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CeMAP Unit 3 > Topic 2 Types Of Borrower > Flashcards

Topic 2 Types Of Borrower Flashcards

1
Q

What are the 3 P’s of assessing a mortgage application?

A
  1. Person
  2. Purpose
  3. Property
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2
Q

Which P’s of assessing a mortgage application is the below?

Is the lender able and will to lend to the applicant?

A

Person

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3
Q

Which P’s of assessing a mortgage application is the below?

Is the purpose of the application acceptable

A

Purpose

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4
Q

Which P’s of assessing a mortgage application is the below?

Is the property suitable security for the required mortgage

A

Property

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5
Q

When a lender is considering a mortgage applicant what are these?

  • Lenders strategy, market positioning & required business levels in certain sectors
  • Applicant risk profile
  • Desired profit margins
  • Areas & recovery statistics & other circumstances
A

What is in a lender’s “Lending policy”

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6
Q

What does “Joint & Several Liability” mean?

A

All parties are liable for mortgage debt not just there share

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7
Q

What are these in relation to mortgage applicants?

  • Private (Personal)
  • Buy-to-Let
  • Business
  • Corporate
A

Types of borrow

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8
Q

What are these in relation to mortgage applicants?

  • Commercial
  • Personal representatives & attorneys
  • Trustees
  • Other
A

Types of borrower

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9
Q

What are the 3 reasons “Private borrowers” seek mortgage finances?

A
  • Family home
  • Second charge
  • Bridging Finance
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10
Q

What is “Interest Coverage Ratio” in a BTL mortgage?

A

Level of rental income against payments (including costs and tax)

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11
Q

What is the minimum standard for BTL “Interest Coverage Ratio” set by the PRA?

A

125%

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12
Q

What is the “Interest rate affordability stress test” in relation to a BTL application?

A

Lender required stress test on borrower’s ability to repay a mortgage if interest rates rose

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13
Q

How long a period must a lender perform a “Interest rate affordability stress test” over

A

5 years

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14
Q

What is the minimum interest rate rise a lender must increase a person interest rate when performing an “Interest rate affordability stress test”?

A

2% (minimum)

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15
Q

What is an “Income Affordability Test” in relation to a BTL application

A

A detailed affordability test that must be carried out if the borrower is using some personal income to support a mortgage application

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16
Q

What does having “4a permission” in the Consumer Credit Directive mean for CBTL’s?

A

The form can carry out regulated CBTL activities (if they register with the FCA)

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17
Q

What is the minimum annual income a person must receive to be classed as “High-net-worth”?

A
  • £300,000 minimum annual income
  • Minimum net assets of £3 million
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18
Q

What is a “Professional Customer”?

A
  • Customer who has worked in the home finance sector for at least a year
  • Firm believes is capable of understanding risks in a mortgage proposal
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19
Q

What does a “Personal representative do”?

A

Executor of the will of deceased person

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20
Q

Under what circumstances are lenders able to lend to “Personal Representatives”?

A
  • Loan is required to administer an estate
  • Purchase property for a dependant of the deceased
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21
Q

In Scotland in relation to executors what is an “executor-nominate”?

A

Person appointment an executor in a will

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22
Q

In Scotland in relation to executors what is an “executor-dative”?

A

Executor appointed by a court

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23
Q

What is an “Attorney”?

A

Somebody given responsibility to deal with another person’s financial affairs

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24
Q

Before lending to a trustee of a trust what should a lender do?

A

Should check to see where the lender has been given the power to borrow under the trust deed

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25
Q

Where can a lender tell if “Clubs & Associations” are able to borrow?

A
  • Constitution
  • Club rules
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26
Q

For a mortgage to be regulated by MCOB How much percentage of land would need to be used as residential?

A

At least 40%

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27
Q

True or False

A mortgage taken out by a business that is secured on business premises needs to be regulated?

A

False

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28
Q

If a mortgage taken out for business purposes is regulated what must the lender see?

A
  • Business plan
  • Other evidence to support
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29
Q

When lending to a Business Partnership where can the below information be found?

  • Each partners share of profit
  • Arrangements if one partner dies, retires or becomes bankrupt
  • Whether the partnership is able to borrow
A

Partnership Agreement

30
Q

Is mortgage lending to a LLP regulated?

A

No (owners are separate legal entities)

31
Q

What is a Special Purpose Vehicles (SPV)?

A

Limited company set up with the purpose of owning BTL property

32
Q

Who is the only legal owner of property when a Special Purpose Vehicle (SPV) is used?

A

The limited company

33
Q

Where a Special Purpose Vehicle (SPV) is used in a BTL mortgage what would a lender required from the directors?

A

Personal Guarantee (taking responsibility if the company fails to cover repayments)

Guarantee usually over the directors property

34
Q

Before lending to a limited company (Corporate borrower) what should a lender check?

A

Whether the memorandum & articles of association permit lending

35
Q

What is the maximum of a Building Society’s commercial assets are able to be loaned to limited companies security on land?

A

Maximum of 25%

36
Q

Is a Commercial mortgage regulated? And why?

A

No as it is secured on commercial property

37
Q

What is a “Mortgage Prisoner”?

A

Customer with a regulated mortgage that may be prevented from changing to a new arrangement or remortgaging if the are subject to standard MCOB affordability checks

38
Q

What are the 4 key drivers that could lead to a customer being classed as “Vulnerable”?

A
  1. Health
  2. Life Events
  3. Resilience
  4. Capability
39
Q

These are what in relation to vulnerable customers?

  • Those buying a property using statutory right to buy
  • Those entering “sale & rent back arrangements
  • Equity release applicants
  • Debt Con applicatants
A

What the FCA classes as vulnerable customers

40
Q

What is the minimum age a person has to be to hold a legal estate?

41
Q

A person who has a lack of mental capacity that requires housing funded by a mortgage needs what?

A

A deputy appointed by the Court of Protection

42
Q

“Sequestration” is what?

A

What Scottish law refers to bankruptcy as

43
Q

A person can petition for their own bankruptcy at any amount but what is the minimum amount that a creditor can petition for a debtor’s bankruptcy?

A

Minimum £5,000

44
Q

What is the role of the trustee in bankruptcy?

A
  • Sell assets
  • Use proceeds to pay court fees & debt
45
Q

A bankruptcy period normally lasts how long?

46
Q

Somebody who is an “undischarged bankruptcy” cannot acquire an interest in a property (apply for an mortgage)

True or False

47
Q

What must a borrower do if they are applying for a mortgage who has previously been bankrupt?

A

Declare it to the lender

48
Q

What is an “Individual Voluntary Arrangement”?

A

Agreement between a debtor and credit to make payments towards their debt over an agreed period

49
Q

What is a “Debt Relief Order”?

A
  • Order issued by the Official Receiver on a person who can’t repay their debts.
  • Stops creditors from chasing debt without courts authority
50
Q

To qualify for a “Debt Relief Order” what are the rules?

A
  • Non property owner
  • Debts less than £30,000
  • Cannot repay debts
51
Q

These are all what?

  • Ordinary
  • Enduring
  • Lasting (Health & Welfare)
  • Lasting (Property & Financial Affairs)
A

Types of “Powers of Attorney”

52
Q

What is an”Deputy” in relation to powers of attorney?

A

Individual appointed by the Court of Protection to look after a person’s affairs after they become mentally incapacitated

53
Q

What “Power of Attorney” is this?

  • Typical used by people who are mental able but physically infirm
  • Donor has controls over their affairs & can also carry out transactions
  • Ceases when the donor becomes mentally incapable
A

Ordinary power of attorney

54
Q

What “Power of Attorney” enables the attorney to look after the affairs of somebody after they become mentally unable?

A

Lasting power of attorney

55
Q

What must be done to enable a “Lasting Power of Attorney” to become effective?

A

Must be registered with the “Office of the Public Guardian”

56
Q

What are the 2 types of “Lasting Power of Attorney”?

A
  1. Property & Financial Affairs
  2. Health & Welfare
57
Q

The below are features of what “Lasting Power of Attorney?

  • Can be registered before the donor loses mental capacity
  • Usually allows borrowing
  • Can still deal with own finances before mental capacity is lost
  • Look after the donor’s finances & property
A

Property & Financial Affairs LPA

58
Q

The below are features of what “Lasting Power of Attorney?

  • Attorney can make decisions about the donor’s medical treatment & care
  • Can only be used once the donor has lost mental capacity
A

Health & Welfare LPA

59
Q

What is the Scottish equivalent of Property & Financial Affairs LPA?

A

Continuing power of attorney

60
Q

What is the Scottish equivalent of a Health & Welfare power of attorney?

A

Welfare power of attorney

61
Q

In Scotland what power of attorney combines property & welfare matters?

A

Combined Power of Attorney

62
Q

What was the precursor of a Lasting Power of Attorney?

A

Enduring Power of Attorney

63
Q

What needs to happen for an “Enduring Power of Attorney” to be used after a donor loses mental capacity?

A

News to be registered at the Office of Public Guardian

64
Q

When an “Enduring Power of Attorney” was registered with the office of public guardian what must happen?

A

Donor & 3 relatives (with mental capacity and 18) must be informed

65
Q

MCOB rules only apply to second charges for business purposes if the loan is how much?

A

£25,000 or less

66
Q

If the sole purpose of a mortgage is to raise funds for the use of a small business under what amount of turnover is regulated by MCOB?

A

Under £1 Million

67
Q

An individual who has taken out an Individual Voluntary Arrangement (IVA) legally take out a mortgage?

True or False

A

True (may not be successful)

68
Q

Why are Corporate mortgages not regulated by the FCA?

A

The loan is to a company not an individual

69
Q

What is a “Corporate Borrower?

A

Unregulated lending to a limited company

70
Q

What are the purposes of Corporate Borrowing?

A

Residential or commercial purposes

CeMAP Unit 3 (4 decks)

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