Cemap 2 Flashcards by Nicki Burns

TO MEET THE FCA DEFINITION OF A HOME REVERSION PLAN, IT MUST BE FOR A SPECIFIED PERIOD. THE SPECIFIED PERIOD MUST BE AT LEAST:

20 years

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ANNIE IS BUYING A BRAND NEW FLAT FROM A DEVELOPER AND HAS AGREED TO EXCHANGE CONTRACTS CONDITIONAL ON COMPLETION BEING SET ON A LONG-STOP DATE. IN THE EVENT OF THE FLAT NOT BEING READY FOR COMPLETION ON THAT DATE SHE WILL BE ABLE TO:

cancel the contract and withdraw from the purchase without penalty.

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IN RELATION TO REGISTERED LAND, POSSESSORY TITLE MEANS THAT:

the owner or applicant could not produce the title deeds when the land was first registered.

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GRAHAM HAS A RURAL COTTAGE THAT IS ON REGISTERED LAND. HE BELIEVES THE PROPERTY MAY HAVE A CHANCEL REPAIR LIABILITY, ALTHOUGH THE PAROCHIAL CHURCH COUNCIL (PCC) HAS NOT REGISTERED AN INTEREST AT HM LAND REGISTRY. ON THE BASIS OF THE CURRENT SITUATION, THIS MEANS THAT, IN RELATION TO A LIABILITY FOR CHANCEL REPAIRS:

Graham and any new owner have a potential liability.

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A HOUSE IS SOLD AT A PROPERTY AUCTION ON 9 APRIL. WHEN WILL CONTRACTS NORMALLY BE EXCHANGED FOR THIS TRANSACTION?

On 9 April.

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WHICH OF THE FOLLOWING IS TRUE IN RELATION TO LENDING FOR A PARTNERSHIP?

limited liability partnership have no liability for the debts of the partnership.

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FIVE SISTERS ARE PURCHASING A PROPERTY IN THEIR JOINT NAMES. WHICH OF THE FOLLOWING IS CORRECT REGARDING THEIR OWNERSHIP OF THE PROPERTY?

A maximum of four of the sisters can be the legal owners.

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NICK IS SELLING HIS HOUSE AND USING ESTATE AGENT JENNIFER, SOLICITOR MARK AND SURVEYOR HOWARD. UNDER THE PRINCIPLES OF AGENCY, WHO IS DEEMED THE PRINCIPAL IN THE TRANSACTION?

Nick

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WHEN ARRANGING A MORTGAGE, AT WHICH POINT DOES THE LEGAL CHARGE TAKE EFFECT?

On completion.

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WHICH OF THE FOLLOWING WOULD BE ABLE TO ARRANGE AN EXECUTION-ONLY MORTGAGE WITHOUT FIRST RECEIVING ADVICE?

High-net-worth individuals.

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WHICH OF THE FOLLOWING IS MOST LIKELY TO AFFECT INTEREST RATES IN THE UK ECONOMY?
House prices.

Taxation revenues.

The level of commercial debt.

The level of government borrowing.

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WHICH OF THE FOLLOWING IS TRUE IN RELATION TO INSTITUTIONS OPERATING IN THE MORTGAGE MARKET?

Building societies are legally restricted to lending only on residential property.

Building societies must devote a minimum of 80% of their total lending activities to residential mortgages.

Specialised mortgage houses are limited companies funded mainly from the wholesale market and operate mainly through intermediaries.

Specialised mortgage houses always operate on a decentralised basis.

Specialised mortgage houses are limited companies funded mainly from the wholesale market and operate mainly through intermediaries.

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CHRIS AND CAROL ARE LOOKING TO BORROW THE MAXIMUM AMOUNT POSSIBLE TO BUY THEIR FIRST PROPERTY, USING A THREE-YEAR FIXED-RATE MORTGAGE AT 3% THEN REVERTING TO THE LENDER’S STANDARD VARIABLE RATE (SVR), WHICH IS CURRENTLY 5%. ASSUMING THERE ARE NO CHANGES TO THE LENDER’S MARGIN AND USING THE FINANCIAL POLICY COMMITTEE’S (FPC’S) RECOMMENDED INTEREST RATE, WHAT IS THE MINIMUM INTEREST RATE THE LENDER SHOULD USE WHEN APPLYING THE STRESS TEST TO THEIR AFFORDABILITY ASSESSMENT?

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A MORTGAGE ADVISER HAS IDENTIFIED WHAT SHE FEELS IS THE MOST SUITABLE REGULATED MORTGAGE FOR HER CUSTOMER AND HAS PRODUCED A EUROPEAN STANDARDISED INFORMATION SHEET (ESIS). WHAT SHOULD SHE DO BEFORE HER CUSTOMER MAKES AN APPLICATION?

Give the customer the ESIS, explain the key details and ask if any clarification is needed.

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SAM IS HOPING TO SECURE A FIVE-YEAR FIXED-RATE MORTGAGE AT 4% REVERTING TO THE LENDER’S STANDARD VARIABLE RATE, WHICH IS CURRENTLY 5%. IN RELATION TO STRESS TESTING, THE LATEST FINANCIAL POLICY COMMITTEE (FPC) RECOMMENDATION WAS TO USE AN INCREASE OF 3%, AND INDEPENDENT MARKET ANALYSIS SUGGESTED A MAXIMUM INCREASE OF 2%. WHICH OF THE FOLLOWING IS TRUE REGARDING THE LENDER’S NEED TO STRESS TEST SAM’S APPLICATION?

A stress test is not required.

A stress test must be undertaken using a minimum interest rate of 5%.

A stress test must be undertaken using a minimum interest rate of 6%.

A stress test must be undertaken using a minimum interest rate of 8%.

A stress test is not required.

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THE MCOB RULES RELATING TO INTEREST-ONLY MORTGAGES REQUIRE LENDERS TO:
include the cost of an appropriate repayment strategy in the affordability assessment.

inform all applicants that they must select a suitable repayment vehicle.

recommend a specific repayment vehicle and ensure that the applicant takes it out.

refuse any interest-only applications unless the applicant is a high-net-worth individual.

inform all applicants that they must select a suitable repayment vehicle.

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ALAN AND MARTHA DO NOT WANT TO TAKE ANY UNNECESSARY RISKS WITH THEIR NEW MORTGAGE, AND ARE CONSIDERING A MORTGAGE WHERE THE INTEREST RATE WILL NOT CHANGE FOR FIVE YEARS. WHAT RISK, IF ANY, DOES THAT TYPE OF ARRANGEMENT EXPOSE THEM TO DURING ITS TERM?

Fixed-rate risk.

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WHICH OF THE FOLLOWING IS FALSE IN RELATION TO MORTGAGE GUARANTORS?

A mortgage guarantor must be informed if the borrower misses any mortgage payments.

Mortgage guarantors must be informed if the borrower seeks a further advance.

The guarantor has no legal interest in the property and no right to inspect the mortgage documentation.

The lender has the right to refuse to release a guarantor from their obligations, even if the borrower’s circumstances improve.

A mortgage guarantor must be informed if the borrower misses any mortgage payments.

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ANDREW WISHES TO MAKE A CLAIM UNDER HIS NHBC BUILDMARK SCHEME GUARANTEE FOR A DEFECT IN HIS PROPERTY. TO WHOM SHOULD HE INITIALLY SUBMIT HIS CLAIM?

The builder.

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THE COST OF A BUILDING SURVEY IS MOST INFLUENCED BY THE:

size and age of the property.

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RYAN AND LAURA ARE BUYING A NEW HOUSE AND HAVE BEEN OFFERED A £120,000, 25-YEAR REPAYMENT MORTGAGE AT 6%, GIVING A MONTHLY PAYMENT OF £6.52 PER £1,000 BORROWED. HOW WOULD THE TOTAL MONTHLY PAYMENTS IN THE FIRST YEAR COMPARE WITH AN INTEREST-ONLY MORTGAGE AT THE SAME RATE, BACKED BY A STOCKS AND SHARES ISA WITH A MONTHLY CONTRIBUTION OF £200?

The interest-only mortgage would be around £18 a month more expensive.

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GEORGE HAS SET UP A SPECIAL PURPOSE VEHICLE (SPV) TO RUN HIS BUY-TO-LET RENTAL BUSINESS, WHILE HIS BROTHER TIM RUNS HIS BUY-TO-LET BUSINESS AS A SOLE TRADER. WHICH OF THE FOLLOWING STATEMENTS IS TRUE?

Tim would be liable to capital gains tax if he made a profit when selling his property. Whereas George would not be liable to capital gains tax on a profit made on selling the SPV property.

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WHICH OF THE FOLLOWING STATEMENTS IS TRUE IN RELATION TO THE HELP TO BUY EQUITY LOAN SCHEME FOR A NEW BUILD PROPERTY IN ENGLAND?

From the start of year six, an annual fee of 1.75% of the equity loan will be charged.

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TONY IS AGED 59 AND HAS AN INTEREST-ONLY MORTGAGE OF £50,000 THAT IS DUE TO BE REPAID SOON. HE HAS JUST RETIRED WITH AN INCOME OF £13,000 FROM HIS OCCUPATIONAL PENSION SCHEME, WHICH MAKES HIM A BASIC-RATE TAXPAYER. HE ALSO HAS A PERSONAL PENSION FUND OF £150,000. IF HE CHOOSES TO USE HIS PERSONAL PENSION TO PAY OFF HIS MORTGAGE, WHICH OF THE FOLLOWING IS TRUE?
can take £37,500 tax free but must use the balance of the fund to provide an income through an annuity or drawdown.

can take £50,000 as a tax-free lump sum to repay the mortgage and take the balance as an income, subject to a cap on the maximum income.

could repay the mortgage by taking £37,500 from the fund tax free, and a further £15,625 as a taxable lump sum.

will not be able to take a tax-free lump sum because he has already taken his occupational scheme benefits

could repay the mortgage by taking £37,500 from the fund tax free, and a further £15,625 as a taxable lump sum.

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ONE MAJOR DIFFERENCE BETWEEN LOW COST WITH-PROFITS AND UNIT-LINKED ENDOWMENTS IS THAT:

holders of unit-linked endowments benefit fully from the fund's investment performance, but a with-profits policy holder may not benefit fully from fund investment performance.

TONY AND ANNA HAVE AN INTEREST-ONLY MORTGAGE WITH A LOW-COST, WITH-PROFITS ENDOWMENT POLICY AS THE REPAYMENT VEHICLE. WHICH OF THE FOLLOWING STATEMENTS IN RESPECT OF THE POLICY IS CORRECT? Annual reversionary bonuses and a terminal bonus may be added to the guaranteed sum assured, but these are not guaranteed. Annual terminal bonuses and a final reversionary bonus may be added to the guaranteed sum assured, but these are not guaranteed. Guaranteed annual reversionary bonuses are added to the guaranteed sum assured, and a terminal bonus may be added, although this is not guaranteed. Non-guaranteed annual reversionary bonuses may be added to the guaranteed sum assured, and a terminal bonus is guaranteed to be added at maturity.

Annual reversionary bonuses and a terminal bonus may be added to the guaranteed sum assured, but these are not guaranteed.

WHICH OF THE FOLLOWING STATEMENTS ABOUT UNIT-LINKED ENDOWMENTS IS TRUE? It may be possible to change the policy term, sum insured or premiums. The policy death benefit consists of the bid value of units at the time of death. The policy offers no guarantees at all. The policy provides a guaranteed sum on maturity, although it may not be enough to pay off the mortgage.

It may be possible to change the policy term, sum insured or premiums.

AARON AND SARAH MOVED INTO THEIR FIRST LOCAL AUTHORITY HOUSE IN ENGLAND IN JUNE 2018 AS SECURE TENANTS. WHEN WILL THEY FIRST GAIN THE RIGHT TO BUY THEIR HOME?

June 2021.

WHAT PART, IF ANY, OF THE BENEFITS PAYABLE UNDER A MORTGAGE PAYMENT PROTECTION INSURANCE (MPPI) POLICY IS SUBJECT TO TAX?

None.

77. JIM AND PAULA HAVE REQUESTED A FURTHER ADVANCE FROM THEIR LENDER, THE EASTERN COUNTIES BUILDING SOCIETY. BEFORE AGREEING TO THE REQUEST, EASTERN COUNTIES MUST CARRY OUT:

an assessment of the property value.

90. MARGOT HAS A GOOD CREDIT HISTORY AND IS CONSIDERING INCREASING HER MORTGAGE TO CONSOLIDATE A NUMBER OF DEBTS, TOTALLING £6,500. UNDER FCA RULES, WHICH OF THE FOLLOWING IS TRUE?

She can opt to proceed on an execution-only basis if she rejects the lender's initial advice.

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 AN ARREARS SITUATION? A list of missed payments. Procedures that the lender must follow to take possession. The FCA customer information sheet on arrears. The total outstanding debt, including any redemption charges.

A list of missed payments.

95. JACKIE AND JOHN, AGED 58 AND 59 RESPECTIVELY, HAVE REALISED THAT THEIR MORTGAGE REPAYMENT VEHICLE WILL NOT PROVIDE ENOUGH CAPITAL TO REPAY THEIR INTEREST-ONLY MORTGAGE IN FIVE YEARS TIME. THIS WILL LEAVE THEM WITH AN APPROXIMATE SHORTFALL OF £12,000. THEIR CHILDREN ARE INDEPENDENT, BUT JACKIE AND JOHN HAVE ALSO DECIDED THAT, ONCE THEY RETIRE, AGED 60, THEY WILL NEED ADDITIONAL FUNDS TO ACHIEVE THEIR ASPIRATIONS AND THEY HAVE INVESTIGATED EQUITY RELEASE. WHICH OF THE FOLLOWING WOULD BE MOST SUITABLE TO MEET THEIR NEEDS?

Take out a hybrid lifetime mortgage to clear the mortgage now, with a view to switching to interest roll-up and increasing the mortgage on retirement.

CHRIS'S LENDER HAS CONFIRMED THAT HER MORTGAGE PAYMENTS ARE IN ARREARS AND, IN LINE WITH THE RULES CONTAINED IN MCOB, IS WRITING TO HER. WHICH OF THE FOLLOWING IS TRUE OF THAT COMMUNICATION? IT MUST: be sent within 15 calendar days of the lender becoming aware of the arrears. include a list of all payments made in the past 12 months. include full details of all charges incurred as a result of the payment shortfall. state the total mortgage debt, including redemption charges.

include full details of all charges incurred as a result of the payment shortfall.

ONLY PROPERTY CAN BE MORTGAGED. True False

False

Mortgage by way of legal charge

he property is owned by the borrower from the outset (compare this with mortgage by demise below). The legal charge is a deed that states that the property has been charged with the debt (the loan) as security for the lender. The lender acquires certain rights that leave it in a very strong position should the borrower default. The charge is cancelled when the mortgage is fully repaid.

Mortgage by demise

The lender becomes the legal owner of the property when it is purchased, and legal ownership is transferred to the borrower when the mortgage is fully repaid. This arrangement was very rare, and was abolished in the Land Registration Act 2002 for new mortgages created for registered land. It can now only be arranged on unregistered property.

THE 'MODERN METHOD OF AUCTION' IS A CONDITIONAL AUCTION CARRIED OUT ONLINE. t or f

true

THE THRESHOLD AT WHICH A HIGHER LENDING CHARGE IS APPLIED IS USUALLY BETWEEN 75 AND 90 PER CENT OF THE PURCHASE PRICE OF THE PROPERTY TO BE MORTGAGED.

False 75-80

32. REGULAR DEPOSITS INTO A SAVINGS OR INVESTMENT PRODUCT IS LIKELY TO BE A POTENTIALLY ACCEPTABLE REPAYMENT STRATEGY FOR AN INTEREST ONLY MORTGAGE. t or f

true

A CONDITION REPORT TAKES INTO ACCOUNT THE MARKET VALUE OF THE PROPERTY AS WELL AS THE OVERALL CONDITION OF THE PROPERTY. True False

False

THE EQUITY OF REDEMPTION REFERS TO THE RIGHT OF A DEFAULTING BORROWER TO SETTLE THEIR MORTGAGE DEBT IN FULL AT ANY TIME UP TO THE POINT OF SALE. True False

True

SUPPORT FOR MORTGAGE INTEREST (SMI) LOAN PAYMENTS ARE PAID TO THE BORROWER. True False

False

SUPPORT FOR MORTGAGE INTEREST (SMI) LOAN PAYMENTS ARE PAID TO THE BORROWER. True False

False

11. THE MINIMUM REQUIREMENT FOR RUPINDER AND PRITTI'S JOINT MORTGAGE APPLICATION TO BE TREATED AS A MORTGAGE TO A HIGH-NET-WORTH BORROWER IS THAT:

one of them has net annual income of at least £300,000 or net assets of at least £3m.

ARNOLD IS CONSIDERING ARRANGING A LASTING POWER OF ATTORNEY (LPA). WHICH OF THE FOLLOWING IS FALSE? Arnold can continue to make decisions once a property and financial affairs LPA has been registered, as long as he is mentally capable. Once a health and welfare LPA is registered, Arnold and his attorney have joint decision making powers until Arnold loses mental capacity. Arnold can register a property and financial affairs LPA at any time once it has been set up. Under a health and welfare LPA, Arnold's attorney will only have powers once Arnold has lost his mental capacity.

Once a health and welfare LPA is registered, Arnold and his attorney have joint decision making powers until Arnold loses mental capacity.

AN FCA REGULATED MORTGAGE CONTRACT IS: subject to the Consumer Credit Acts if it exceeds £25,000. exempt from the Consumer Credit Acts. subject to the Consumer Credit Acts if it is taken out for business purposes. exempt from the Consumer Credit Acts if the borrower signs a disclaimer.

The correct answer is: exempt from the Consumer Credit Acts.

JOE AND LORNA OWN THEIR PROPERTY AS JOINT TENANTS. IF JOE DIES BEFORE LORNA, IN WHAT CIRCUMSTANCES, IF ANY, CAN JOE'S SHARE OF THE PROPERTY PASS TO A BENEFICIARY OTHER THAN LORNA UNDER THE TERMS OF HIS WILL?

None

STEVEN AND MARY OWN A LEASEHOLD FLAT SITUATED IN A PURPOSE-BUILT BLOCK COMPRISING OF 12 IDENTICAL PROPERTIES. THEY ARE KEEN TO PURCHASE THE FREEHOLD INTEREST BUT, AS A STARTING POINT FOR THIS TO BE POSSIBLE, THE COMMONHOLD AND LEASEHOLD REFORM ACT 2002 REQUIRES THAT: all other qualifying leaseholders in the block must be party to the transaction. the entire block must be only for residential use. the original lease must have been granted for a term exceeding 21 years. they must live in the flat.

the original lease must have been granted for a term exceeding 21 years.

24. WHAT IS SECURITISATION?

A collection of mortgage assets repackaged and sold by the lender.

THE MCOB RULES RELATING TO INTEREST-ONLY MORTGAGES REQUIRE LENDERS TO:

include the cost of an appropriate repayment strategy in the affordability assessment.

JIM AND JO WISH TO BUILD A SINGLE STORY EXTENSION TO THE REAR OF THEIR DETACHED HOUSE. THEY CAN PROCEED WITHOUT PLANNING PERMISSION, PROVIDING THE EXTENSION DOES NOT PROJECT BY MORE THAN WHAT DISTANCE FROM THE ORIGINAL HOUSE WALL?

COLIN RECENTLY COMMISSIONED A RICS CONDITION REPORT ON THE PROPERTY HE WISHES TO BUY. WHICH OF THE FOLLOWING IS TRUE? It is designed to be available for all types and ages of property. It will use a traffic light system to rate the condition of each part of the building and the services. The surveyor will give advice and recommendations regarding any necessary remedial action. The surveyor will look at areas in the property that are covered or hidden if asked to do so.

It will use a traffic light system to rate the condition of each part of the building and the services.

CLIVE AND CLAIRE ARE LOOKING TO BORROW THE MAXIMUM AMOUNT POSSIBLE TO BUY THEIR FIRST PROPERTY. WHICH OF THE FOLLOWING SHOULD THEIR ADVISER BE MOST CONCERNED ABOUT?

The impact of a future rise in interest rates.

ON INSPECTION OF THE PROPERTY THAT TONY IS PROPOSING TO BUY, THE SURVEYOR FOUND EVIDENCE OF A FEW SMALL BUT LONG-STANDING CRACKS IN SOME OF THE INTERIOR WALLS. THEY DO NOT APPEAR TO HAVE WORSENED OVER THE PAST FEW YEARS. WHAT IS THE SURVEYOR MOST LIKELY TO RECOMMEND IN VIEW OF THE PROBLEM?

It is unlikely to affect her lending recommendation.

BYRON HAS BEEN TOLD HE WILL HAVE TO PAY A MARRIAGE VALUE WHEN HE EXTENDS THE LEASE ON HIS FLAT. WHICH OF THE FOLLOWING IS TRUE? It means that his lease must have at least 80 years to run. The freeholder will be entitled to 50% of the marriage value. The marriage value will reduce as the lease term reduces. The value will be determined by negotiation with the freeholder.

The freeholder will be entitled to 50% of the marriage value.

WHICH OF THE FOLLOWING IS TRUE IN RELATION TO BUILDINGS INSURANCE ON A LEASEHOLD APARTMENT? Either the freeholder or the lender can insist on the leaseholder arranging a specific building and contents insurance policy. The leaseholder has the right to choose an appropriate insurance policy, subject to the lender's approval. The lender can insist on the use of a specific insurer and policy. The freeholder's right to select a buildings insurance policy overrides the rights of the lender.

The freeholder's right to select a buildings insurance policy overrides the rights of the lender.

THE FCA REQUIRES LIFE ASSURANCE COMPANIES TO CARRY OUT A REVIEW OF A MORTGAGE ENDOWMENT HOW OFTEN?

Every 2 years

JENNIE HAS TAKEN OUT A LIFETIME MORTGAGE THAT MEETS THE EQUITY RELEASE COUNCIL'S RULES AND PRODUCT STANDARDS. IF SHE TAKES ADVANTAGE OF THE SCHEME'S MORTGAGE INTEREST ROLL-UP FACILITY, WHAT ARE THE IMPLICATIONS?

The arrangement increases the debt that needs to be repaid on her death.

ANABELLE'S PROPERTY HAS RECENTLY BEEN TAKEN INTO POSSESSION BY HER MORTGAGE LENDER. WHAT ARE THE IMPLICATIONS FOR ANABELLE?

Anabelle can reclaim her property by redeeming her outstanding mortgage account in full before the property is sold.

FRANK HAS RECEIVED A CALLING-UP NOTICE IN RESPECT OF HIS MORTGAGE, WHICH IS SERIOUSLY IN ARREARS. WHAT IS THE SIGNIFICANCE OF THIS NOTICE?

He must make arrangements to fully repay the loan.

BEN OWNS HIS APARTMENT, CURRENTLY VALUED AT £175,000, AND HAS A MORTGAGE OF £125,000. FOUR YEARS AND SIX MONTHS AGO HE ENTERED INTO AN INDIVIDUAL VOLUNTARY AGREEMENT (IVA) WITH HIS CREDITORS. AS HE OWNED HIS APARTMENT WHEN HE ENTERED INTO THE ARRANGEMENT, THE AGREEMENT CONTAINED AN EQUITY CLAUSE, DUE TO TAKE EFFECT IN FOUR WEEKS TIME. WHICH OF THE FOLLOWING IS TRUE? Ben would typically be required to remortgage under the agreement, but the increased mortgage costs cannot exceed his existing IVA payments. Ben would typically be required to remortgage under the agreement, but the remortgage could not exceed 85% of the property value. In four weeks time, Ben would be required to extend the IVA term by 12 months. Under the arrangement, Ben would not be required to remortgage under any circumstances.

Ben would typically be required to remortgage under the agreement, but the remortgage could not exceed 85% of the property value.

Cemap 2 Flashcards

(62 cards)