Loan Security Valuation

Question 1

What different loan security purposes do you value for? How does your approach differ for each?

Question 2

Talk me through the lending credit risk management process

Question 3

What role does risk management have in property lending decision?

Question 4

What are key differences between a loan security valuation and a valuation for another purpose?

Question 5

How do lenders use the valuation report to determine the suitability of
the property for lending?

Question 6

How do you determine your competence to undertake loan security valuations?

Question 7

What effect does council tax (or other taxes) have on the value of a property?

Question 8

What factors could influence a lender’s decision to proceed?

Question 9

How is lending controlled?

Question 10

What risk analysis techniques are used?

Question 11

What is personal credit scoring / credit risk analysis / risk predictive
modelling?

Question 12

How do lenders identify risk?

Question 13

What is the purpose of an audit department? How do you work with yours?

Question 14

What is mortgage fraud? When may it occur?

Question 15

How do you reduce the risk of mortgage fraud?

Question 16

What is an SAR and when might you submit one?

Question 17

What is the role of debt finance in property?

Question 18

What types of debt are you aware of? When might they be used?

Question 19

What due diligence would you carry out for a loan security valuation?

Question 20

What financial products are relevant to your market?

Question 21

What negligence caselaw are you aware of relevant to your duty of care?

Question 22

Explain the duty of care you owe to an owner occupier and commercial
BTL investor. What caselaw relates to this?

Question 23

What do you understand by the Smith v Bush and Scullion v Bank of
Scotland cases?

Question 24

What do you understand by the Harris v Wyre Forest DC case?

Question 25

Explain the industry-wide process to value tall building. What height of building does this relate to? Why has this process been introduced?

Question 26

What is the External Wall Fire Review? How does this work?

Question 27

What do EWS 1 forms no longer need to be used for?

Question 28

How would you complete a EWS 1 form?

Question 29

How would you value a building over 18m where materials are thought to
be potentially combustible?

Question 30

What RICS guidance relates to how you would approach the valuation of
a multi-occupancy high rise building with combustible cladding? How would you decide which approach to take in this type of valuation?

Question 31

What is a FRAEW?

Question 32

How would you consider a FRAEW on a secured lending instruction?

Question 33

What is a FRAEW produced under?

Question 34

What is PAS 9980?

Question 35

What other considerations would you make on a secured lending
valuation of a multi-occupancy high rise building?

Question 36

What issues are you aware of in relation to mortgage lending and spray
foam insulation?

Question 37

Explain your understanding of how a lender might consider nontraditional forms of construction.

Question 38

Explain what RICS guidance has been published relating to secured
lending valuations of residential blocks of flats. What does this Guidance Note say about EWS1 forms and when they are required due to visible cladding? When is the guidance effective from?

Question 39

What RICS guidance relates to residential leasehold properties and
secured lending valuation? What principles from this are you aware of?

Question 40

What sections of the Red Book and the UK National Supplement should
this guidance be read alongside?

Question 41

How do you comply with VPGA 2 of the Red Book Global?

Question 42

Explain what VPGA 2 says about previous or current involvement.

Question 43

What type of involvement might result in a conflict of interest?

Question 44

If you were instructed by a party who is not the intended lender, e.g., a
prospective borrower or broker, how would you record this in your terms
of engagement?

Question 45

Do you need to enquire whether the subject property has been subject to
a recent transaction or provisionally agreed price, if so – why?

Question 46

What do the terms ‘mark to model’ and ‘mark to market’ mean?

Question 47

When might you agree a special assumption in a secured lending valuation?

Question 48

Explain the additional reporting and disclosure requirements set out by
VPGA 2.

Question 49

How would you apply VPGA 2 to a property that is, or will be, owneroccupied / held as an investment / intended to be or the subject of
development or refurbishment?

Question 50

How have you applied UK VPGA 10, 11, 12 or 13 (depending on specific
valuation and asset type)?

Question 51

What does the UK National Supplement say about the use of the DRC method?

Question 52

How would you formalise any communication channels with the borrower?

Question 53

What is a panel agreement?

Question 54

Explain your understanding of the RICS Residential Mortgage Valuation
Specification. Where would you find this?

Question 55

How do you reconcile any differences between the 2014 and current UK
National Supplement editions when referring to the RICS Residential
Mortgage Valuation Specification?

Question 56

If you provide advice on residential mortgages, what FCA guidance are
you regulated by?

Question 57

What is a regulated mortgage contract defined as?

Question 58

Under a regulated mortgage contract, what is residential property
defined as?

Question 59

What is the role of the FCA in relation to secured lending?

Question 60

What is the role of the valuer under UK VPGA 11?

Question 61

What is Projected Market Value (PMV) defined as?

Question 62

What are the specific requirements of UK VPGA 11 when adopting PMV
as a basis of value?

Question 63

Is PMV a projection or a forecast?

Question 64

Does PMV require the valuer to adopt a special assumption?

Question 65

What does UK VPGA 11 say about the extent of a valuer’s inspection and
investigations? In this respect, is the valuer expected to investigate roof voids and under floor voids?

Question 66

Should the valuer move furniture and floor coverings?

Question 67

Should the valuer test services?

Question 68

Should the valuer consider the EPC rating?

Question 69

What additional requirements relate to the inspection of a flat or maisonette?

Question 70

How should you record a lender’s instruction to provide a valuation
without internal inspection?

Question 71

What level of investigations are required by the valuer into legal, planning
and environmental matters?

Question 72

What assumptions does UK VPGA 11 require the valuer to make without
verification, unless limited enquiries reveal otherwise?

Question 73

Explain some of the reporting requirements set out by UK VPGA 11.

Question 74

How should the valuer treat incentives in a secured lending valuation?

Question 75

How would a valuer report an insurance replacement cost if requested by
the lender? How would you adhere to the BCIS guidelines in doing so?

Question 76

Explain the valuation basis where a property is the subject of possession
proceedings following default

Question 77

What length of unexpired lease term does the RICS guidance refer to? Why does it not relate to unexpired lease lengths below this?

Question 78

What factors might affect the valuation of a leasehold property according
to the RICS Guidance Note? What assumptions might be made in this type of secured lending valuation?

Question 79

What special assumption might be agreed and why, with the lender client?

Question 80

What methods are available to value a leasehold property and when/why
might you adopt each?

Question 81

When would you use a leasehold relativity graph?

Question 82

How would the absence of a new build warranty affect value and security
for lending purposes?

Question 83

How would you deal with speculative development value in a mortgage
valuation?

Question 84

Explain your understanding of Section 13 of Building Societies Act 1986 in
relation to inspection for a mortgage valuation

Question 85

How would you inspect a loft for a mortgage valuation?

Question 86

Would you inspect the drains during a mortgage valuation inspection?

Question 87

For a leasehold property, would you need to inspect the common areas
for a mortgage valuation?

Question 88

When might a property be declined for secured lending purposes based
on condition?

Question 89

What other reasons may lead to a property being declined for secured
lending purposes?

Question 90

What does ‘secured lending’ mean?

Question 91

How would you report on the impact of a defective property being
repaired in a secured lending valuation?

Question 92

How could an unrepaired property affect mortgagability?

Question 93

How would a repaired property, but not under a certified scheme, affect
mortgagability?

Question 94

Explain how you would value a MMC residential property for secured
lending purposes

Question 95

Who provides warranties for MMCs and how would you report on these
to a lending client?

Question 96

Why did the Bank of England withdraw the affordability test?

Level 1

Question 97

Talk me through a loan security valuation you have carried out

Level 2

Question 98

How have you incorporated lender’s specific requirements into a
valuation?

Question 99

What research have you undertaken into factors affecting risk?

Question 100

What factors have you come across that affect the ability to obtain
finance?

Question 101

How have you dealt with the situation where a lender’s requirements
differ to those of the Red Book?

Question 102

Talk me through Terms of Engagement you have agreed. How have you complied with valuation standards within these?

Question 103

What research have you carried out into factors affecting valuation
certainty?

Question 104

What local / wider market factors have affected a valuation you have
carried out?

Question 105

Tell me about when you have valued a property subject to a special
assumption.

Question 106

Tell me about how you would report to lenders / NCA about potential
fraud or suspicious activity

Question 107

Did you review the leases at Swan Court and what, if anything was the
impact?

Question 108

Was condition a factor at Swan Court and how did you assess it?

Answer 108

What other factors came into your SWOT analysis at East Street, Chichester?

Question 109

Did you consider the wider retail market in your valuation of East Street, Chichester and what comments did you make?

Question 110

What local factors did you consider in your valuation of East Street, Chichester?

Level 2

Question 111

Tell me about when you have provided complex reasoned quantitative
valuation advice to clients in the form of compliant valuation reports

Level 3

Question 112

Tell me about when you have used a SWOT analysis, commented on loan
terms, commented on future performance of the investment or
commented on the influences of the wider market

Question 113

Describe the complex reasoning behind your recommendations to client
in order to mitigate risk

Question 114

Tell me about a specific valuation report you have provided in accordance
with valuation standards.

Question 115

How have you incorporated a valuation comparable matrix, sensitivity
analysis or other evidence of valuation methodology and approach into a
valuation report?

Question 116

Talk me through a specific valuation report you have provided in
accordance with valuation standards, incorporating appropriate narrative
on the strengths and weaknesses of the investment, marketability if the
lender was to re-possess and the risks involved in lending in the property
in relation to the loan terms.

Question 117

How have you identified and explained the risk profile of property and
how it affects clients’ needs in terms of advice, i.e. why do they need
advice?

Question 118

Explain your valuation advice on a property’s suitability for secured
lending.

Question 119

Explain your reasoned advice where properties are not considered
suitable for secured lending due to Red Book or lenders’ requirements.

Question 120

What was the nature of the cracks at Victoria Road and why did they
concern you?

Question 121

Did you obtain an EPC assessment at Victoria road and what did it say?

Question 122

What were the issues with the rear boundary and how did you go about
obtaining the legal advice?

Question 123

How different were the borrowers and BCIS costs at Hollands Lane?

Question 124

What finance assessment did you make in your residual for Hollands Lane?

Question 125

How close were your valuations of Hollands Lane and which would you have relied on should they have been very different?