Unit 3 Topic 3 Flashcards
Mortgage Regulation
Which of the following loans would not be treated as a regulated mortgage contract? (3.3.1)
A. Gaynor, who is arranging a mortgage to buy a property equally split between a flat for her family and a shop, to house her new business venture.
B. Jamil, who is remortgaging his family home to raise money for a loft extension.
C. Imran, who is arranging a mortgage on a three-storey factory building with a selfcontained caretaker’s flat on the top floor.
D. Suzanne, who is buying a two-bedroom flat so that her mother can move closer to her family.
C. Imran, who is arranging a mortgage on a three-storey factory building with a selfcontained caretaker’s flat on the top floor.
Imran is looking to purchase a property which represents a third of the overall property, so less than the 40% requirement for a regulated mortgage.
Mike has both a first and second charge on his property but has been unable to make any
payments on either loan recently. He also has an unsecured loan. If the lenders exercise their power of sale, where does Mike fall in the order of priority to receive any proceeds ?
(3.1.2)
A. First
B. Second
C. Third
D. Fourth
C. Third
The first two loans are secured against Mike’s property and must both be repaid on sale or repossession. If there is any remaining money after the two secured loans are cleared, this will pass to Mike, who will then have to deal with the unsecured loan provider directly.
Under Mortgages and Home Finance Regulation, how are Islamic home finance plans categorised? (3.3.4)
A. Regulated mortgages
B. Lease to own mortgages
C. Home Purchase Plans
D. Home Finance Plans
C. Home Purchase Plans
Islamic home finance plans are covered by the category ‘home purchase plans’. Home purchase plans involve the provider buying a property and then selling it to the ultimate owner.
The Mortgage Conduct of Business (MCOB) sourcebook contains specific rules regarding: (3.4)
A. how the Annual Percentage Rate (APR) is calculated
B. the maximum permitted level of arrears charges
C. the maximum level of charges for providing advice
D. the basis of compensation for mis-selling
A. how the Annual Percentage Rate (APR) is calculated
MCOB 10.3 sets out the formula and assumptions for the calculation of APR. The annual percentage rate (APR) on a mortgage is a better indication of the true cost of the loan than the mortgage interest rate by itself. The APR takes into account not only the mortgage rate, but also the lender’s other charges and fees.
An estate agent who significantly exaggerates the dimensions of a property they’re marketing is providing misleading information and potentially in breach of: (3.5.1)
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
B. The Consumer Protection (Amendment) Regulations 2014
The Consumer Protection (Amendment) Regulations 2014 replaced earlier legislation and is designed to control marketing and selling practices and cover situations where professionals, including estate agents, deal with customers. Where an estate agent significantly exaggerates the dimensions of a property, this is misleading information and is potentially in breach of the regulations.
Albert took out a second charge loan on his house in January 2016. What is the status of the loan? (3.2.1)
A. It will be subject to Financial Conduct Authority regulation under MCOB rules, provided it meets the criteria for regulated second charges.
B. It will be subject to Financial Conduct Authority regulation under the Consumer Credit Act 2006
C. It will not be a Financial Conduct Authority regulated loan
D. It will be subject to Prudential Regulation Authority regulation under the Consumer Credit Act 2006
A. It will be subject to Financial Conduct Authority regulation under MCOB rules, provided it meets the criteria for regulated second charges.
Although the loan was taken out before 21st March 2016, this second-charge mortgage will be treated as a ‘back book loan’ and subject to the MCOB rules, provided it meets the criteria for regulated second mortgages that were introduced in March 2016.
Which of the following types of mortgage is most likely to be exempt from the requirements of the Mortgage Credit Directive (MCD) (3.3.2)
A. A consumer buy-to-let mortgage
B. A lifetime mortgage
C. A second charge mortgage
D. An interest-only mortgage
B. A lifetime mortgage
Lifetime mortgages are exempt from the Mortgage Credit Directive 2016 and are regulated by the FCA as a separate type of loan.
Rick has received confirmation from his lender that his mortgage will not be a regulated mortgage; this is probably because: (3.3.6)
A. the property will be a holiday home.
B. 20% of the building will be used as a shop.
C. he bought the property for his daughter to live in.
D. the property was purchased as an investment to be rented out.
D. the property was purchased as an investment to be rented out.
Rick has taken out a business buy-to-let mortgage. These mortgages are outside FCA regulation.
The Wooliwide Building Society has recently launched a mortgage which is aimed at helping older borrowers raise equity from their property. Which of the following conditions prevents it from being classified as a regulated lifetime mortgage? (3.3.2)
A. The interest rate is fixed
B. It is an interest-only mortgage
C. The capital is only repayable on the borrower’s death, or a move into residential care.
D. The capital must be repaid in equal instalments over the term.
D. The capital must be repaid in equal instalments over the term.
One of the definitions of a lifetime mortgage is that no capital repayments are required, but regular interest payments must be made until the end of the mortgage.
Which of the following statements in relation to a mortgage is true? (3.1.1)
A. The mortgagor is the lender
B. Property is the only class of asset that can be mortgaged
C. It can be defined as using assets by the lender as security for a loan.
D. The most common method is ‘mortgage by demise’.
C. It can be defined as using assets by the lender as security for a loan.
A mortgage is an arrangement where an asset is used by the lender as security for a loan.
Option A is incorrect : the borrower is the mortgagor, the lender is the mortgagee,
Option B is incorrect : property is not the only asset that can be mortgaged, other assets, such as share portfolios can be mortgaged.
Option D is incorrect : a mortgage by demise is rare, because it can only be arranged with unregistered property. Most mortgages are on the basis of ‘mortgage by legal charge’
Which of the following would not be a potential breach of the Consumer Protection (Amendments) Regulations 2014 when dealing with a potential buyer ? (3.5.1)
A. Describing a property with a public right of way through its garden as private.
B. Exaggerating the property’s dimensions.
C. Failure to disclose the property’s existing electricity supplier.
D. Omitting details about remedial work that has been carried out
C. Failure to disclose the property’s existing electricity supplier.
From an estate agent’s perspective, a consumer can be expected to make their own enquiries and find publicly-available information, but agents are expected to point out important or unusual matters to consumers.
There are three main parts to The Consumer Protection (Amendments) Regulations 2014. Which of the following does not apply? (3.5)
A. A blacklist of practices
B. A general ban on unfair commercial practices
C. Misleading and aggressive practices
D. Protection for consumer credit
D. Protection for consumer credit
The legislation doesn’t apply to financial services or consumer credit
