Redmill Week 3

Question 1

How does the FCA regard the risk of equity release?

Answer 1

The FCA regards equity release as having ‘high regulatory risk’

Question 2

Unless through ‘execution only’ - the only route to equity release is through advice. Who is execution only available to?

Answer 2

Execution only is available to high net worth individuals, professionals and those who have rejected advice.

Question 3

Its best practice for who to complete paperwork? Adviser or customer?

Answer 3

The customer

Question 4

If a customer has a pessimistic view on life expectancy, is a home reversion plan likely to be suitable?

Answer 4

No it is unlikely to be suitable

Question 5

Where does the most complaints around equity release come from?

Answer 5

The family

Question 6

Why may a minimum inheritance guarantee be considered?

Answer 6

To protect a percentage of the property value should death occur in the early years.

Question 7

Does the customer have the right to choose their own solicitor or must they go with an appointed one?

Answer 7

They have the right to choose their own

Question 8

when should a solicitor offer a ‘certificate’ to a customer?

Answer 8

After explaining the rights and obligations of an equity release contract to show that everything has been explained and understood.

Question 9

Taking which type of equity release product may result in the customer becoming a ‘tenant in common’?

Answer 9

A home reversion policy

Question 10

What does ‘conditions subsequent’ mean?

Answer 10

This means events that lead to the loan to fall due (death, sale, entering LTC)

Question 11

How are the contracts structured for a home reversion plan?

Answer 11

Under a home reversion plan there are two types of contract, one for the sale of all/part of the property and then a second contract for the lease allowing the tenant to stay in the property for life.

Question 12

Are second charges on a lifetime mortgage regulated and when are they paid?

Answer 12

They are regulated and will be paid after the first charge.

Question 13

What affect may rising interest rates have on home reversion plans?

Answer 13

Rising interest rates can reduce the value of the property or slow the rate of increase. Due to supply and demand pressures

Question 14

Which type of equity release plan is the most flexible?

Answer 14

Lifetime mortgages are more flexible

Question 15

Under a lifetime mortgage, how long does an individuals representatives have to sell the property before the bank starts looking into it?

Answer 15

1 year

Question 16

Does a complaint have to be valid?

Answer 16

A complaint does not have to be valid

Question 16

On death of a customer with a home reversion plan, who is responsible for the sale?

Answer 16

Under a home reversion plan, the provider will sell the property, even f they only have a minority shareholding in the property.

Question 17

Who qualifies as an eligible complainant?

Answer 17

• An individual
• Small business with less than 10 staff and a balance sheet or turnover with less than EUR2m
• Charity with annual income less than £6.5m or a trust with less than £5m assets

Question 18

When should customers be sent acknowledgement of a complaint?

Answer 18

Within a ‘reasonable timeframe’

Question 19

When should a customer receive the right to go to the FOS?

Answer 19

After 8 weeks

Question 20

When should a referral to the FOS be made within?

Answer 20

o 6 months of receipt the right to go to the FOS
o 6 years of the event in question or 3 years of coming aware of the event (if this is later)

Question 21

Who are FOS decisions legally binding on?

Answer 21

They are legally binding on the provider but not the complainant.

Question 22

How much can the FOS make a legally binding payment of resolution on?

Answer 22

£415,000 plus
Interest, plus
Costs, plus
Interest on costs

Question 23

How is the FSCS funded?

Answer 23

By levies

Question 24

How much protection does the FSCS provide on mortgages?

Answer 24

100% of £85,000

Question 25

Must an equity release customer get consent from the provider before making alterations to the home?

Answer 25

yes

Question 26

True or false, stamp duty land tax is due on a home reversion plan?

Answer 26

True, as it involves conveyancing of the property