Chapter 1

Question 1

What is equity release

Answer 1

Allows home owners to release money from their property while remaining in their home and without having to make monthly payments

Question 2

Name two market participants who are not regulated by the fca

Answer 2

Solicitors (conveyancers) and surveyors

Question 3

Outline the 3 qualifying termination events as defined by the fca

Answer 3

Person dying
Person becoming a resident of a care home
The end of a specified period of at least 20 years from date the seller entered into the arrangement

Question 4

How long should records be kept for

Answer 4

3 years from recommendation

Question 5

What is a vulnerable customer

Answer 5

Someone who due to their personal circumstances is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care

Question 6

5 ways a firm can help a vulnerable customer

Answer 6

. Arrange calls and meetings that suit customer
. Conduct several short meetings
. Make customer aware of lasting POA
.be aware customers communication preferences
. Make customer aware of other support

Question 7

Difference between legal and beneficial owner

Answer 7

Official owner - owns the property as registered at land property
Beneficial owner - right to occupy and/or to a share of the proceeds if the property is sold

Question 8

Who are the market participants

Answer 8

Lifetime mortgage providers
Home reversion providers
Financial advice firms and advisors

Question 9

Who does the fca define as a regulated contract

Answer 9

The fca defines a regulated mortgage contract as one which, at the time it is entered into, satisfies the following conditions;
Credit
Obligation
Land

Question 10

Who are regulated participants

Answer 10

Providers - firms that develop equity release plans
Administrators - the party responsible for the ongoing management of equity release plans
Arrangers - the party that makes the arrangements for a homeowner to enter into an equity release plan
Advisors

Question 11

When will the lender seek full repayment in terms of a life event

Answer 11

. Death
. Customer leaces the property to live somewhere else without the reasonable prospect of returning (i.e care)
. Customer moves to another property and uses it as main residence
. Customer sells the property
. Lender exercises its legal right to take possession of the property under the mortgage contract

Question 12

Are lifetime mortgages exempt from Mortgage Credit Directive?

Answer 12

There are specific exemptions in relation to lifetime mortgages where the lender;
.Provides the lump sum or income that will be repaid from the future sale of the property; or
. Will not seek repayment of the capital outstanding until one of the specified life events occur or the customer breaches the contract

Lifetime mortgages on the market meet these conditions so are exempt

Question 13

What are the terminal events for home reversion plans to end

Answer 13

. Person going into care home
. Person dying
. The end of a specified period of at least 20 years from the date the seller entered the arrangement

Question 14

When did sale and rent back become regulated

Answer 14

Full regulation came into play in june 2020 as part of mcob

Question 15

Equity release is subject to regional variations dictated by which factors?

Answer 15

• law applicable in each country
• northern island property restrictions
• provider choice not to operayin certain country areas

Question 16

Whats the financial advisors role

Answer 16

• access the customer needs and objective
• access the customer financial ad personal situation
• recommend a suitable solution to the needs identified from the range if products available

Question 17

Solicitor role

Answer 17

• aware of the implication of the change of ownership in the case of a home reversion plan or of mortgaging the property in the case of a lifetime mortgage
• understand the recommendation and the obligations contained in the agreement
• is aware of any legal issues relating to the proposed arrangement

Question 18

ERC rules and guidance

Answer 18

• legal advice
• no negative equity guarantee
• right to remain in home
• portability
• right to penalty free payments

Question 19

FCA conduct of business rules

Answer 19

• lifetime mortgages regulated since 31st October 2004
• home reversion plans regulated since 6 april 2007
• ## both cases, plans arranged before those dates are not regulated

Question 20

Additional FCA requirements from 26 april 2014

Answer 20

. Firms can no longer offer customers the choice of advised/non advised
. For lifetime mortgages, the firm must consider whether it is more appropriate for the borrower to pay any fees or charges up front rather than adding to mortgage
. Where a customer wishes to arrange a lifetime mortgage where regular interest payments are made the affordability requirements applying to a normal interest only mortgage apply
. When assessing customers ability t make regular payments, lender must include the cost of regular interest payments and funding the repayment strategy
. Records must be kept for 3 years from the date of advice or when choice was made

Question 21

Mcob rules of disclosure

Answer 21

. The range of equity release products the form or advisor offers
- whether the firm offers lifetime mortgages, home reversion or both
- whether plans are the whole market, a limited number of providers or a single company

. Remuneration including fees

. Availability of finance options such as further advantage

Question 22

Mcob rules of service being provided at distance such as telephone

Answer 22

. Type of service
- advice recommendation or
- information only

. Who regulates the firm
. What to do in the event of a complaint
. Details of FSCS

Question 23

Mcob rules on financial promotions

Answer 23

. Must be clear fair and not misleading
. Home reversion - must state home reversion plan, no other term. Customers must ask pe’s must ask personal illustration to understand features and benefits
. Home reversion must give prominence to disadvantages
. Must keep records of all non real time promotions for 12 months from time of communication

Question 24

Vulnerability

Answer 24

. Older individuals may be susceptible to scams, inappropriate sales, pressure or poor advice
. The need to understand home reversion or lifetime
. Home reversion - ensuring the new tenant does not feel pressured or hindered
. Miselling
. Firm must make a reasonable valuation of the property

Question 25

Vulnerability statement by fca

Answer 25

Someone who fue to their personal circumstances is especially susceptible to detriment particularly when a firm is not acting with appropriate levels of care