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Summary of Experience, Case Study and CPD Q+As > Loan Security Valuation Specific Questions > Flashcards

Loan Security Valuation Specific Questions Flashcards

1
Q

Tell me about sources of risk

A
  • Fraud
  • Inflated EV/RV
  • False claims on application form (eg income etc)
  • Scheme manipulation
  • Money laundering
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2
Q

Tell me about risk analysis techniques

A
  • sensitivity analysis

scenario analysis Monte Carlo simulations

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3
Q

Tell me about different financial products Global Standards 2020 (VPGA 2)

A
  • Fixed rate
  • Variable rate
  • Tracker
  • Interest only
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4
Q

Tell me about Global Standards 2020 (VPGA 2)

A

COT

Consistency
Objectivity
Transparency

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5
Q

Tell me about UK National Supplement 2017 (effective 2019) (VPGA 11-13)

A
  • VPGA 11 – Val for resi mortgage
  • VPGA 12 Val of resi property for miscellaneous
  • VPGA 13 - Resi secured lending for other purposes including HBR
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6
Q

Tell me about owing a duty of care

A

Yianni v Evans

Smith v Bush

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7
Q

London Road CR4 Talk me through TMW buy-to-let mortgage criteria.

A
  • Will not accept more than 4 occupiers/sharers

- TMW (under its own criteria) define this as an HMO and as such is covered by a specialist HMO product.

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8
Q

London Road CR4 Talk me through your Suspicious Activity Disclosure Form.

A
  • Property info
  • Applicant name etc
  • Suspected suspicion category (Scheme abuse)
  • Reason for suspicion
  • Sent to SID
  • Copied in manager
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9
Q

Epsom Road CR0 Talk me through your site concerns.

A
  • Commercial premises - pub
  • Nationwide will not lend on a flat which sits directly above or immediately adjacent to any commercial use likely to generate/cause smell, noise, disturbance, increased traffic (pedestrian or vehicular – deliveries etc), or indeed any factor likely to adversely impact demand/saleability
  • main roads – noise pollution
  • a trainline and train station – noise pollution
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10
Q

Epsom Road CR0 Why were the proximity of main roads/train line/train station/commercial premises an issue?

A
  • Commercial premises - Nationwide will not lend on a flat which sits directly above or immediately adjacent to any commercial use likely to generate/cause smell, noise, disturbance, increased traffic (pedestrian or vehicular – deliveries etc), or indeed any factor likely to adversely impact demand/saleability
  • main roads – noise pollution
  • a trainline and train station – noise pollution
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11
Q

Epsom Road CR0 How did local market conditions negatively the security of the investment?

A
  • Less demand for properties with no outside space

- Oversupply of NB properties

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12
Q

Epsom Road CR0 Why was the development outside the lender’s risk appetite?

A
  • Commercial premises - Nationwide will not lend on a flat which sits directly above or immediately adjacent to any commercial use likely to generate/cause smell, noise, disturbance, increased traffic (pedestrian or vehicular – deliveries etc), or indeed any factor likely to adversely impact demand/saleability
  • main roads – noise pollution
  • a trainline and train station – noise pollution
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13
Q

Epsom Road CR0 Why was the development outside the lender’s risk appetite?

A
  • Commercial premises - Nationwide will not lend on a flat which sits directly above or immediately adjacent to any commercial use likely to generate/cause smell, noise, disturbance, increased traffic (pedestrian or vehicular – deliveries etc), or indeed any factor likely to adversely impact demand/saleability
  • main roads – noise pollution
  • a trainline and train station – noise pollution
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14
Q

Epsom Road CR0 Explain the lender’s risk appetite.

A
  • Nationwide is a low risk lender
  • Nationwide looks to operate in the upper quartile of the market, consequently, secondary/tertiary locations will not be acceptable for mortgage
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15
Q

Epsom Road CR0 Talk me through your site appraisal form.

A
  • Includes details of the scheme
  • Number of units
  • Construction HTB
  • Developer
  • Previous land use
  • Surroundings
  • Tenure/lease info
  • Incentives
  • Rationale
  • RAG rating
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16
Q

Epsom Road CR0 Why did you set an exposure level of 0%?

A
  • Commercial premises main roads – noise pollution
  • a trainline and train station – noise pollution
  • main roads – noise pollution
  • Outside risk appetite
  • Market concerns
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17
Q

Epsom Road CR0 What was your rationale for the 0% exposure level?

A
  • Commercial premises main roads – noise pollution
  • a trainline and train station – noise pollution
  • main roads – noise pollution
  • Outside risk appetite
  • Market concerns
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18
Q

Wallington SM6 Why was the internal company instruction not subject to the Red Book?

A
  • PS1 Compliance with standards where a written valuaiton is provided
  • 5 VPS1-5 exceptions
  • Providing valuations to a client purely for internal purposes
  • Without liability or a third party
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19
Q

Wallington SM6 How did you utilise the previous marketing material?

A
  • Floor plans
  • Pictures
  • Floor areas
  • Condition
  • Aspect
20
Q

Wallington SM6 How did you utilise the previous marketing material?

A
  • Floor plans
  • Pictures
  • Floor areas
  • Condition
  • Aspect
21
Q

Wallington SM6 What advice did you give regarding pre-and post-release value?

A
  • I advised a pre-release valuation figure based on the existing garden and garage
  • I advised the post-release valuation figure following the release of the garden and garage
  • I advised the impact this would have on the subject due to the market conditions
  • I advised the material uncertainty clause
22
Q

Wallington SM6 How did you identify that flats without outside space were decreasing in value?

A
  • Speaking with estate agents
  • Speaking with colleagues
  • Identifying trends when doing val work
  • Properties achieving under asking
  • Properties being on the market for a long time
23
Q

Highgate Edge N2 Highgate Edge, what was the unexpired lease term?

A

60 years

24
Q

Highgate Edge N2 Why was the short lease term an issue?

A
  • The leasehold value diminishes as the lease decreases
25
Q

Highgate Edge N2 Talk me through your comparable valuation.

A
26
Q

Highgate Edge N2 How did you comply with RICS Valuation of Residential Leasehold Properties for Secured Lending Purposes 2021?

A
  • Only relied on assumptions where appropriate
  • Undertook reasonable efforts to determine lease terms
  • Attempted to locate comps with similar lease terms
  • Assessed the relativity of the comps with different lease terms
27
Q

Highgate Edge N2 Which relativity graph(s) did you use?

A
  • Graphs of relativity online relativity graphs
  • RICS greater London and England graph
  • Used the average of 5 curves
28
Q

Highgate Edge N2 Why did you select these relativity graphs?

A
  • Most relevant to my location (Greater London)

- Average of five sources (based in greater London and SE)

29
Q

Highgate Edge N2 Talk me through your use of the online leasehold calculator?

A
  • Leasehold advice Lease Extension Calculator
  • Provides an estimated range for the lease extension premium
  • Inputted:
    o Ground rent
    o Date of expiry of lease
    o Long lease value of the property
  • I then deducted this figure from the long lease value of the subject making an allowance for fees
30
Q

Highgate Edge N2 Were there any limitations to Online calculators? If so, what were they?

A
  • Online calculators have varying degrees of accuracy
  • Used as a cross check
  • Do not account for rising GR
31
Q

Highgate Edge N2 Talk me through your secondary evidence.

A
  • I used a comparable that was most similar to the subject (physically and tenure)
  • Although it had fallen through it was a useful form of secondary evidence as it indicated the what a purchaser was willing to pay for the property
  • Reflect the lower number of available (cash) purchasers
32
Q

Highgate Edge N2 What advice did you provide?

A
  • I advised the valuation figure for the subject
  • I advised the figure at which the property should be marketed
  • I provided advice regarding the auctioneer’s valuation figures
33
Q

Highgate Edge N2 What comments did you make on the auctioneer’s valuation figures?

A
  • 4x figures
  • 3x estimates too high
  • 1x – similar estimates
34
Q

What is the definition of an HMO?

A

A property occupied by 3 or more people comprising 2 or more households

Housing Act 2004

35
Q

Red Book 2022 changes/ updates

A

Emphasising agreeing clear terms of engagement

The term partial or non Red Book should not be used in terms of engagement.

Requiring more detailed commentary on sustainability (ESG) matters

36
Q

Red Book Global - PS 1 and 2

A

PS 1 - Compliance

PS 2 - Ethics and conflicts

37
Q

Red Book Global - VPS 1 - 5

A

Valuation Practice Statement

VPS 1 - ToE

VPS 2 - Inspections

VPS 3 - Reporting

VPS 4 - Basis of value

VPS 5 - METHOD - Valuation method

TIRBV

38
Q

Red Book Global -VPGA 2, 8, 10

A

Valuation Practice Guidance Application

VPGA 2 - Loan Security

VPGA 8 - val of real property interests

VPGA 10 - Uncertainty

39
Q

UK Red Book VPGA 11 - 13

A

VPGA 11 - Valuation for residential mortgage purposes

VPGA 12 - Valuation of residential properties for miscellaneous purposes

VPGA 13 - Residential secured lending guidance for other related purposes

40
Q

Covid eviction restricitons 2020

A

Coronavirus Act 2020

Possession proceedings suspended

41
Q

Exceptions to Red Book

A

ALIES

AGENCY 
LIGITIGATION 
INTERNAL 
EXPERT WITNESS
STATUATORY
42
Q

Assumption

A

A supposition that can be taken as true without specific investigation

43
Q

special assumption

A

Assumes facts differ than those at the val date

44
Q

Ensure all key sections of red global and UK are listed here

A
45
Q

S11 of the Landlord and Tenant Act 1985

A

obligation on landlords to maintain the exterior and structure of the rentals property

Summary of Experience, Case Study and CPD Q+As (21 decks)

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