Belgravia Proposition

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  • Conservative Party Conference

    October 2011

    Prepared for

    EMMA CARIAGA

    LAND SECURITIES

    Helping kick-start the housing market

    www.easy-step.co.uk

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    Capital adequacy and responsible lending issues

    have created a market where borrowers realistically

    require a deposit as high as 25%. The result is a

    struggling housing market. The Belgravia top up lending

    proposition is unique in securing a framework for

    lenders to share risk and to meet capital adequacy

    and responsible lending requirements. It provides

    borrowers with access to true, responsible 90% lending.

    The scheme is privately funded with over 250m

    available double the government allocation. Whilst

    supporting home builders in their sales needs, it also

    allows them to recapitalise in months rather than

    years.

    John Lloyd BA (Hons), MBA

    John Lloyd 07595953277

    Robert Rogers 07914818651

  • www.easy-step.co.uk

    Background:

    Capital adequacy and responsible lending issues have created a market

    where borrowers realistically require a deposit as high as 25%. There are a

    large number of 90% loans available and there are great aspirations for 95%,

    but the reality is that the banks cannot afford the capital reserves to

    substantiate such lending and the FSA demand substantial validation for high

    risk lending. The result a struggling housing market.

    Current solution:

    The current solution is the government-backed shared equity scheme. This

    facilitates a sale by offering an equity loan to bridge the finance gap. There

    are two issues: the amount of funding required from both builder and

    government at this time on the one side, and the open-ended financial

    commitment on the borrower, on the other hand. The borrower has no idea

    what level of finance they may have to raise in years to come, or indeed,

    what their financial position will be at that time.

    Proposed solution:

    Top up lending in a new transparent scheme.

    10% personal deposit.

    This promotes responsible lending. The default rate at 95%

    compared to 90% is considerable. This requirement provides

    confidence to lenders.

    75% first charge loan.

    This facilitates good quality low LTV lending. It meets capital

    adequacy requirements.

    Lender Transparency Document.

    A new document & procedure introduced to summarise the

    total lending required. This document details both lenders, the

    borrowing requirement, the product, the rate charged and the

    monthly repayment. This supports the requirement on the lenders

    (whilst underwriting at 75% and 15% respectively) to apply an

    overall affordability measure at 90%. The document allows both

    lenders to communicate under the Data Protection Act.

    15% top up loan.

    This is offered by the builder on commercial terms. RICS has

    confirmed that this transaction does NOT constitute an incentive

  • www.easy-step.co.uk

    and, as such, should NOT be recorded on the CML declaration

    of incentives form. The builder holds the loan for a minimum of 3

    months. This provides a payment profile before sale. The builder

    sells the loan on commercial terms in month 4, assuming the first

    3 monthly repayments have been received. The loan note is sold

    at a discount of 33.3%, offering an excellent return for the

    investor and an immediate recapitalisation for the builder. The

    33.3% discount is similar in cost to the builder to 5% of the

    purchase price.

    Costs: The top up loan is a fixed loan of 15%. The amount repaid is fixed at

    20%. The repayments are fixed. The duration of the loan is fixed (10

    years). There is an administration fee for the top up loan (maximum

    275+vat). There will be a range of first charge products offering fee-

    free or lower rates.

    Example: 100,000 purchase price, 15% loan = 15,000, amount repaid

    20% = 20,000 over 120 months 166.66 per month.

    Mortgage Sale Agreement:

    The lenders and builder will sign up to the MSA in advance. Firmly

    entrenched in this agreement are the arrears management protocol

    and loan terms, conditions, rate and duration. This protects the

    consumer and the reputational risk of the lender and builder. The

    builder has asked for an option to buy back a property in the event of

    a potential repossession. This may be exercised where the default is

    immediate and occurs on a house at the commencement of a

    development.

    Panel management:

    The scheme requires the use of panel lenders, solicitors and IFAs.

    Belgravia will manage appointments to the panels. The scheme must

    be controlled and transparent. The solicitors and IFAs will be trained in

    the product and must agree not to profiteer from their panel

    appointment.

    Branding:

    The scheme can be branded to meet an individual builder

    requirement. Barratt have selected a brand of Easy Step. The product

    will be supported by a brochure and information website. The website

    offers details about every component in the scheme, as well as

    supporting the home builder and home hunter with a range of free

    house buying tools.

  • Easy Step for Barratt Purchasers

    Only 10% deposit

    Take 75% mortgage

    Plus 15% top up loan

    Providing an Easy Step

    on to the property ladder

    Struggling to secure a mortgage or save a large

    deposit? Barratt Easy Step is here to help.

    You only need 10% deposit

    Barratt lends you 15% over 10 years

    This means you only need a 75% mortgage

    75% mortgages are easier to secure than a

    conventional 90% loan from the same lender

    Terms and conditions apply. Scheme cannot be used in conjunction with any other Barratt offer. Ask your sales adviser for full details. BDW Trading Limited (company number 03018173) whose registered office address is Barratt House, Cartwright Way, Forest Business Park, Bardon Hil l, Coalville, Leicestershire LE67 1UF (BDW) BDW is a subsidiary of Barratt Developments PLC. BDW provide a loan for 15% of the purchase price of the property which is secured as second charge on your property.

  • Easy Step for Barratt Purchasers

    If you only have a small deposit of 10%

    Barratt Easy Step is designed to help

    Easy Step is a top up loan of 15% of the property

    value repaid over 10 years with fixed monthly

    instalments. Easy!

    How Does Easy Step Work?

    Your lender will require you to have a 10% deposit. Your

    mortgage will be for 75% of the property value. Barratt

    Easy Step offers you a top up loan of 15%.

    The Easy Step loan is for a fixed amount (15%) for 10

    years with fixed repayments and a fixed interest rate. At

    the end of 10 years you will have paid off your 15% loan

    (plus interest).

    Example:

    Purchase Price 100,000

    Deposit required 10% 10,000

    Mortgage 75% 75,000

    Easy Step loan 15% 15,000

    The Easy Step loan is repayable in equal

    instalments of 166.66 including interest over a term of 10 years and interest is

    payable at

    APR 6.7% How Do I Apply?

    Easy Step is available on houses priced

    at 100,000 and above on selected

    developments.

    If you would like more details, your Barratt

    Sales Adviser will refer you to an

    Independent Financial Adviser who is familiar

    with the scheme.

    Your lender will use a conveyancer who is

    familiar with this scheme. You will be invited

    to use the same firm as this will offer you

    attractive rates and a swift transaction.

    Applications will be subject to status. Barratt

    terms & conditions will apply, including

    exchange of contracts within 28 days and

    legal completion by a specified date. Written

    details are available on request. Barratt

    Homes does not give financial advice.

    Mortgage lenders criteria may vary.

    Barratt Easy Step Loans

    Barratt Homes is not a financial institution and will,

    therefore, look to such institutions to take over our loans

    as soon as it can. This allows us to keep offering the

    product and helping purchasers to secure an easy step

    on to the property ladder. Assuming banks/lenders take

    over our loans, nothing changes so far as the borrower is

    concerned. The rate, the terms, the monthly

    repayments, the direct debit/standing order always

    remain the same.

    Does This Mean I Have Two Loans?

    Yes. Firstly, you will have a mortgage for 75% of the

    property value. This may be fixed or discount your

    Independent Mortgage Adviser will help you choose.

    Secondly, you will have a fixed rate top up loan of 15% of

    the property value. Add the two payments together to

    compare the cost to a conventional 90% loan.

    YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

    OR ANY OTHER LOAN SECURED ON IT

    Do I Qualify?

    You must have a