Topic 25&26

Question 1

The Mortgage Conduct of Business Rules require a lender to make a record of its dealings with a borrower whose regulated mortgage contract is in arrears. For how long must this record be maintained?

A. Three years from the date of their dealings.

B. One year from the date the account went into arrears.

C. Five years from the date on which the arrears were cleared.

D. Five years from the date the account went into arrears.

Answer 1

A. Three years from the date of their dealings.

Question 2

On which type of mortgage would it be LEAST likely that arrears could be dealt with by extending the term?

A. Repayment
B. Unit-linked endowment
C. With-profits endowment
D. Pension

Answer 2

C. With-profits endowment

Question 3

To whom is Support for Mortgage Interest benefit paid?

A. Trustee in bankruptcy
B. The borrower
C. The lender
D. Person granted letters administration

Answer 3

C. The lender

Question 4

If a court grants a lender the right to outright possession, the lender can take possession of the property in:

A. 7 days
B. 14 days
C. 28 days
D. 3 months

Answer 4

C. 28 days

Question 5

Following repossession & subsequent sale, a claim on a mortgage indemnity guarantee can be made when the:

A. outstanding loan exceeds 80% of the property value.

B. property value exceeds 80% of the outstanding loan.

C. outstanding loan exceeds the sale price.

D. property value exceeds the outstanding loan.

Answer 5

C. outstanding loan exceeds the sale price.

Question 6

Ian has entered into an arrangement with his mortgage lender. This means he has:

A. taken out a new first mortgage.

B. received approval for a second mortgage.

C. reduced his mortgage term.

D. agreed the term over which to repay arrears.

Answer 6

D. agreed the term over which to repay arrears.

Question 7

Why is surrendering an endowment policy NOT usually recommended as a way of reducing arrears?

A. Benefits are in trust to the lender.

B. The return is often small in relation to premiums paid.

C. There is a tax charge of 20% for early encashment.

D. A replacement investment vehicle will always be required.

Answer 7

B. The return is often small in relation to premiums paid.

Question 8

A borrower in arrears retains the right to settle the mortgage debt until the:

A. property is sold.
B. property is advertised for sale.
C. lender takes possession.
D. debt exceeds one year’s interest.

Answer 8

A. property is sold.

Question 9

Under the Administration of Justice Act 1973 the Courts have the powers to:

A. reschedule mortgage payments over a specified period.

B. confiscate any equity held in the house.

C. place a second charge on the property.

D. let the property to repay arrears.

Answer 9

A. reschedule mortgage payments over a specified period.

Question 10

If a mortgage is in arrears, a court is unlikely to sanction a lender taking possession if the borrower is complying with the terms of:

A. the MCOB rules
B. an arrangement
C. the endowment policy
D. the Mortgage Code

Answer 10

B. an arrangement

Question 11

June and Tim have a capital repayment mortgage. They have built up a significant sum of arrears on this mortgage owing to an illness sustained by Tim, a self-employed builder. Their lender has agreed to allow them to reschedule the arrears now that Tim is back in regular employment. What would be the effect on their mortgage of this rescheduling?

A. They will pay an increased rate of interest on their loan for an agreed period.

B. They will pay a lower rate of interest on their loan for an agreed term.

C. The term of the mortgage account will be extended to enable them to reduce their monthly repayment.

D. It would increase their monthly repayment for an agreed period while they clear the arrears.

Answer 11

D. It would increase their monthly repayment for an agreed period while they clear the arrears.

Question 12

Pauline’s current mortgage was taken out in June 2015. She has now lost her job and cannot make the repayments. How soon could her claim for Support Mortgage Interest start to be paid?

A. 39th week
B. 18th week
C. 26th week
D. 13th week

Answer 12

A. 39th week

Question 13

Joanne’s property has recently been taken into possession by her mortgage lender. What are the implications for Joanne?

A. If the lender sells the property for more than the original loan taken out by Joanne, then any difference between the original purchase price and the sale price must be immediately passed to Joanne.

B. Joanne can reclaim her property by redeeming her loan in full before the property is sold.

C. Joanne can only stop the lender selling the property by clearing the outstanding arrears.

D. The lender must delay the sale of the property until the sale price covers Joanne’s original loan.

Answer 13

B. Joanne can reclaim her property by redeeming her loan in full before the property is sold.

Question 14

Andy’s mortgage has recently gone into arrears. His first missed payment was on Monday 1st July. His lender became aware of the missed payment on Wednesday 3rd July. When is the latest date that the lender must write to warn Andy of the situation?

A. Monday 8th July
B. Wednesday 10th July
C. Wednesday 24th July
D. Monday 15th July

Answer 14

C. Wednesday 24th July

Question 15

Under the Administration of Justice Act, the power of discretion was provided to the County Courts to:

A. Suspend or adjourn possession proceedings instigated by lenders.

B. Allow lenders to capitalise mortgage arrears.

C. Insist that lenders extend a mortgage term to assist borrowers in difficulty.

D. Ensure that lenders do not increase interest payments on arrears.

Answer 15

A. Suspend or adjourn possession proceedings instigated by lenders.

Question 16

A building society has completed the sale of a property that it had repossessed and has realised a surplus of £25,000. If there are three further mortgagees, which of the following statements in respect of the disposal of the surplus is correct?

A. It will be passed directly to the former borrower who will be asked to satisfy any other debts they have directly with other lending institutions.

B. The society only has an obligation to settle the debt of the second mortgagee. It will return the remainder of the surplus to the former borrower.

C. The society’s only obligation is to pay any surplus to the second mortgagee.

D. The society will ask each subsequent mortgagee to confirm the amounts owed and then distribute the surplus accordingly.

Answer 16

C. The society’s only obligation is to pay any surplus to the second mortgagee.

Question 17

Advice given by the Citizens’ Advice Bureau to a borrower who is having difficulty making his mortgage payments is:

A. free of charge to both the borrower and the lender.

B. free of charge to the borrower but not the lender.

C. subject to a charge to the borrower that can be added to the mortgage account.

D. subject to a charge which the borrower can reclaim from the lender.

Answer 17

A. free of charge to both the borrower and the lender.

Question 18

Stuart has an interest-only mortgage supported by a low-cost with-profits endowment policy. Through unemployment, his mortgage account is now three months in arrears. If Stuart is about to start a new job, which of the following options would be most appropriate?

A. A suspension of the repayment of capital for an agreed period.

B. A temporary extension of the mortgage term.

C. An increase in monthly payment for an agreed period, subject to affordability.

D. Capitalisation of the arrears.

Answer 18

C. An increase in monthly payment for an agreed period, subject to affordability.

Question 19

Ian was made redundant last month and has applied for Support Mortgage Interest (SMI) to cover his mortgage interest payments. His low-cost endowment mortgage of £150,000 began in October 2010. Which of the following is correct in respect of his entitlement to SMI?

A. Benefit covering all his mortgage interest is payable from the ninth week.

B. No benefit will be payable for the first eight weeks following the claim, with 50% of the mortgage interest being covered from the ninth week.

C. No payments will be made in respect of his endowment premiums.

D. Benefit covering his full entitlement up to 100% of the mortgage interest will be payable from the 13th week after the date of his claim.

Answer 19

C. No payments will be made in respect of his endowment premiums.

Question 20

Which of the following is true in relation to a lender appointing a receiver?

A. The receiver acts on behalf of the lender but is an agent of the borrower.

B. This remedy can be used only if the borrower has been declared bankrupt.

C. The receiver must not be an employee of the lender.

D. The receiver acts on behalf of the borrower but is an agent of the lender.

Answer 20

A. The receiver acts on behalf of the lender but is an agent of the borrower.

Question 21

Which of the following must be included in the warning letter that a lender must send to a borrower within 15 business days of becoming aware of arrears?

A. A list of missed payments.

B. Procedures that the lender must follow to take possession.

C. the CML information sheet on arrears.

D. the total outstanding debt including any redemption charges.

Answer 21

A. A list of missed payments.

Question 22

Lenny’s property has been taken into possession and sold by his lender at a price of £18,000 less than the outstanding mortgage debt. If the lender claimed on a mortgage indemnity insurance and received £10,000 in full settlement, which of the following statements would be correct?

A. The insurer can sue Lenny for the recovery of £18,000.

B. The insurer can sue Lenny for the recovery of £8,000 only.

C. The insurer and the lender can jointly sue Lenny for the recovery of £10,000 only.

D. The lender can sue Lenny for the recovery of £8,000.

Answer 22

D. The lender can sue Lenny for the recovery of £8,000.

Question 23

Gavin and Sarah are about to have their home repossessed by their lender. Under the Mortgage Conduct of Business Rules:

A. if there is a claim on a MIG policy as a result of the sale, the insurer has six years to notify Gavin and Sarah of its intention to claim payment from them.

B. the lender must market the property for sale within three months.

C. the lender must obtain the best price reasonably possible for the property.

D. where the sale proceeds exceeds the outstanding debt, the lender can keep the surplus.

Answer 23

C. the lender must obtain the best price reasonably possible for the property.