21
Q

What is a joint borrower, sole proprietor mortgage? How many incomes need to be assessed? Who is liable to pay?

A

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

22
Q

What is the main advantage of taking out a joint borrower, sole proprietor mortgage? (2)

A
  1. SDLT - Avoids a joint owner surcharge’
  2. 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
23
Q

What is a County Court Judgement? (CCJ)

A

Court ruling of how debt should be repaid, e.g lump sum or instalments

24
Q

What happens if terms of a CCJ are not met?

A

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)

25
Q

Where are CCJs recorded? How long are they recorded for? What constitutes as satisfied?

A

The register of Judgements Orders and Fines

recorded for 6 years

If paid off within 1 month after passing of judgement, will be recorded as ‘satisfied’, otherwise stay unsatisfied for whole 6 years

26
Q

True or false, concealing CCJs is a criminal offense?

A

True

27
Q

Can lenders lend to people with CCJs?

A

Yes, but not many will. Higher rates for those who do

28
Q

What happens to a property owned by someone who is bankrupt? Can it be seized? What does this depend on?

A

Can be taken by the bankruptcy trustee if
1. you are sole owner
2. you have a property that has £1,000+ equity

You would no longer be the legal owner and the trustee can sell it to settle debt

29
Q

What happens to a property owned by a couple, where only one is bankrupt? Can it be seized? Can it be sold?

A
  1. Trustee doesn’t automatically get property, but can apply for a possession order if the bankrupt’s share of equity is £1,000+
  2. Form J Restriction entered onto land reg - notifies the trustee of any attempts to sell, but does not stop the joint owner from selling
  3. The joint owner can buy out the bankrupt’s share
30
Q

If a property belonging to a bankrupt is a main residence, what can the trustee do?

A

Delay forced sale for at least 1 year to allow family to make other arrangements

31
Q

How many years does a bankruptcy trustee have to make a forced sale?

A

3 years, otherwise ownership reverts back to the bankrupt

32
Q

What percentage of creditors must agree to an INVA?

A

Those owning 75% of total debt

33
Q

What happens once an IVA is in place? (2)

A
  1. interest and charges frozen
  2. debtor makes monthly repayments
34
Q

What is a company voluntary agreement? Who has to agree to this?

A

Ltd company equivalent for IVA

All directors/partners must agree

35
Q

What are the eligibility requirements for a debt relief order? (3)

A
  1. Owe a maximum of £30k
  2. Total GROSS assets of less than £2k
  3. Disposable monthly income of less than £75
36
Q

What is a moratorium on debts?

A

Wit debt release order, creditors are subject to a moratorium on debts - this means they can’t seek repayment for 12 months

If debtor meets the terms, the debt must be written off

37
Q

Are Debt release orders likely to be offered for mortgages?

A

No, too high risk

38
Q

Has mortgage fraud been committed if the applicant misrepresents at application stage but the mortgage does not get offered?

A

Yes

39
Q

In what way can lenders seek to eliminate fraud when collecting info on income and outgoings? (2)

A
  1. seek written confirmation
  2. follow up with telephone calls
40
Q

In what way can lenders seek to eliminate fraud when dealing with sol traders and partnerships accounts? (2)

A
  1. ensure accounts are signed off by a qualfied accountant
  2. check with HMRC
41
Q

What must lenders do if they suspect fraud?

A

report it to the authorities

42
Q

True or false - reference checks are covered under GDPR?

A

True

43
Q

What is customer due diligence? How is this achieved? (5)

A

Verifying customer and their identity

Gather evidence which can include:
1. passport
2. driving licence
3. electoral roll
4. ultility bill/c-tax
5. credit card statements accompanied by card

44
Q

What is not acceptable to use to verify a customer’s identity?

A

Mobile phone bills

45
Q

For broker cases, do lenders need to check identity?

A

no, can accept broker’s assurance that they have

46
Q

What is financial exclusion?

A

When someone is unable to access financial services due to lack of ID

47
Q

What can be used as alternative forms of ID to prevent financial exclusion? (3)

A

Letter from person in position of responsibility:
1. Doctor
2. Sols
3. Religious minister

48
Q

How long must evidence of ID be kept for money laundering purposes?

A

5 years after relationship with customer ends

49
Q

How long should evidence of transactions be kept for money laundering purposes?

A

5 years from when the transaction is executed

Cemap 2&3 Self Testing (29 decks)

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