U6: T28 - ARREARS AND DEBT MANAGEMENT Flashcards
What is the 52‐week linking rule for SMI claims?
Under the 52‐week linking rule, a borrower who has already served the waiting period for SMI and then ceases to claim payments for up to 52 weeks will not have to serve a further waiting period at the start of the second claim.
Can you recall whether a customer seeking a mortgage to consolidate debts can opt for an execution‐only sale?
Under MCOB 4.8A.7, a customer seeking a mortgage to consolidate debts CANNOT opt for an execution‐only sale. They would be defined as a ‘vulnerable’ customer and any mortgage must be arranged on an advised basis unless they reject the advice and recommendation.
What is the definition of a ‘credit‐impaired customer’?
A ‘credit impaired’ customer is one who:
1) within the last two years has owed the equivalent of three months’ payments on a mortgage or other loan, unless late payment was the result of errors by a bank or other third party; or
2) within the last three years has had one or more county court judgments, totalling more than £500; or
3) has had an IVA or bankruptcy order in force within the last three years.
Lenders are under no obligation to contact borrowers about mortgage arrears. True or false?
False: a lender must contact a borrower within 15 business days of becoming aware of arrears.
What must a lender do if it becomes clear that a borrower’s mortgage account is in arrears?
A lender must write to a borrower within 15 business days of it becoming aware of the account being in arrears. The letter must contain:
- a Money Advice Service information sheet;
- a list of due payments either missed or paid in part;
- the total of the shortfall;
- the total outstanding debt, excluding charges that may be made on redemption;
- an indication of the nature and level (if possible) of charges likely to be incurred unless the shortfall is cleared.
For how long must a lender keep a record of its dealings with a borrower who is in arrears?
a) One year from the date of the dealings.
b) Three years from the date of the dealings.
c) Five years from the date of the dealings.
d) Until the end of the mortgage term.
b) A lender must keep a record of its dealings with a borrower who is in arrears for three years from the date of the dealings.
Accepting interest‐only payments is a way of helping capital repayment mortgage borrowers with a payment shortfall. True or false?
True: making interest‐only payments will reduce the monthly payment, although it should only be seen as a temporary measure.
Gavin lost his job a few months ago and is now in arrears with his capital repayment mortgage payments. Although he is trying hard, he sees no prospect of finding a job in the foreseeable future. His lender has turned down his request to capitalise his arrears. Explain the lender’s reason for turning down his request.
Capitalising the arrears adds the arrears to the mortgage, thereby increasing the debt and the payments due. As Gavin cannot afford the current payments, he will not be able to afford the higher payments, which will start almost immediately. He may be better asking to pay interest only for an agreed period.
Extending the term in order to reduce mortgage repayments is not appropriate for low‐cost endowment mortgages. True or false?
True: the term of with‐profit endowments cannot normally be extended.
When George defaulted on his mortgage, the lender took possession of his flat and sold it to pay his outstanding mortgage, but the proceeds did not repay the whole debt. Within what period of time must the lender inform George of its intention to pursue him for the remaining shortfall?
a) One year from the sale.
b) Three years from the sale.
c) Five years from the sale.
d) Six years from the sale.
d) Six years from the sale.
If a lender decides to recover a shortfall, it must notify the borrower of its intention within six years of sale.
The costs of remortgaging during an IVA can be deducted from the available amount. True or false?
True: the remortgaging costs during an IVA can be deducted from the available amount.
In mortgage and debt consolidation, the new mortgage does not have to meet the lender’s normal affordability and LTV criteria. True or false?
False: in mortgage and debt consolidation, the new mortgage must meet the lender’s normal affordability and LTV criteria.
Which of the following statements is true of mortgage rescue schemes?
a) Schemes never allow the former owner to repurchase the property if their situation improves.
b) Some schemes allow the former owner to repurchase the property if their situation improves.
c) All schemes allow the former owner to repurchase the property if their situation improves.
b) Some schemes allow the former owner to repurchase the property if their situation improves.
Some mortgage rescue schemes allow the former owner to repurchase the property if their situation improves.
Which MCOB section requires that a borrower who has arrears or a mortgage debt shortfall must be dealt with fairly by the lender.
MCOB 13 requires that a borrower who has arrears or a mortgage debt shortfall must be dealt with fairly by the lender.
Where a borrower has a payment shortfall, the lender must not attempt to process more than X direct debit requests in any Y calendar month.
X = 2
Y = 1
Where a borrower has a payment shortfall, the lender must not attempt to process more than two direct debit requests in any one calendar month.
Define capitalisation?
Treat the payment shortfall as if it was part of the original amount – known as ‘capitalisation’ and effectively adding the shortfall to the capital owing;
