Section 1; Contract Law; Types Of Borrower

Question 1

1.1.1 In property terms what is the ‘consideration’ that a buyer gives?

Answer 1

Money

Question 2

1.1.1 In property terms what is the ‘consideration’ that the seller gives?

Answer 2

The property

Question 3

1.1.1 What’s the Latin for ‘let the buyer beware’?

Answer 3

Caveat Emptor

Question 4

1.1.1 What is the Latin for the principle of ‘upmost faith’?

Answer 4

Uberrima fides

Question 5

1.1.1 Insurance contracts have been based traditionally on the principle of uberrima fides. What does this mean?

Answer 5

All material facts must be disclosed by both parties (the principle of utmost faith)

Question 6

1.1.1 When was the Consumer Insurance (Disclosure and Representations) Act legislated? And how did it affect consumers material disclosures?

Answer 6

2012. It abolished the duty of consumers to volunteer material facts when applying for insurance, instead requiring them to take reasonable care to answer the insurers questions fully and accurately

Question 7

1.1.1 If careless misrepresentation is identified on an insurance contract in situations other than a claim, what rights do the insurer and the policy holder have?

Answer 7

The insurer and the policy holder have the right to terminate the contact with reasonable notice

Question 8

1.1.1 If careless misrepresentation is identified on a life insurance contract, can the insurer terminate the contract?

Answer 8

No

Question 9

1.1.1 What is the following known as: the setting out in writing of the remit of an agent (estate agent) on behalf of a principal (seller)?

Answer 9

Actual Authority

Question 10

1.1.2 What does the Principle Of Agency mean?

Answer 10

That the principal (for example a seller) is liable for the agent’s actions, unless the agent acted outside of their remit

Question 11

1.1.2 What is apparent authority?

Answer 11

When the principal has done or communicated something which apparently gave the agent authority to act outside of their remit on something

Question 12

1.1.2 In relation to apparent authority, what is ratification?

Answer 12

When the principal agrees after the event when the agent has acted outside their remit

Question 13

1.1.3 in relation to mortgages, what are the three Ps that mortgage lenders will focus on and what do they mean?

Answer 13

Person: is the lender legally able to lend to the person

Property: is the property suitable security for the required mortgage

Purpose: whether the purpose of the mortgage is acceptable eg house purchase, home improvement, raising capital etc

Question 14

1.1.4 What two types of Personal Buyers are there?

Answer 14

First time buyers

Second or subsequent buyers

Question 15

1.1.4 When did the FSA publish a policy statement in relation to the Mortgage Market Review (MMR) and when did the changes to MCOB take effect from?

Answer 15

2012 and April 2014

Question 16

1.1.4 What’s the main change that MMR required lenders to do?

Answer 16

To focus more on a borrowers affordability as part of the assessment process for mortgage applicants

Question 17

1.1.4 How did maximum affordability used to be worked out compared with post MMR?

Answer 17

Max used to be worked out with income multiples (eg income x 3 etc) but now it is worked out with income vs expenditure

Question 18

1.1.4 When people take out a loan or a mortgage, what can the contract also be known as?

Answer 18

The deed

Question 19

1.1.4 When two people take out a mortgage and the mortgage deed makes them jointly and severally liable for that loan, what does this mean?

Answer 19

This means that they are both liable for the whole amount of the loan not just their ‘share’ of it

Question 20

1.1.4.2 for BTL criteria what does the level of rent typically need to be for most lenders in relation to the mortgage repayments?

Answer 20

125% of the repayments

Question 21

1.1.4.2 are BTL mortgages usually regulated?

Answer 21

No

Question 22

1.1.4.2 why are BTL mortgages not usually regulated (2 reasons)?

Answer 22

Because they are defined as business loans and are not secured on the borrower’s main residence

Question 23

1.1.4.2 loans that are secured on a property of which at least ? % will he occupied as a main residence by the borrower or a relative are regulated mortgages and subject to MCOB

Answer 23

40%

This would include mortgages raised on the borrowers own main property in order to finance a BTL purchase and mortgages secured on a BTL property where a relative will be in occupation