Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

MORT > U3: T3 - MORTGAGE REGULATION > Flashcards

U3: T3 - MORTGAGE REGULATION Flashcards

1
Q

Is the following mortgage regulation included in the MCOBs?

Lifetime mortgages

A

Yes.

MCOBs includes:
Lifetime and second‐charge mortgages; bridging loans; home reversion plans; and home purchase plans (more commonly known as Islamic mortgages).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Is the following mortgage regulation included in the MCOBs?

Second-charge mortgages

A

Yes.

MCOBs includes:
Lifetime and second‐charge mortgages; bridging loans; home reversion plans; and home purchase plans (more commonly known as Islamic mortgages).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Is the following mortgage regulation included in the MCOBs?

BTL mortgages

A

No.

MCOBs includes:
Lifetime and second‐charge mortgages; bridging loans; home reversion plans; and home purchase plans (more commonly known as Islamic mortgages).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

‘Back book loans’ are:

A) First-charge mortgages
B) Second-charge mortgages

A

B) Second-charge mortgages

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

How do you define a regulated mortgage?

A

A regulated mortgage contract is one that, at the time it is entered into, meets the following conditions:
„
A) a lender provides credit to an individual or to trustees (the ‘borrower’); and

B)„ the borrower’s obligation to repay is secured by a mortgage on land in the UK, where at least 40 per cent of the land is used, or is intended to be used, as or in connection with a dwelling.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

If a mortgage was implemented prior to 21 March 2016 which section of the MCOB is it likely to be covered by?

A) Regulated mortgages;
„B) MCD regulated mortgages.

A

A) Regulated mortgages;

Regulated mortgages are those completed before 21 March 2016, when the MCD came into effect.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

If a mortgage was implemented prior to 21 March 2016 which section of the MCOB is it likely to be covered by?

A) Regulated mortgages;
„B) MCD regulated mortgages.

A

A) Regulated mortgages;

Regulated mortgages are those completed before 21 March 2016, when the MCD came into effect.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the difference between a home purchase plan and a regulated mortgage?

A

Home purchase plans involve the provider buying the property and then selling it to the ultimate owner via a special agreement, either through regular payments of capital, or a single payment at the end of a specified term.

With a conventional mortgage the property buyer uses money borrowed from the lender to buy the property in their own name(s), and is usually required to pay interest on the outstanding loan.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Islamic mortgages come under which category?

A) Home Purchase Plan
B) Regulated Mortgage

A

A) Home Purchase Plan

Islamic home finance plans are covered by the category ‘home purchase plan’ because under Islamic law it is forbidden to take out a conventional mortgage requiring payment of interest to the lender.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Home reversion plans are regulated. True or false?

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Customers with unresolved complaints about CBTL mortgages can take their complaint to the

A) FCA
B) FSA
C) FOS

A

C) FOS - Financial Ombudsman Service.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Which of the following are ‘accidental landlords’? What would the implications be for them if they needed to arrange a new mortgage on the property they are renting out?

a) A son inherits his parents’ house. He has his own property but does not wish to sell his parents’ house yet because the market is poor. In the meantime, in order to cover the costs of maintenance, etc, he decides to rent it out.

b) A couple have moved to another area to work but have been unable to sell their house. In order to cover the cost of maintenance, etc, they have decided to rent it out while they settle nearer to work and perhaps buy another property in the area.

A

In both cases the owners would be regarded as ‘accidental landlords’, and any new mortgage they arranged on the property would be regulated as a CBTL mortgage.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

A business (professional) BTL is regulated. True or false

A

False.

A business buy‐to‐let mortgage is arranged to purchase or otherwise fund a property that is intended solely to be rented out as part of a business. These mortgages continue to be outside FCA regulation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

A back-book loan entered into in 2015 and doesn’t meet the 2016 back-book criteria is regulated by which of the following?

A) MCOB
B) MCD
C) CONC

A

C) CONC

Between 1 April 2014 and 20 March 2016, FCA regulations on second charges were contained in its Consumer Credit (CONC) sourcebook.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

A back-book loan entered into in May 2016 is regulated by which of the following?

A) MCOB
B) MCD
C) CONC

A

A) MCOB

Following the implementation of the MCD on 21 March 2016, second‐charge regulation was incorporated into MCOB.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

A back-book loan entered into in 2015 but does meet the 2016 back-book criteria is regulated by which of the following?

A) MCOB
B) MCD
C) CONC

A

A) MCOB

Second‐charge mortgages entered into before 21 March 2016 are subject to MCOB, as back book loans, if they meet the 2016 criteria for regulated second charges.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Anita took out a second mortgage on her home in January 2016. Is her mortgage subject to MCOB?

A

Yes (assuming they meet criteria).

Second‐charge mortgages that would have been subject to MCOB had they been taken out after 21 March 2016 fall within the MCOB regime.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Brian has just bought a three‐storey property with the help of a mortgage. Two floors provide office accommodation and the top floor is a two‐bedroom flat. Is the mortgage regulated?

A

No. The mortgage would not be regulated, because less than 40 per cent of the land is to be used as a dwelling.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

What type of lending became subject to MCOB rules in 2016, and included back book loans?

A

Second‐charge lending.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

All mortgages on BTL property owned by individuals are consumer buy‐to‐let mortgages. True or false?

A

False, for two reasons:

a) the CBTL regime applies only to mortgages arranged on or after 21 March 2016;

b) a mortgage is only a CBTL mortgage if the borrower is an ‘accidental landlord’, ie is not involved in a property‐letting business.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Gabby, aged 56, has entered into an arrangement where a lender has given her a mortgage that must be repaid only when she moves, goes into care or dies.

What type of arrangement does she have?

a) A home reversion plan.
b) A home finance plan.
c) A lifetime mortgage.

A

c) A lifetime mortgage.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Andy has arranged a home reversion plan, entering 50 per cent of his property into the plan in exchange for a lump sum of £80,000. On his death the property is valued at £300,000. How much, if any, of the property value would be included in his estate for distribution to his heirs?

a) Nothing.
b) £110,000.
c) £150,000.
d) £220,000.

A

£150,000 would form part of Andy’s estate.

He entered 50 per cent of the property into the plan, which means the provider would be entitled to 50 per cent of the proceeds of the sale, regardless of how much Andy received when the plan started.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Which of the following is not a chapter of MCOB?

a) Application and purpose.
b) Training and competence.
c) Financial promotions.
d) MCD: further advances.

A

b) Training and competence.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

True or false?

Regulated mortgages of less than £25,000 on residential property are regulated under the Consumer Credit Acts 1974 and 2006.

A

False.

Regulated mortgages are regulated under MCOB, not the consumer credit legislation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

True or false?

George wants to borrow £20,000 in the form of a personal loan to install a new bathroom and kitchen in his house. This loan would be subject to consumer credit legislation.

A

True.

George wants to use a personal loan, rather than a further advance on his mortgage, to fund his home improvements, so the loan is subject to consumer credit legislation rather than MCOB. There is no upper limit on the amount of the loan covered by the legislation as the loan is not for business purposes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

An estate agent that makes misleading claims about the properties it is marketing is potentially in breach of:

a) Consumer Protection from Unfair Trading Regulations 2014.
b) The Consumer Protection (Amendment) Regulations 2014.
c) Consumer Credit Act 1974.
d) Consumer Credit Act 2006.

A

b) The Consumer Protection (Amendment) Regulations 2014.

26
Q

A mortgage can only be secured using property or land. True or false?

A

False.

Although mortgages are usually associated with property, property is not the only asset that can provide security for a mortgage. Other assets, such as share portfolios, can be mortgaged too, and mortgage-backed loans may be used for purposes other than property purchase.

27
Q

Some time ago, Anita built a family house on a plot of land she bought, and she is now looking to remortgage. The mortgage will be regulated if:

A) at least 40% of the house and garden will be used as family accommodation.
B) the house and garden occupies at least 40% of the land.
C) the house was built after 31 October 2004.

A

B) the house and garden occupies at least 40% of the land.

A mortgage is regulated if at least 40% of the land is used, or is intended to be used, as or in connection with a dwelling. As long as Anita’s house and garden equate to 40% of the total land, any mortgage would be regulated. The date the house was built is not relevant, but only mortgages entered into since 31 October 2004 are regulated.

28
Q

Vladimir today applied for a commercial mortgage to buy a three-storey building with a shop on the ground floor and a two-storey maisonette on floors one and two. All floors are of an equal size. Vladimir intends to live in the maisonette and rent out the shop. The mortgage will be:

A) an MCD regulated mortgage.
B) a buy-to-let mortgage.
C) a regulated mortgage.

A

A) an MCD regulated mortgage.

As roughly 66% of the building will be used as Vladimir’s home, and the mortgage will be arranged after 21 March 2016, it will be a Mortgage Credit Directive (MCD) regulated mortgage.

29
Q

Brenda and Tom have been informed that their mortgage is a regulated lifetime mortgage. Which of the following statements are not true? Select all the false statements.

A) Brenda and Tom must be in their 30s.
B) The lender can require full repayment of the mortgage after a stated time.
C) The lender may require Tom and Brenda to make regular interest payments.
D) The lender can allow Brenda and Tom to roll up any interest payments.
E) The mortgage will end if Tom and Brenda sell their house.

A

A) Brenda and Tom must be in their 30s.
B) The lender can require full repayment of the mortgage after a stated time.
D) The lender can allow Brenda and Tom to roll up any interest payments.

A regulated lifetime mortgage must only be available to older borrowers over a certain (unspecified) age and the lender cannot seek full repayment until one of a number of specified events occurs. The arrangement can require some regular capital and/or interest payments (but not total repayment), or interest can be deferred until the mortgage ends.

30
Q

Brenda and Tom have been informed that their mortgage is a regulated lifetime mortgage. Which of the following statements are not true? Select all the false statements.

A) Brenda and Tom must be in their 30s.
B) The lender can require full repayment of the mortgage after a stated time.
C) The lender may require Tom and Brenda to make regular interest payments.
D) The lender can allow Brenda and Tom to roll up any interest payments.
E) The mortgage will end if Tom and Brenda sell their house.

A

A) Brenda and Tom must be in their 30s.
B) The lender can require full repayment of the mortgage after a stated time.
D) The lender can allow Brenda and Tom to roll up any interest payments.

A regulated lifetime mortgage must only be available to older borrowers over a certain (unspecified) age and the lender cannot seek full repayment until one of a number of specified events occurs. The arrangement can require some regular capital and/or interest payments (but not total repayment), or interest can be deferred until the mortgage ends.

31
Q

Shahid is buying a house through an Islamic home finance plan. Which of the following would not be acceptable under Islamic law?

A) The provider buys the property and sells it to Shahid at a higher price, with Shahid making regular payments of capital over an agreed term.

B) Shahid arranges a mortgage to buy the property, but any interest due is added to the capital and repaid at the end of an agreed term.

C) The provider buys the property and sells it to Shahid at the same price. Shahid then makes regular payments of capital and rent over an agreed term.

A

B) Shahid arranges a mortgage to buy the property, but any interest due is added to the capital and repaid at the end of an agreed term.

Under Islamic law it is forbidden to take out a conventional mortgage requiring payment of interest to the lender. Islamic home finance plans meet this requirement by adopting the other methods outlined.

32
Q

Which of the following is untrue? To be classified as a regulated home reversion plan, the plan must end:

A) if the occupier enters residential care.
B) if the occupier dies.
C) at the end of a specified term of at least 25 years.

A

C) at the end of a specified term of at least 25 years.

A regulated home reversion plan will end if the occupier dies or enters residential care, or at the end of a specified term of at least 20 years.

33
Q

When a lender assesses an application for a ‘consumer buy to let’ mortgage, it:

A) must assess the application in a similar way to a standard residential mortgage.

B) can use a less stringent assessment of affordability than for a standard mortgage.

C) can opt to use the Mortgage Credit Directive exemption.

A

A) must assess the application in a similar way to a standard residential mortgage.

A ‘consumer buy to let’ mortgage must be treated in a similar way to a standard residential mortgage. The Mortgage Credit Directive exemption applies to the government rather than lenders.

34
Q

Jacob is buying a house. Which of the following would define a mortgage on the property as a business buy-to-let mortgage? Select all that apply.

A) The property forms part of Jacob’s property portfolio.
B) Jacob will use the property for holiday lettings
C) Jacob has moved for work reasons and will rent out his old house to cover costs until he can sell it.
D) Jacob has bought the house for his mother to live in.

A

A) The property forms part of Jacob’s property portfolio.
B) Jacob will use the property for holiday lettings

If Jacob moved for work reasons and rented out his old house to cover costs until he could sell it, any mortgage would be consumer buy to let. If Jacob bought the house for his mother to live in, it would not be considered business buy to let.

35
Q

An estate agent has exaggerated the dimensions of several rooms in a property it has advertised. This is a potential breach of the:

A) Property Misdescriptions Act 1991.
B) Consumer Protection (Amendment) Regulations 2014.
C) Consumer Rights Act 2015.

A

B) Consumer Protection (Amendment) Regulations 2014.

This would be a breach of The Consumer Protection (Amendment) Regulations 2014, which replaced the Property Misdescriptions Act 1991. The Consumer Rights Act 2015 deals with unfair terms in standard contracts between firms and consumers.

36
Q

Which of the following statements is false in relation to the Consumer Credit Acts of 1974 and 2006?

A) Regulated mortgages are exempt from the Consumer Credit Acts.
B) The Acts do not apply to lending to limited companies.
C) Second-charge loans are subject to the Consumer Credit Acts.

A

C) Second-charge loans are subject to the Consumer Credit Acts.

Regulated mortgages, including second charges, are exempt from the Consumer Credit Acts. Loans to limited companies are not within the scope of the Consumer Credit Acts.

37
Q

A mortgages only secured on property?

A

No.

A mortgage is an arrangement where an asset is used by the lender as security for a loan.

In the case of house purchase, the loan is secured on a
property through a legal charge.

38
Q

Who used to have regulatory responsibility for the marketing and sales of mortgage and home finance?

A) FCA prior to April 2013
B) FSA prior to April 2013

A

B) FSA prior to April 2013

39
Q

What term is interchangeable with home purchase plans?

A

Islamic mortgages

40
Q

When did Home reversion plans become regulated by the FSA?

A

April 2017

41
Q

True or false.

Contracts that were entered into before 31 October 2004 (ie before mortgages came within the remit of the then regulator, the Financial Services Authority)
cannot be regarded as regulated mortgage contracts, even if they satisfy the ‘regulated mortgage contract’ criteria.

A

True

42
Q

If a regulated mortgage completed on 20Mar2016 how is it considered?

A) A regulated mortgage
B) An MCD regulated mortgage

A

A) A regulated mortgage

Regulated mortgages are those completed before 21 March 2016, when the MCD came into effect. In most areas of regulation, any matters that arise from a mortgage set up before 21 March 2016 will be dealt with under the MCOB rules that applied prior to implementation of the MCD. Any change to the mortgage that does not constitute a new contract, such as a further advance, will be subject to the original MCOB rules.

43
Q

If a regulated mortgage completed on 23Mar2016 how is it considered?

A) A regulated mortgage
B) An MCD regulated mortgage

A

B) An MCD regulated mortgage

An MCD regulated mortgage is one entered into on or after 21 March 2016 and subject to the amendments made to MCOB in order to comply with the MCD. This includes remortgages because they will be a new contract.

44
Q

Customers with unresolved complaints about CBTL mortgages can take their complaint to the …?

A

FOS (Financial Ombudsman Service)

45
Q

A business BTL is regulated, true or false?

A

False

A business buy‑to‑let mortgage is arranged to purchase or otherwise fund a property that is intended solely to be rented out as part of a business. These mortgages continue to be outside FCA regulation

46
Q

Which of the following is NOT covered by the ‘Consumer Credit Legislation’?

A) An Individual
B) A partnership of three or fewer members
C) A corporation
D) An unincorporated association

A

C) A corporation - not covered.

Consumer credit legislation is intended to protect ordinary consumers and small businesses, and uses the term ‘individual’ to define those borrowers. An ‘individual’ is defined as an ‘ordinary’ borrower, a partnership with three or fewer members or an unincorporated association. Other businesses are outside the legislation.

47
Q

Which regulatory board took over regulating mortgages after April 2013?

1) FCA
2) FSA

A

1) FCA

The Financial Conduct Authority (FCA) took over regulatory responsibility for the marketing and sales of mortgages and home finance from the Financial Services Authority (FSA) in April 2013.

48
Q

For what 2 type of loans were new MCD sections added?

A

buy-to-let mortgages & second charge loans

49
Q

What is a back-book loan?

A

A second charge loan

50
Q

Define a regulated mortgage?

A

A regulated mortgage contract is one that, at the time it is entered into, meets the following conditions:

„A) a lender provides credit to an individual or to trustees (the ‘borrower’); and

„B) the borrower’s obligation to repay is secured by a mortgage on land in the UK, where at least 40 per cent of the land is used, or is intended to be used, as or in connection with a dwelling.

51
Q

A regulated mortgage that came into effect before 21 Mar 2016, will be referred to as a:

A) Regulated mortgage
B) MCD regulated mortgage

A

A) Regulated mortgage

Regulated mortgages are those completed before 21 March 2016, when the MCD came into effect.

52
Q

A regulated mortgage that came into effect after 21 Mar 2016, will be referred to as a:

A) Regulated mortgage
B) MCD regulated mortgage

A

B) MCD regulated mortgage

Regulated mortgages are those completed before 21 March 2016, when the MCD came into effect.

53
Q

Relating to a regulated lifetime mortgage, in which circumstance can a lender not seek repayment of the loan?

1) „ the borrower’s death;
„2) the borrower moves to live elsewhere without the reasonable expectation of returning – into residential care or sheltered accommodation, for example;
„3) the borrower moves to another ‘main residence’;
„4) the borrower sells the property;
„5) the lender exercises its legal right to take possession under the mortgage contract.
6) the borrower becomes chronically ill in hospital

A

6) the borrower becomes chronically ill in hospital - not one

54
Q

Are home reversion plans regulated?

A

Yes.

Home reversion plans have been regulated since 2007.

55
Q

What is the definition of CBTL according to the Mortgage Credit Directive, 2015?

A

A CBTL mortgage contract is one “which is not entered into by the borrower wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by the borrower” (Mortgage Credit Directive Order, 2015).

56
Q

Who can Customers complain to about the CBTL?

A

Financial Ombudsman Service.

Customers with unresolved complaints about CBTL mortgages can take their complaint to the Financial Ombudsman Service.

57
Q

Which part of regulation handbook were second charge loans contained in Between 1 April 2014 and 20Mar2016?

A) CONC
B) MCOB

A

A) CONC

58
Q

What regulation are second charge loans subject to if entered into after 21 Mar 2016?

A) CONC
B) MCOB

A

B) MCOB - Second‐charge mortgages entered into before 21 March 2016 are subject to MCOB, as back book loans, if they meet the 2016 criteria for regulated second charges.

59
Q

What products does consumer credit legislation apply to?

A

Unsecured or credit card loans

The consumer credit legislation applies to unsecured loans, credit cards and similar lending.

60
Q

Where is the consumer credit legislation contained?

A

Consumer Credit sourcebook (CONC).

61
Q

Is a regulated mortgage exempt from Consumer Credit Act of 1974 and 2006?

A

Yes.

62
Q

Is an MCD mortgage contract exempt from Consumer Credit Act of 1974 and 2006?

A

Yes

63
Q

Lifetime mortgages do not apply for the Mortgage Credit Directive exemption. True or false?

A

False.

Lfetime mortgages continue to be regulated as a separate type of mortgage from MCD loans.

MORT (30 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions