Unit 6 - Topic 29 Flashcards
Lenders’ legal rights and remedies
In relation to possession proceedings, the power of discretion given to the County Courts includes: (29.1)
A. allowing lenders to capitalize mortgage arrears
B. ensuring lenders do not increase interest payments on arrears
C. insisting that lenders extend a mortgage term to assist borrowers in difficulty
D. suspending or adjourning possession proceedings instigated by lenders.
D. suspending or adjourning possession proceedings instigated by lenders.
The County Court has discretion to take one of three courses of action when the lender
petitions the court for a possession order :
o Grant an outright possession order
o Suspended possession order
o Adjourn or suspend the case
A court has granted an outright possession order. Within what period would the lender normally be able to take possession? (29.1.1)
A. 14 days
B. 28 days
C. 1 month
D. 3 months
B. 28 days
If an outright possession order is granted by the court, the lender can take possession, usually within 28 days.
Where there is income from a property in the form of rent from tenants, which of the following legal remedies can be used by the lender against a borrower in default? (29.1.3)
A. Appoint an official receiver
B. Sue on the borrower’s personal covenant
C. Sue for possession
D. The right to appoint a receiver
D. The right to appoint a receiver
This legal remedy is available to the lender where there is an income from the property.
For the purposes of an exam question, it’s worth remembering that the receiver acts on
behalf of the lender, but is an agent of the borrower.
Which of the following legal remedies is no longer used in the UK ? (29.1.5)
A. The right to appoint a receiver
B. The right to sue on the borrower’s covenant
C. Foreclosure
D. The right to sue for possession and exercise the power of sale
C. Foreclosure
Foreclosure is not used in the UK now, because it means the lender can take all of the
borrower’s property, sell it and keep any surplus value.
In dealing with properties in possession, what must the lender always allow the borrower to
do? (29.4)
A. Allow the customer to extend the loan
B. Switch from endowment to repayment
C. Settle the mortgage debt in full, at any time up to the point of sale.
D. Remove a joint borrower from the mortgage arrangement
C. Settle the mortgage debt in full, at any time up to the point of sale.
This question revolves around what is known as the ‘equity of redemption’, which means
the borrower has the right to settle the mortgage debt in full at any time. ‘In full’ means the settlement must include any arrears.
Which of the following is not an option which is available to a court when considering an application for possession? (29.1.1)
A. Adjourn the case
B. Grant a suspended possession order
C. Grant an outright possession order
D. Order the borrower to repay the debt within a specified period
D. Order the borrower to repay the debt within a specified period
The County Court has discretion to take one of three courses of action when the lender
petitions the court for a possession order :
o Grant an outright possession order
o Suspended possession order
o Adjourn or suspend the case
Angelo’s property has recently been repossessed by his mortgage lender. Which of the following statements correctly describes the position? (29.4)
A. The sale of the property must be delayed until the lender can sell the property for a sufficient amount to clear the debt.
B. If Angelo can clear the outstanding arrears, the sale of the property can be stopped.
C. If the property is sold by the lender for more than the outstanding debt, the surplus must be refunded to Angelo.
D. If Angelo settles the mortgage account in full, prior to the point of sale, he can reclaim the property.
D. If Angelo settles the mortgage account in full, prior to the point of sale, he can reclaim the property.
Not A = The lender is not required to do this; they will sell the property as quickly as possible.
Not B = Just settling the arrears won’t be enough – Angelo will have to clear the whole debt in full
Not C = If there is a surplus on the sale of the property, the lender will deduct all expenses
and costs involved in connection with the sale as well as the redemption of the full amount of
the mortgage debt.
Yes D = Angelo can reclaim his property, provided he can repay the mortgage debt in full before the point of sale.
A firm must ensure that when a property has been taken into possession, steps are taken to : (29.4)
A. sell the property within 3 months of the date of repossession.
B. sell the property at a price that will ensure the mortgage debt is covered.
C. maintain the property, to ensure that a reasonable price can be obtained.
D. value the property, in order to set an appropriate selling price.
D. value the property, in order to set an appropriate selling price.
Not A = After repossession, the lender will seek to sell the property as quickly as possible –
there is not timescale.
Not B = The lender is only required to obtain
the best price that is reasonably possible.
Not C = The lender is not required to look after and maintain the property in order to obtain
a higher price.
Yes D = A valuation is necessary to set an appropriate selling price.
If sale proceeds are insufficient to repay the mortgage, the lender must inform the borrower. If the lender intends to sue for the payment of any shortfall, the borrower must be notified within what period, following the date of the sale of the property? (29.4)
A. 28 days
B. 1 year
C. 6 years
D. 3 years
C. 6 years
If the sale proceeds are not enough to pay off the mortgage, the lender must inform the
borrower of any shortfall in a ‘durable medium’. If it intends to pursue the borrower for payment of any shortfall, the lender has six years from the date of sale to notify the
borrower.
Where a Mortgage Indemnity Guarantee (MIG) policy is in place, which of the following statements regarding the procedure on default is correct? (29.5)
A. The lender can exercise its right of subrogation
B. The borrower is protected by the MIG policy
C. The insurer could avoid paying a claim if they felt the lender hadn’t followed a prudent lending policy.
D. The borrower cannot be sued by both the lender and the mortgage indemnity insurer.
C. The insurer could avoid paying a claim if they felt the lender hadn’t followed a prudent lending policy.
Not A = The lender doesn’t have a right of subrogation – this right belongs to an insurer.
Not B = Although they pay the premium, the borrower is not protected by a mortgage
indemnity policy. The lender is the policyholder, not the borrower.
Yes C = The insurer is able to insist that the lender exercises prudent underwriting methods and can refuse a claim if not satisfied that that was the case.
Not D = Both lender and insurer can sue the borrower. The lender can sue for the amount ofany shortfall and the insurer can sue for any claim that they have paid to the lender.
