Unit 6 - Topic 28 Flashcards
Arrears and debt management
Under MCOB rules, between which reasonable hours can the lender make contact with the borrower regarding arrears? (28.1.3)
A. 8am to 9pm
B. 9am to 9pm
C. 9pm to 9am
D. 8am to 8pm
A. 8am to 9pm
The lender must not put pressure on the borrower through excessive telephone calls or
correspondence, or by contact at an unreasonable hour. A reasonable hour is generally considered to be between 8am and 9pm
The Mortgage Conduct of Business Rules require a lender to make a record of its dealings with borrowers whose mortgage is in arrears, or who have a shortfall debt. For how long must this record be kept? (28.1.1)
A. Three years from the date of the dealings
B. One year from the date the account first fell into arrears
C. Five years from the date an initial agreement to clear the arrears was made
D. Five years from the date on which the arrears were cleared
A. Three years from the date of the dealings
The lender must keep records of its dealings with borrowers who are in arrears or have a shortfall debt. The records must be kept for three years from the date of such dealings.
The MCOB Rules allow lenders to repossess the property of a borrower in arrears, if : (28.1.3)
A. all other reasonable attempts to rectify the problem have failed
B. all attempts to communicate with the borrower have failed
C. the arrears exceed £2,000
D. the arrears exceed 10% of the initial loan
A. all other reasonable attempts to rectify the problem have failed
One action a lender can take if all attempts to rectify the problem have failed, is to seek a
possession order.
Geoff’s mortgage account has recently gone into arrears. His first missed payment was on Monday July 1st. His lender became aware of the missed payment on Wednesday July 3rd. When is the latest date the lender must write to warn Geoff of the situation? (28.1.2)
A. Monday 8th July
B. Wednesday 10th July
C. Monday 18th July
D. Wednesday 24th July
D. Wednesday 24th July
Under MCOB 13, the lender must write to the borrower within 15 business days of becoming
aware that the account is in arrears
Which of the following must be included in the warning letter a lender must send to a customer on becoming aware of an arrears situation? (28.1.2)
A. A list of payments missed, or only partly paid
B. Procedures that the lender must follow to take possession
C. The Council of Mortgage Lenders information sheet
D. The total outstanding debt, including any redemption charges
A. A list of payments missed, or only partly paid
Once the lender is aware that the borrower is in arrears, they must write within 15 business
days. The letter they send must contain 6 key enclosures, one of which is a list of payments
missed, or partly paid. Probably worth noting that the information sheet, which also has to
be enclosed, is now available from the Single Financial Guidance Body.
Under MCOB rules, a firm must ensure that when a property has been repossessed, steps are taken to: (28.1.4)
A. sell the property within three months of the date of repossession.
B. sell it at a price which will ensure the mortgage debt is covered.
C. market the property quickly.
D. obtain the best price that might be reasonably achieved.
D. obtain the best price that might be reasonably achieved.
The lender is not able to delay accepting reasonable offers and must aim to obtain the best price that might reasonably be achieved.
Kohli and Vaughan are in trouble with their mortgage, having missed the last two payments.
They have sought help from Citizens Advice; what advice are they likely to receive, as standard practice? (28.5)
A. To contact a financial adviser
B. To contact a mortgage rescue scheme
C. To contact the StepChange Charity
D. To contact their lender
D. To contact their lender
Citizens Advice is not able to provide financial ‘advice’, as defined by the FCA in relation to
regulated products. It is standard practice for the borrower to be advised to contact the
lender as early as possible
Support for Mortgage Interest (SMI) is available to homeowners who claim certain specified benefits. Which of the following benefits is not included? (28.4)
A. Child Tax Credit
B. Universal Credit
C. Jobseekers Allowance
D. Pension Credit
A. Child Tax Credit
The loan is available to homeowners with a mortgage who are in receipt of Universal Credit, Income Support, Income-based Jobseeker’s Allowance, income-related Employment and Support Allowance or Pension Credit.
With a Support for Mortgage Interest (SMI) loan, for those not receiving Pension Credit, the amount on which the Government will pay interest is based on : (25.4)
A. a mortgage of up to £200,000
B. a mortgage, plus arrears of up to £200,000
C. a mortgage, plus insurance premiums of up to £100,000
D. a mortgage of up to £100,000
A. a mortgage of up to £200,000
The loan covers interest (not capital) on a mortgage of up to £200,000
Which of the following statements regarding Support for Mortgage Interest is correct ? (25.4)
A. With the exception of those claiming Pension Credit, the waiting period between making a claim and payments starting, is 39 weeks.
B. The SMI loan is secured by a first charge on the property.
C. Where the property is transferred to the claimant’s partner on death, the loan must be repaid.
D. SMI payments are made direct to the homeowner.
A. With the exception of those claiming Pension Credit, the waiting period between making a claim and payments starting, is 39 weeks.
Not B = The SMI loan is secured by a second charge on the claimant’s property
Not C = Where the property is transferred to the claimant’s partner on death and they
remain in the property, or the property is transferred as a result of a number of court orders or a maintenance agreement, the loan is not repayable at that point.
Not D = SMI payments are made direct to the lender.
Under the Administration of Justice Act 1973, to enable borrowers to bring the account to order, courts sometimes expect lenders to permit borrowers a period to repay arrears of : (28.2.1)
A. up to 18 months
B. up to 2 years
C. up to 3 years
D. up to 4 years, or even longer
D. up to 4 years, or even longer
The borrower may agree to clear arrears by paying more than the monthly instalment for an agreed period, known as rescheduling. Most lenders will agree to increased payments to
bring the account back to order within a maximum period of 12 months.
The courts however, can take a more generous view of the rescheduling period, sometimes
expecting the lender to permit up to four years (or even more) to bring the account to order.
Courts have the power to enforce this under the Administration of Justice Act 1973.
Malcolm is in arrears on his endowment-linked mortgage; he’s considering surrendering the policy and switching to a capital and interest repayment basis. If he sells his policy on the secondary market rather than surrendering, which of the following could be a potential advantage for him? (28.2.6)
A. All types of endowment can be traded
B. Replacement life cover will not be needed
C. The amount he receives could be greater
D. Settlement will be quicker
C. The amount he receives could be greater
Selling a policy is usually a better option financially than surrendering.
Not A = The option to sell is limited to with-profits policies only.
Not B = Alternative life cover should be arranged, because the death benefit would be
payable to the new owner of the policy.
Not D = The process of selling the policy is likely to be a longer process than surrender and financial advice would be needed.
