Download - Equity Release Options for Vulnerable Homeowners Research Project Doug Wright -November 2007
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Equity Release Options for Vulnerable Homeowners
Research ProjectDoug Wright -November 2007
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Aims and Objectives
• Aim: maximise number of homes occupied by vulnerable people that are made decent
• Objectives– To stretch limited public sector capital resources by
recycling more back into the loan fund– To lever in private finance to supplement public resources – To make use of the equity in people’s homes– To be able to offer affordable products that vulnerable
people will want to take up– To investigate delivery options– To ensure good quality advice
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Products Examined
• Capital and interest repayment loan• Interest only loan• Equity share loan, e.g. property appreciation
loan (PAL)• Discounted PAL• Interest rolled up loan
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Regulation
• Financial Services Authority regulates all first charge mortgages
• Consumer Credit Act governs other lending• Two levels of FSA approval; information and
advice• LAs and RSLs exempt from regulation • Concerns about miss-selling loans
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Delivery Options
• RSL subsidiary model, e.g. ART Homes• Intermediary agency model, e.g. Houseproud• Community Development Finance Initiative
model, e.g. Wessex Reinvestment Trust• RSL model• Equity Swap, e.g. London Rebuilding Society
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Private Finance• No commercial lender wishes to lend to
vulnerable individuals• Only option is for public funds to be ring fenced
into a loan fund and for private finance to be levered in
• Max ratio public to private is 70:30• Only two agencies in partnership with private
sector; ART Homes, WRT• Private lender require significant volumes of
loans
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Recommendations - 1
• Suite of loan products should be introduced• External organisation should deliver loans and
lever in private finance• Organisation should be FSA regulated up to
‘advice’ standard• RSL subsidiary delivery model should be
adopted• Should engage with GLA to establish sub-
regional or regional loans delivery agency
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Recommendations - 2
• Boroughs to adopt a loans first, grants second policy and aim for common policies
• Aim for implementation of recommendations by March 2009
• Interim pilot scheme to trial PAL in one or more borough
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Questions for Workshop
• Do we agree with the recommendations?• How should we take them forward?