Loan Security Valuation Specific Questions Flashcards
Tell me about sources of risk
- Fraud
- Inflated EV/RV
- False claims on application form (eg income etc)
- Scheme manipulation
- Money laundering
Tell me about risk analysis techniques
- sensitivity analysis
scenario analysis Monte Carlo simulations
Tell me about different financial products Global Standards 2020 (VPGA 2)
- Fixed rate
- Variable rate
- Tracker
- Interest only
Tell me about Global Standards 2020 (VPGA 2)
COT
Consistency
Objectivity
Transparency
Tell me about UK National Supplement 2017 (effective 2019) (VPGA 11-13)
- VPGA 11 – Val for resi mortgage
- VPGA 12 Val of resi property for miscellaneous
- VPGA 13 - Resi secured lending for other purposes including HBR
Tell me about owing a duty of care
Yianni v Evans
Smith v Bush
London Road CR4 Talk me through TMW buy-to-let mortgage criteria.
- 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.
London Road CR4 Talk me through your Suspicious Activity Disclosure Form.
- Property info
- Applicant name etc
- Suspected suspicion category (Scheme abuse)
- Reason for suspicion
- Sent to SID
- Copied in manager
Epsom Road CR0 Talk me through your site concerns.
- 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
Epsom Road CR0 Why were the proximity of main roads/train line/train station/commercial premises an issue?
- 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
Epsom Road CR0 How did local market conditions negatively the security of the investment?
- Less demand for properties with no outside space
- Oversupply of NB properties
Epsom Road CR0 Why was the development outside the lender’s risk appetite?
- 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
Epsom Road CR0 Why was the development outside the lender’s risk appetite?
- 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
Epsom Road CR0 Explain the lender’s risk appetite.
- 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
Epsom Road CR0 Talk me through your site appraisal form.
- Includes details of the scheme
- Number of units
- Construction HTB
- Developer
- Previous land use
- Surroundings
- Tenure/lease info
- Incentives
- Rationale
- RAG rating
Epsom Road CR0 Why did you set an exposure level of 0%?
- Commercial premises main roads – noise pollution
- a trainline and train station – noise pollution
- main roads – noise pollution
- Outside risk appetite
- Market concerns
Epsom Road CR0 What was your rationale for the 0% exposure level?
- Commercial premises main roads – noise pollution
- a trainline and train station – noise pollution
- main roads – noise pollution
- Outside risk appetite
- Market concerns
Wallington SM6 Why was the internal company instruction not subject to the Red Book?
- 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
Wallington SM6 How did you utilise the previous marketing material?
- Floor plans
- Pictures
- Floor areas
- Condition
- Aspect
Wallington SM6 How did you utilise the previous marketing material?
- Floor plans
- Pictures
- Floor areas
- Condition
- Aspect
Wallington SM6 What advice did you give regarding pre-and post-release value?
- 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
Wallington SM6 How did you identify that flats without outside space were decreasing in value?
- 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
Highgate Edge N2 Highgate Edge, what was the unexpired lease term?
60 years
Highgate Edge N2 Why was the short lease term an issue?
- The leasehold value diminishes as the lease decreases
Highgate Edge N2 Talk me through your comparable valuation.
Highgate Edge N2 How did you comply with RICS Valuation of Residential Leasehold Properties for Secured Lending Purposes 2021?
- 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
Highgate Edge N2 Which relativity graph(s) did you use?
- Graphs of relativity online relativity graphs
- RICS greater London and England graph
- Used the average of 5 curves
Highgate Edge N2 Why did you select these relativity graphs?
- Most relevant to my location (Greater London)
- Average of five sources (based in greater London and SE)
Highgate Edge N2 Talk me through your use of the online leasehold calculator?
- 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
Highgate Edge N2 Were there any limitations to Online calculators? If so, what were they?
- Online calculators have varying degrees of accuracy
- Used as a cross check
- Do not account for rising GR
Highgate Edge N2 Talk me through your secondary evidence.
- 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
Highgate Edge N2 What advice did you provide?
- 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
Highgate Edge N2 What comments did you make on the auctioneer’s valuation figures?
- 4x figures
- 3x estimates too high
- 1x – similar estimates
What is the definition of an HMO?
A property occupied by 3 or more people comprising 2 or more households
Housing Act 2004
Red Book 2022 changes/ updates
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
Red Book Global - PS 1 and 2
PS 1 - Compliance
PS 2 - Ethics and conflicts
Red Book Global - VPS 1 - 5
Valuation Practice Statement
VPS 1 - ToE
VPS 2 - Inspections
VPS 3 - Reporting
VPS 4 - Basis of value
VPS 5 - METHOD - Valuation method
TIRBV
Red Book Global -VPGA 2, 8, 10
Valuation Practice Guidance Application
VPGA 2 - Loan Security
VPGA 8 - val of real property interests
VPGA 10 - Uncertainty
UK Red Book VPGA 11 - 13
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
Covid eviction restricitons 2020
Coronavirus Act 2020
Possession proceedings suspended
Exceptions to Red Book
ALIES
AGENCY LIGITIGATION INTERNAL EXPERT WITNESS STATUATORY
Assumption
A supposition that can be taken as true without specific investigation
special assumption
Assumes facts differ than those at the val date
Ensure all key sections of red global and UK are listed here
S11 of the Landlord and Tenant Act 1985
obligation on landlords to maintain the exterior and structure of the rentals property
