Unit 6 Flashcards
What must lenders provide borrowers with outlining all costs for extra work post completion?
Tariff of charges
Where will a tariff of charges be?
Tucked in with your mortgages statement
Lenders have to write to clients within how long in regards to arrears?
15 working days of a lender being aware of a missed payment
What is the single financial guidance body called for arrears?
Problems paying your mortgage
How long should records be kept after arrears being cleared?
3 years after
For arrears, charges a a result of what?
Debt
Does arrears have anything to do with the FCA?
NOOOOO
What’s the first thing you should do when you have arrears?
Contact the lender
What will a lender come up with when you contact them about arrears?
Come up with an arrangement
How could you clear arrears?
Make interest only payments Extend the term Capitalisation Trade down Allow the suspension of payments(short term) Surrender the repayment vehicle
When can a lender get in touch with you for arrears? What hours between
8:00am-9:00pm 7 days a week
Lenders shouldn’t take more than…….direct debits in a month?
2
What is the only advice we give on arrears?
Can you pay the arrears over an agreed period?
You got yourself in get yourself out
You have up to…..months to clear arrears?
12
What is classed as medium term arrears?
Up to 12 months
What does litigation mean?
the process of taking legal action
What are the potential drawbacks of surrendering the investment vehicle?
No means of repaying capital
Poor surrender values
May not be possible to obtain new life cover
Alternatives
Sale of endowments
Is it legal to just hand the keys back when you’re in arrears to clear the debt?
No
When your in arrears your credit rating will be what?
Blemished
What is the waiting time for SMI from a claim being made?
There is a 39-week waiting period from the time you claim SMI until your first payment is made (unless you’re getting Pension Credit, in which case you can get help immediately).
What is the max claim on a SMI?
£200,000
What is the claim on a SMI?
The claim is the mortgage amount
Is SMI means tested?
Yessssss
Is a SMI available to those claiming income based benefits?
Yes
No claim can be made on a SMI if the person has over how much in their savings?
£16,000
From what year was SMI a secured loan?
2018
SMI is now a what provided by the government?
A mortgage
For SMI, the loan is written off on death if?
There is no equity in the property
Clients can voluntarily make payments of how much for a SMI?
£100
When are SMI mortgages reviewed?
Every 6 months
Are SMI mortgages paid for arrears?
No
What is a mortgage interest run on for a SMI?
Benefit paid for further 4 weeks after obtaining employment
What is the 52 week linking rule for for a SMI?
If you’re made unemployed within a year of the ending of a successful claim, you don’t have to wait another 39 week period.
Is a SMI a repayment vehicle?
NO
How do you work out the standard rate for SMI?
Average of the top lenders rates
What does a mortgage rescue scheme do?
Help homeowners facing repossession
What is a shared equity loan in a mortgage rescue scheme?
A registered social landlord issues and equity loan between 25-75% of the total mortgage
They will then take a share of the equity on sale
A sale and rent back for a mortgage rescue scheme must be given a fixed tenancy agreement of how long?
5 years
What are the four actions a lender can take against a borrower in default?
- Sue on the personal covenant for the debt
- Appoint a receiver
- Foreclosure
- Repossession
What does appointing a receiver do for a lender who is dealing with a borrower with defaults?
Receiver collects the rent and applies it to the account in default
When can you ONLY appoint a receiver for legal remedies upon default?
Only if there is an income from the property
Who does the receiver act on behalf of when appointing a receiver for legal remedies upon default?
Lender
Who is the agent when it comes to appointing a receiver for legal remedies upon default?
The borrower
What does foreclosure mean in terms of legal remedies upon default?
When is this used?
Lender repossess property and keep all the proceeds
Never
Does the law allow foreclosure?
No even though it’s a legal remedy
Even when a property is being repossessed what does the lender have to the borrower?
Duty of care
Should the lender consider letting the borrower to stay in the property when it is going be repossessed?
Yes
When a property is being repossessed the lender wants the best price. Who should it go to first?
Estate agent
For repossession offers must be made?
Public
When a house is being repossessed the court can order the outright possession usually within how long?
28 days
After a house has been repossessed the borrower has the right to get their property back if they clear all debts and arrears before the property is sold. What is this called?
Equity of redemption
If debt remains after a property has been repossessed and sold the lender must inform the borrower within how long?
6 years of their intention to pursue them for these amounts
When a house has been repossessed and sold who takes what and in what order?
First charge takes what’s owed and then passes residue on to any second charge. Only when all charges are cleared are monies given to client.
If a clients been bankrupt they may lose their property through a sale forced by who?
Official receiver
If a sale of a house is being done because of a bankruptcy, it can be delayed for up to how long to allow the family to find alternative accomodation?
12 months
Can you have a higher lending charge on a 2nd charge?
No
When does MIG kick in?
75%
Is income protection short or long term?
Long
Is an investment is taking place do you need a suitability report?
No
Mcob requires a lender must send a statement to the borrower every how
Often?
Annually
From what date were bridging loans covered by MCOB?
March 2016
Will a bridging loan lender take into account affordability?
Yea
What is meant by open bridging?
Buying a new property before you have found a buyer for the current property
Is open bridging risky?
Yes
What is closed bridging?
Buying a property with a firm buyer in place for the current property
When does closed bridging usually start?
Starts at or just after exchange of contracts
When do bridging loans become unregulated?
If they’re over 12 months
Any extension on a bridging loan must be treated as what?
A new loan and subject to affordability assessment unless the customer is high net worth
A mortgage deed that obliges the lender to make a further advance means further advances will what?
Take priority over other lenders charges
MCOB rules cover requirements for an illustration for a further advance. What must this illustration be based on?
On the amount of the further advance only
What is an advantage of a home reversion plan over a lifetime mortgage?
Probably receive more cash
When you remortgage who will the new mortgage be regulated under?
mortgage credit directive
What will a borrower need when remortgaging?
Need a redemption statement to ascertain what the amount outstanding is including redemption penalties
Increasing the level of borrowing to a higher LTV could also trigger what?
Higher lending charge
When does a transfer of equity arise?
Arises when a borrower is added in o or removed from The contract
Will a lender charge a fee for a transfer of equity?
Yes
Oliver and harriett are considering remortgaging their property values at £200,000 from the £160,000 variable rate to a £175,000 fixed rate deal in order to build a conservatory. What should they be wary of?
The conservatory is unlikely to add any value to the property
What is the most likely reason for a lender requiring a nee valuation when a borrower applies for a further advance?
The original loan to value ratio was high
A mortgage deed that obliges the lender to make a further advance mean what?
That the further advances will take priority over the lenders charges
What must an illustration for a further advance be based on under MCOB rules?
Based on the amount of the further advance only
What is an advantage or a home reversion scheme compared to the lifetime mortgage when wanting to
Raise capital from their home?
They will
Probably be able to receive more cash
Where are early redemption fees found? What doc
Mortgage deed
What costs are included on mortgage exit administration fees?
Deeds release fees
HM LANs registry
Staff processing costs
A reasonable proportion of staff processing costs
A new adult occupant moves in to a house that is subject to a mortgage. What responsibility does that impose on the borrower at that stage in relation to the mortgabe?
None - like my Paul moving in
If you want to get a partner on your mortgage (further advance) and they’re an undischarged bankrupt what should the lender do?
Insist that they sign a consent to mortgage form if the further advance is approved in principe
What risk is a borrower taking by consolidating unsecured debts into a repayment mortgage?
The increased risk of negative equity at some point in the future
When might a court set aside a mortgage lenders early redemption fee?
It was considered so large that it effectively prevented early
Redemption
The action of a lender releasing a borrower from his covenants is known as what?
Vacation
What is meant by the term a clog on the equity of redemption?
Where a lender includes a term in the mortgage deed that deliberately prevents a borrower from repaying a mortgage early
What can the lender do if someone wants to make a part payment on his mortgage?
Stipulate a minimum amount
What does the letter include that’s sent to a client in arrears? 4 things
Money advice service
List of overdue payments and the total arrears
Total outstanding debt balance
Charges likely to be incurred as a result of arrears
What is not going to be on a letter of arrears?
Redemption charges
When an arrangement is agreed for arrears what should the lender do?
Send written confirmation to the borrower to use as evidence should the arrangement be broken
In the event that the borrower is unable
To repay the debt the lender has the legal right to?
Demand repayment and seek possession
A lender will sometimes want to discuss alternatives to seeking possession. What are some alternatives? 5
Using other capital Trading down Extending term Choosing a RIO Equity release
Can contribution based Jobseeker’s Allowance people get SMI?
No
How is the SMI loan secured?
Secured by a second charge
When must a SMI loan be repaid?
When property is sold Or Owner does Or Can be repaid voluntarily
Is there a time limit on a smi claim?
No
What happens is there isn’t enough equity to repay a smi loan?
Balance is written off
What rate is used for the payment of a SMI loan?
Standard interest rate
If the standard interest rate is more than the actual interest rate what happens
The excess is credited to the account
What is interest run on for SMI?
Benefit will run on for a further 4 weeks where the applicant returns to work for a period or at least 5 weeks
What does SMI exclude payments towards?
Endowment
Life insurance
Home insurance
Can a SMI claim be accepted for a further advance?
Yessss
Who are SMI payments made direct too?
Lender
SMI claims made for further advances can be taken out to carry what out?
Essential repairs or home improvements
To buy out an ex partners share
Why do mortgage rescue schemes exist and what do they do?
These schemes exist to help the borrower by either selling the property to a registered social landlord and then staying on as a rent paying tenant
OR
Selling part of the equity to a registered social
Landlord who will take a share in the equity on sale
What do some mortgage rescue schemes allow?
The former owner to repurchase the property if the situation improves
Who are mortgage rescue schemes usually run by?
Local councils
Housing associations
Lenders
On which type of mortgage would it be least likely that arrears could be dealt with by extending the term?
With profits endowment
Under the right of subrogarion the insurance company can also sue who?
The borrower for the amount that it had to pay to the lender
Why is surrendering an endowment policy not usually recommended as a way of reducing arrears ?
The return is often small in relation to premiums paid
A building society has completed the sale of a property that it had repossessed, there is a surplus. There are three further mortgages what happens now in respect of the disposal of the remaining surplus?
The society’s only obligation is to pay any surplus to the second mortgagee.
Is interest payable or charged on a home reversion scheme?
No
What is a disadvantage of a roll
Up lifetime mortgage?
Taking out such plan could lead to reduced state benefits
Does a second charge usually charge a higher rate of interest than a first charge?
Yessss
Who has the right of subrogation as a result of a successful claim under a mortgage indemnity guarantee policy?
Insurer
If you request a further advance from your lender, before agreeing to the request the lender must carry out what?
Property assessment
If you want to convert a mortgage from a capital repayment to a interest only what can the lender do?
They’re not obliged to agree
What is the significance of a no equity arrangement on a lifetime mortgage?
The mortgage plus rolled up interest cannot exceed the property value
If you have an unsecured loan or £3800, what change to this loan could increase the risk of his home being repossessed?
Switching it to secured status
If you consolidate your debts under a remortgage package, and this has a drawdown facility. What does it enable you to do?
Increased the amount borrowed
What event under a mortgage can give rise to subrogation rights?
Payout under a higher lending charge policy
