level 3:certificate mortgage advice and practice module 2 - specimen pap… · this question paper...

ifs Level 3: Certificate in,Mortgage Advice andPracticeCeMAP@Module 2Mortgages

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Specimen paper:Length of examination:

A2 hours

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Instructions to candidates

1. Do not open this question paper until instructed to do so.

2. This question paper consists of 100 questi,qns. Each,que'stiopcarries one mark.

3. Answer all questions .

Information for candidates

1. Basic silent desktop calculators with'+.ix l%'and memory fUnctions are allowed.Scientific, programmable or ,calculat6r~:With a!"y .adaitional functions are not allowed.

2. Taxation tables will be pr6vid~d. No other books,papers or~i,dsmay be used in thisexamination.

Note: Taxation rates for th~ year 2014/15 apply in this examination.

The Institute of Financial Services is the professional body of ifs University College, a registered Charity, incorporated by RoyalCharter.' , ,

Y/501/8717 Unit 03 Mortgage law, policy practice and markets0/501/8718 Unit 04 Mortgage applicationsH/501/8719 Unit 05 Mortgage payments methods and productsY/501/8720 Unit 06 Mortgage arrears and post-completion issues

This qualification is accredited by the regulatory authorities for England, Wales and Northern Ireland and is incorporated into theNational Qualifications Framework: CeMApI!l501/0629/6.

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CeMAP@Module 2 specimen 'Paper A

Unit3: MLPP

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1.

2.

Harry has a regulated mortgage on his new family home. This means that the dwelling must occupy"at least what minimum percentage of th~land it is on?,

A 20%.

B 25%.

C 40%.

D 50%. ....,.-:...-

In relation to registered land, possessory title means that: .

A it is not possible to guarantee freehold title; but good: leasehold can be confirmed.

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3. Graham has a rural cottage thatis,on registered land, arid he believes the property may have a..chancel repair liability. The Paroch'ialChurch Council did not-register their interest at the Land,Registry by 12 October 2013. This means that, in relation to chancel repairs:'

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B

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D

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B

C

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the land is freehold and title is granted to the person ,in possession.

the title, as"registered, is in someway defective bU,tgood title is guaranteed. '_-

the applicant could not produce tile title deeds when the land was first registered.

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Graham no longer has a liability but'a new owner wiil have a liability.

Graham wilfstill have a liability but anew owner will not.

neither Graham nor a future owner will have a liability. '

the liability will continue to be an overriding interest on the land.

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Which of the folloWi~g would bea standardconditiol"!jn amo,rtgage offer?~

A A retention.

B Completion of roads and access.

C Redemption 'of an existing mortgage.e - ~.-~ ~

D Satisfactory report on title.

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5.

CeMAP@Module 2 specimen Paper A

For which of the following reasons might a lender insist on an undertaking?

A

B

C

D

The borrower did not pay the full 10% deposit.

The presence of extensive dry rot.

The property needs redecoration.

When an insurance policy has not been assigned to the lender.

6. On inspection of the property that Tony is proposing to buy, the surveyor found evidence of severalsmall but long-standing cracks in some of the interior walls. They do not appear to have worsenedover the past few years. What is the surveyor likely to recommend in view of the problem?

A He is likely to recommend a retention.

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A None of it.

COnly £5,040.

Page 2 of 50

All of it.D

B Only £560.

B The seller can keep the deposit and seek recompense from Parwililder if he later sells theproperty for a lower price.

Hazel paid a £5,600 deposit following her successful bid at a property auction. However, due to anunexpected change in her circumstances, she was unable to proceed with the purchase. How muchof her deposit, if anything, will normally be returned to her?

C There are no issues as long as Parwinder withdraws before exchange of contracts.

D This situation would not occur because Parwinder would have been required to pay the fullpurchase price on the day of the auction.

C He is likely to recommend that the lender arranges a report from a 'structural engineer.

D It is unlikely to affect his lending recommendation.

Parwinder made a successful bid for a property at auction and paid the deposit. What are theimplications if he cannot go through with the purchase?

A Either party can withdraw from the agreement without penalty up to 28 days after the auction.

7.

8.

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CeMAP@Module 2 specimen PaperA

9. Which of the following statements is true of personal borrowers who take out a mortgage on a joint -basis?

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C

D

They must each pay half of the mortgage every month.

They will be jointly and severally liable for the'loan,

They will be singlyand severally liable for tne loan.

They _willeach be responsible for 50% of the loan if they default.

10; In order for trustees to arrange a mortgage to buy ,a property for a beneficiary, the lender would:

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8

C

D

carry out a credit search on the trustees only.

require evidence that the trust deed gives the trustees the power to borrow.

require proof of each of the trustee's personal income.

require proof that the beneficiary is aged under 18.

'". 11. Arnold is considering arranging lasting powers of attorney (LPAs). Which of the following is false?

12. Steven and Mary own aflat situated in a purpose-built block comprising 12 identical properties.They are keen to purchase the freehold interest but; as a starting poinUorthis to be possible, theCommon hold and Leasehold Reform Act 2002 requires that:

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D

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D

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Arnold can continLJeto make decisions once a property and affairs LPA has been registered,as long as he is mentally capable.

Arnold can still make decisions about his own care once a personal welfare LPA has beenregistered.

Arnold can register a property and affairs LPA at any time onceit has been setup.

Under a personal welfare LPA, Arnold's attorney will only have powers once Arnold has losthis mental capacity.

all other qualifying leaseholders in the block must be party to the transaction.

the entire block must be only for residential use.

the lease must have originally been granted for a term exceeding 21 years.

they must live in the flat.

PCige3 of 50

13. Richard and Liz have decided to re-arrange ownership of their house as tenants in common. IfRichard died leaving his share of the property to their daughter Karen:

14. Sam bought a newly constructed house with NHBC Buildmark Scheme protection dating from June2006. When is the insurance under the scheme due to expire?

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the vendor to answer honestly all questions about the property.

the purchaser to be able to provide the required deposit.

Liz and Karen would be joint legal owners.

Liz and Karen would be joint equitable owners.

2008.

Liz would be the sole legal owner and Karen would be an equitable owner.

Karen could force Liz to sell the property.

C

D

The principle of utmost good faith in respect of a contract to purchase a property requires:

B the vendor to be legally able to sell the property.

A both parties to the contract to be aged 18 or over.

B The vendor.

C The vendor and the estate agent jointly.

D The vendor's solicitor.


Under the Protection from Unfair Trading Regulations 2008 (CPR), whose responsibility is it toensure that the basic details are correct when marketing a property?

D 2016.

C 2013.

B 2011.

A The estate agent.

D

C

A

B

A

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17. Nick is selling his house and using estate agent Jennifer, solicitor Mark _andsurveyor Howard .Under the principles of agency, who is deemed the principal in the transaction?

A Howard.

B Jennifer.

C Mark.

D Nick.

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18. A lender discovers that a borrower has allowed the property insurance on his mortgaged property tolapse. What steps will the lender normally take when that happens?

j A Allow the borrower a short period, typically three months, in which to reinstate the cover.

B Call in the mortgage because the terms and conditions have been breached.

I C Pay the premium and charge it to the mortgage account.

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D Switch-cover to the lender's block policy scheme and pay the premium out of reserves.

The Mortgage Conduct of Business (MCOB) rules ban unsolicited real-time promotions. What doesthis cover?

A Cold calling.

B Direct mail.

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C Off-the-page advertising:

D Requests for referrals.

Which ofthe following would not be a lender's right in relation to a mortgage contract?

A To call in the loan in the event of a compulsory purchase order.

B To insure the property if the borrower fails to do so.-

C To make further advances without creating anew mortgage deed.

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To transfer the mortgage to another lender"without the borrower's consent.

Page 5 of 50

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21. An offer of advance:,,~

A

B

C

D

can be withdrawn by the lender.

constitutes a legal contract.

is binding on the applicant but not on the lender.

is binding on the lender but not on the applicant.

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22. Which of the following is most likely to affect interest rates in the UK economy?

A

B

C

House prices.

The level of commercial debt.

The level of government borrowing.

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\,D Taxation revenues.

D seek a positive ballot of 75% of its members.

C obtain approval from the Financial Conduct Authority.

Chris, a 22-year-old trainee solicitor.

Ryan, who has three recent county court judgments against him.

Julie, an employee with 12 months' employment history.

B

B have its business plan agreed by the Prudential Regulation Authority.

D

C

Oxbridge Building Society intends to alter its lending policy and restrict its lending on residentialmortgages to a maximum of 50% of its total lending activities. If it proceeds, it will need to:

A convert to pic status.

A Anna, who wishes to borrow 90% of the property value.

Alan is a mortgage adviser. For which of the following clients would he be most likely torecommend a mortgage from a sub-prime lender?

23.

24.

July 2014 Page 6 of 50

GeMAP@ Module2sp'ecimen. Paper A

Which of the following is not a relevant factor fora borrower looking to choose the.right mortgage?

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Interest rate.

The lender's loan criteria.

The lender'sproductprofit margin.

The provider's reputation.

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Page 7 of 50

C Cash flow statement.

C review a number of bank statements.

A Balance sheet.

emphasise the longer-term advantages.

A Capital and interest.

B

D refer Sean to the key facts illustration.

Alan and Brenda are applying for their first mortgage. They know nothing about mortgages but wantto take as little risk as possible. Which of the following mortgages would be most suitable?

C inform Sean that he must not repay the mortgage early.

A check Sean's understanding and acceptance of the implications.

D seek confirmation of Bob's income from his employer.

B complete a search for county court judgments.

A consult a credit referencing organisation.

B Business taxation computation.

CeMAP~ Module 2 specimen Paper A

D Corporation tax return.

4.

3. Polly, a mortgage adviser, has recommended a product to Sean that carries early repaymentcharges. In order to confirm that this product matches his immediate needs, as well as those for thelonger term, as a priority she should:

2. Sam, a mortgage adviser, is seeking to establish whether Bob is able to manage all of his financ~seffectively. The most likely initial requirement would be for Sam to:

1. Graham is self-employed and has been asked to provide various pieces c;)finformation in support ofhis application for a mortgage. In which of the following documents would a figure for his personaldrawings be found?

Unit 4: MAPP

B NISA-linked.

C Low-cost endowment-linked.

D Unit-linked endowment-linked.~.",~\:;."

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Kevin is 44 years of ageand~isarranging a 25-year repayment mortgage. What specific matter ismost likely to concern his adviser about the arrangement?

A The speed of the reduction over the term.

B Whether a shorter term would reduce the initial monthly payments.

C Whether income protection insurance cover can continue until the end of the mortgage term.

D Whether Kevin's potential retirement income will cover paYments .

. 6. Harry is a mortgage adviser. Which of the following,would indicate that he is following the principles. of ethical advice?

A Always recommending the lowest-cost product

B Pres~nting a range of products that maybe suitable, and allowing the customer to choose themost appropriate one.

C

D

Recommending the product that best meets the needs of the customer and the adviser.

Using plain, customer-friendly languagewheln explaining recommendations.

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7. Which ofthefollowing would be least useful to adender.seeking to verify anemployed.mortgageapplicant's income?

B An accountant's reference.

A Ask the customer to read the illustration and then ask her for clarification where necessary.

A mortgage adviser has iden~ified what she feels is the most suitable mortgage for her customerand has produced an illustration. What must she do, if anything, before her customer makes anapplication? .

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A

C

D

B

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A self-assessment tax calculation.

Employeris reference.

Recent bank statements.

Explain that the illustration is an approximate guide to the costs of the contract, which mayend up higher than.shown. .

C Tell them the main information contained in the illustration .•

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There are no formal requirements.

Page 9 of 50 f}


9. According to the MCOB rules, which of the following would be included in the 'basic essentialexpenditure' category when assessing affordability?

A Child care.

B Council tax.

C Credit agreements.

o Recreation costs.

10. Alan has offered to provide a limited guarantee for his daughter's mortgage. The lender:

A will be required to assess whether Alan could afford to take on the mortgage payments shouldhis daughter fail to make payments.

B will be required to explain that Alan will be responsible for the whole mortgage if his daughterfails to make payments.

C will insist that Alan becomes party to the mortgage for the period of the guarantee.

o will take a charge over Alan's residential property.

11. Which of the following is true in relation to a collateral deposit?

A It can be any form of additional security that is held by a third party.

B It can be used to cover any increases in mortgage repayments that occur when interest ratesrise.

C It usually takes the form of money deposited with the lender, who then holds the funds untilthe debt is repaid.

o It will be secured on the property to be mortgaged.

12. Which of the following statements is true in respect of an endowment policy?

A If deposited with a mortgage lender, the lender has a legal right to its proceeds.

B It can be assigned to a mortgage lender, but the lender has few rights over the policy.

C It can be deposited with a mortgage lender, thereby giving the lender an equitable right.

o It is unlikely to have a surrender value during the first five years.


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CeMAP@Module2"specimen Paper A

13.Jo bought a house for £287,000 in October 2014.How much stamp duty land tax (SDLT) did shepay?

A £2,870.

B £4,860.

C £8,610.

D £11,480.

14. Which of the following would not be covered byanenvironmental search?

A A history of flooding in the area.

B Mining,subsidence.

C Planned development in the area.

D The presence of radon gas.

15. How much would be payable to the Land Registry for registering a property valued at £1.5m in thenew owner's name?

A £40.

B £240.

C £500.

D £910.

16. When Shirley started her mortgage, she was asked to pay a fee for a title indemnity policy. Thepurpose of this was to protect:

A Shirley and her lender from legal action by the Land Registry in the event of a solicitor's error.

B Shirley and her lender from ownership claims from others.

C Shirley's solicitor in the event that"there was a later dispute over their legal work and thequality"ofthe title.. -

D the lender in the event of Shirley defaulting on the loan and disputing any claim by the lender.

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July 2014 --," Page 11 of 50

D pay a premium price for the flat.

A be forced to take over the agreement.

C only be eligible for a commercial mortgage.

When the loan exceeds the lender's normal affordability criteria.

When the loan-to-value ratio exceeds 75%.

C

D

A When the mortgage amount exceeds a predetermined amount.

Felicity wants to purchase a flat, for which she requires a mortgage. The flat has a tenant with atenancy agreement with the vendor, and the tenant is to remain in the flat. This means that Felicityis likely to:

B When the borrower has a poor credit history.

In which of the following circumstances might a lender require a borrower to pay a higher lendingcharge?

B be turned down by most lenders.


B It is usually about the same as the property's market value.

Which of the following is true of the 'reinstatement value' of a property?

A It is the amount that the insurer will pay in the event of theft or damage.

Which of the following is true in relation to listed buildings?

C It represents an estimate of the cost of rebuilding the property.

D It will be established by the insurer.

B Proposed changes to a Grade 1 or 2 listed building are likely to require National Heritageinvolvement.

C The local authority cannot dictate repairs an owner must make to a listed building.

A A new owner will have no responsibility for unauthorised alterations to a listed building madeby a previous owner.

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D

July 2014

The Secretary of State will be informed of any local authority decision to allow alterations toany listed building.

Page 12 of 50

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C It is likely to lend only if evidence of planning permission can-be produced .. , ,:

Alan and AM have appliedfOr a m0l1gage,90 a',propertylhat'hCls 'be~p:Jhe<subject of major 'extension. What 'would ,!:>ethelender's;appr<;>ach regarClfhgplanning',perinissidn?:7c , ,,' '

A It is likely to ask Ajan,and'Annfor anindemdity, ag~inst action, from the lo,calauthority.

B ,It,is likely toinsistthat'Alan and Ann apply for retrospective planningpEm11ls,sion:, ,

WhichoHhefoHowingis correct in relation to the cpntents of a basic valuation'report on apropertyi

A It is not,atull survey but should iaentifYalistructural'defects.

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C

Planning permission is a matter for Alan andAnn rather than the lender.,

It will provide a warranty as to the reaspnablEmessof the purchase price.

It will snow valuations for botti' mortgage and insurance, pli rposes.

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D The 'report will con~nJ1that the property hasbeensurveyedtho'roughly.

23. Which ofthefoHowing is true in respect of a building survey on-a property?, .

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B

C

D

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A buiJding survey must be carr,ied outif-the property isrnore thim-two years old.

Anydefects~;e'likely to be discovered and the bprrower has some reco~rse against thesurveyor in the event that they fail to'identify- and report them.

Lenders routinely accept a buyer-initiatedbuildin'gsur:vey,in placebf avaluation.

The commissioning6fsuchasurvey-is al~ays theresporlsibility oUhe v,eOdorpriorto puttingthe propertyon the market.

24. A HomeBuyer Report differs from a' Condition Repoi'tbecause it contains:

A advice on certain issues forthe-buyer's solicitor.

B adviceoh repairs and ongoing maintenance.

,C issues for further investigation-.

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serious issues .or those needing attention.

Page 13 .of50 ••:~


25, Under the Neighbour Consultation Scheme, having received a notice, how long will those sharing aboundary with the applicant have to lodge their objection?

A 14 days.

B 21 days.

C 28 days.

D 30 days.

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1. Whi~hof the f6110~ingwill :provide a' borrower:with:a high degree ofcert~inty thatthe loan will. berepaid in full by theehd ofthe mortgage tElrm,tog-ether with a 16w~coStiorrru:iflife assurance? '

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B

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'A capitl:il repaymentmortg'age with a low-cost with p~o~ts~e~.dowmeht'pOlicy,;: - - ~'.

A capital repayment l110rtgage with amortgage~protect'ion policy,,,--.-.";~-'_ -,,:.::.-. u

An-interest-Orily mortgagelinkedto a stocks:andshcmis NISA and a decreasing term.assurance.

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Aninfer~st.;only'moitgage with level-term assLJranc~ti•

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2. Which onhe following ,'istrue in relation to interest..-:only;niortgages?,;;~ -.~~»-.

Interest rates 'tend to be slightly lower than for repaymentioans.

B Most lenders will consider a potential inheritance as a rea'iisficrepayment vehicle.

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The monthly mortgage payments will be loweI' than with a repaymentmortgage.

D, '

They are suitable fOLrisk~averse borrowers.

3. - .Inwhich,of the followingdrcumstancesmight a;lender:be'abl~tocorisidEkapureinterf3st-only~~~~. '" ,

If the lender is confidentthatfuture house inflation. will be-high.- .

If the borrower signs an appropriate disclaimer.

If the borrower is happy to select that route.

If the loan-to-value is very low.

B

D

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5.

6.


Tony and Anna have an interest-only mortgage with a low-cost, with-profits endowment policy asthe repayment vehicle. Which of the following statements in respect of the policy is correct?

A Annual reversionary bonuses and a terminal bonus may be added to the guaranteed sumassured, but these are not guaranteed.

B Annual terminal bonuses anda final reversionary bonus may be added to the guaranteed sumassured, but these are not guaranteed.

C Guaranteed annual reversionary bonuses are added to the guaranteed sum assured, and aterminal bonus may be added; although this is not guaranteed.

D Non-guaranteed annual reversionary bonuses may be added to the guaranteed sum assured,and a terminal bonus is guaranteed to be added at maturity.

Tony is aged 59 and has an interest-only mortgage of £65,000 that is due to be repaid soon. He hasjust retired with an income of£13,OOO from his occupational pension scheme, and he also has apersonal pension fund of £150,000. If he chooses to use his personal pension to payoff hismortgage, which of the following is true?

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A He can take £37,500 tax-free but must use the balance of the fund to provide an incomethrough an annuity or capped drawdown.

B He can take £65,000 as a tax-free lump sum and take the balance as an income, subject toGAD rates.

C He could take £37,500 from the fund tax-free, and a further £27,500 as a taxable lump sum.

D He will not be able to take a tax-free lump sum because he has already taken hisoccupational scheme benefits.

Which type of mortgage is likely to be most attractive to those who want a straightforward, easy-to-understand arrangement?

A Capped. \B Libor-linked.

C

D

Offset.

Variable rate.

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CeMAP@Module 2 specimen-paper A

Which of the following could be considered as an advantage of a base rate tracker mortgage over astandard variable-rate mortgage, both offered by the same lender?

A An arrangement fee is unlikely to be payable.

B An early repayment charge is unlikely to apply.

C The interest rate charged is likely to be lower.

D The interest rate charged will not exceed a predetermined level.

8. Which offollowing statements is correct in respect of a five-year, fixed~rate 'mortgage?

A It cannot be redeemed during the>five-year, fixed-rate period.

B The lender is likely to charge an arrangement fee.

C The rate charged will always be higher than the lender's standard variable rate.

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D The rate charged will always be linked to the Libor rate.

9. Nikki is considering a capped-rate mortgage. Which of the following statements is true?

A Capped-rate mortgages always have a 'collar' (or 'floor').

I B The interest rate will always be lower than the lender's standard variable rate.

C The interest rate will track the Bank of England base rate.

D The interest rate will vary with the lender's variable rate up to thecap.~-

10. Which of the following is a difference between fixed and capped~rate mortgages?

A Capped rate mortgages may have extended early repayment charges.

B Fixed rate mortgages may be subject to a 'collar'.;,i

C Fixed rate mortgages usually require an arrangement fee.

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D Payments on a capped mortgage may go down.

July 2014 Page 1Tof,50

11.


Which of the following is a difference between a lifetime mortgage and a home reversion scheme?

A Interest rates on a home reversion plan tend to be higher.

B The planholder retains property ownership with a lifetime mortgage.

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The planholder retains the right to remain in the property with a reversion scheme.

The reversion plan can provide cash and/or income.

12. Sandra is considering a £150,000 interest-only offset mortgage with a variable interest rate of 4.5%.After meeting the costs of the mortgage, she will have £15,000 in a deposit account, earning 2.5%interest. Assuming no changes to interest rates, how much interest will she be charged each year ifshe offsets her savings within her mortgage instead of retaining the current arrangement?

A £6,075.~1

1B

C

o

£6,375.

£6,210.

£6,750.

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13. Which of the following is a specific requirement for a fixed-rate mortgage to meet CAT standards?

A Interest must be calculated on an annual basis.

B The arrangement fee cannot exceed £150.

C

o

There can be no separate high loan-to-value charge.

No early repayment charge may be levied at any time.

14. Apart from the need to budget, what other key factor can influence the attractiveness of a fixed-ratemortgage compared to a variable-rate mortgage?

A A desire to avoid early repayment charges.

B A desire to keep the mortgage term as short as possible.

C The ability to avoid future interest rate volatility.

o The borrower's state of health.


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15. .A'cOrT1mercialrriortg~ge is best described as a mortgage where:

A the associated repayment vehicle is paid for with company funds.

B the borrowe~is self-'employed.

;. C the lender makes a loan to a group of borrowers.- '

16. Jennie has taken out a lifetime mortgage that meets the Equity Release Council's code of practicerequirements. If she takes advantage of the scheme's mortgage interest 'roll-up,' facility, what arethe implications?

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D the security for the loan is non-residential property.

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A Her interest payments will gradually decrease year on year.

~ ..

D The scneme is available to any potential buyer who lives in a participating local' authority area.

In wliichof the fbllowingtransactions is the lender least likely to use the applicant's income fromemploymentindetermining-how much to lend?'

"-ti

The maximum possible discount is £16,000, deperiding on the location of the property.

The 'arrangement-might resultina negative-'equity situation if interest rates'increase.

"'\: .~,...It incre~ses the debt that needs to be repaid on her death.

Her repayment vehicle may not be sufficientto'repay the mortgage at the end of the term.

B

B

C

C The maximum share that a Social HomeBuy applicant can purchase is 25% ..

A Brian,.who is purchasing a property on a shared ownershipbasis.

Which of the' following statements is true in relation to Social HomeBuy schemes?

D

A A landlord can charge rent of up to 5% per year of the equity it still holds.

18.

17.

.~f

B Dean, who is purchasing his flat from h'islaridlord, the local authority.

t

f...I..1

C

D

Emma, who is purchasing a property with a buy-'to-Iet mortgage.

Lisa, IIIIhois purchasing a small hbusewith an equity share mortgage.

July 2014" Page 19 of 50


19. Nigel has bought a new house and is required to pay monthly rent as well as mortgage payments.What type of mortgage and purchase arrangement does he have? I •

\,>.

A Deferred interest.

B Equity share.

C

D

Libor.

Shared ownership.

20. Which of the following statements is correct in respect of Sharia-compliant mortgages?

A convertible term assurance.

B decreasing term assurance.

,Only the Ijara method involves the payment of interest to the lende~.

The Murabaha method involves the payment of rent to the lender.B

The life assurance policy designed to support a repayment mortgage is a type of:

D Under the Murabaha method, the property is purchased by the lender and sold to theapplicant at a higher price.

C Under the Ijara method, the lender purchases the property and immediately transfersownership of it to the applicant.

A

21.

22. Which of the following statements is true in relation to income protection !insurance and criticalillness cover?

C

D

A

B

C

D

July 2014

level term assurance.

pension term assurance.

Critical illness cover provides a taxable lump sum on diagnosis of a defined illness.

Critical illness policies provide income benefits only.

There is no limit to the level of benefit that can be arranged under an income protectioninsurance plan.

There is no limit to the number of claims that can be made on an income protection insurancepolicy, provided that premiums are paid up-to-date.

Page 20 of 50

CeMAP@Module 2 spe-cimen Paper A

23. Most buildings insurance policies automatically provide cover fordamage caused by:

A - corrosion to a heating system.

B subsidence and landslip.

C theft while the property is unoccupied .

.i. D trees falling on fences and hedges.t.I,. 24. What is the typical minimum deferred period on waiver of premium benefit? At least:

(i

25.

A 4 weeks.

B 13 weeks.

C 26 weeks.

D 52 weeks.

. ~';"-.-

Whatpart, if any, of the benefits payable under a mortgage payment protection insurance (MPPI)scheme is subject to tax?

A None.

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B

C

D

July 2014

Any income that exceeds the mortgage repayment.

Any lump sum paid.

All benefits received.

Page 21 of 50-


...•-\

Unit6: MAPC"~I

Which of the following is the least likely reason for an individual to take out an equity releasemortgage?

1.

A To buy a holiday home.

B To carry out home improvements.

A a borrower wishes to extend the term of the mortgage.

A Ownership transfers to the provider.

A deed of postponement might be necessary if:

To raise a cash sum to give to family members.

To release the burden of mortgage payments in retirement.

C The borrower could build up a negative equity situation.

B Taking out such a plan could lead to reduced state benefits.

D The owner loses all rights to any increase in the property value.

Which of the following could be seen as a disadvantage of an Equity Re.lease Council-compliant'roll-up' lifetime mortgage?

C

D

3.

2.

B a mortgage contract does not contain an obligation for the lender to make further advances.

C

D

a property owner wishes to arrange a second charge.

one party wishes to be removed from a mortgage.

4. A second mortgagee:

A

B

C

D

cannot register a charge without the consent of the first mortgagee.

is not automatically entitled to a share of the proceeds of sale if the first mortgagee sells inpossession.

must charge the same rate of interest as that charged by the first mortgagee.

normally charges a higher rate of interest than the first mortgagee.


---------------------------------------------------,

CeMAP@Module 2 specimen PapecA

- -

5. - In which of th'efollo"wing circumstanceswould open oridging~nahcebe-appropriate?

B Louise, who wishes to purchase a pr()pertybefore a-buyerhas-been found for her existingproperty.

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For:

A

c

D

John, who has exchanged contracts on the ~aleof part of the land adjoining his property.

M;uk, who has exchanged contracts :onthe saleofhispropertybufwishes to'complete hispurchase before h-issgle. -

Mary, who wishes to purchase a plot ofland on which she wants to build her own home.

I, 6.'.~ .•••. .~.' -.-=

What specific feature of a mortgage can avoid the need for 'tacking'?

Shaun is considering a remortgggefrbm,his existingc6.5% .interest-only loan to a three-year fixedrate at 5%. He vyill notincrease the £120;OQOborrowing an.dhas calculated that it will cost £750 incharges, fees and legal costs, which he will pay fromsavings~ At what point will he start to benefitfinancially from the new arrangement?,

C In 6 months.

- D _ In 13 months:

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7.

A

B

cD

A

B

Daily calculation of inte'rest.

Drawdown fgcility.

Early repayment charge.

Fixed-rgte-of interest.

Immediately.

In 4 mo.oths.

-.•.,. '- ..•

8.' , '-NgyanandCnandra areconsic:lering;movingnow that thei£firsU:>aby'ls.due.,WhiclJ ofthe followingstatements is tFlIe?

- -A The lender's checks will be less stringent now that they are on the property ladder.

B They cannot use existing life policies for the new mortgage.

C They will be able to reclaim part of the higher lending chargelhey'pgid when they bought theirexisting" property. - -

D They will need to set aside money to cover costs.

July 2014 - Rage-230t50."' -


9. Harry and Rebecca are considering taking advantage of their existing lender's latest fixed-rate dealby switching from their variable-rate mortgage. They will not raise any additional capital and themortgage would represent 82% LTV compared to the original 94%. Which of the following would betrue of their proposed action?

A It is likely to be less costly to arrange than a remortgage.

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\,B The switch is likely to be cost free.

C

D

They may have to pay another higher lending charge.

They would have to allow for conveyancing costs.

10. What is the position when a joint borrower wishes to be released from their commitment due to animpending divorce?

The lender:

A cannot refuse under any circumstances.

l,1\'I:'\

11. What is meant by the term 'a clog on the equity of redemption'?

B

C

D

is likely to refuse if it believes that the remaining borrower will be ul'i1ableto meet the mortgagerepayments.

should recommend that the remaining borrower move to a cheaper' property.

will not be able to act until the decree absolute is obtained.

It is when:

A a borrower defaults on payments and the lender wishes to force repayment of the loan.

B a borrower refuses a request from the lender to repay the mortgage.

the lender delays 'providing the borrower with a redemption statement so that the mortgagecannot be redeemed.

C a lender includes a clause in the mortgage deed that deliberately prevents or discourages theborrower from repaying a mortgage early. I

D


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12.yaul wishes to make a partial redemption payment on his mortgage. Which.oUhe followingstatements is correct?

A An early repayment charge cannot be applied.

B

C

If the payment is made, Paul must reduce 'his monthly payment.

If the payment is made, the existing mortgage term must be maintained.

D The lender may stipulate a minimurn amount.

A It is likely that her credit rating will be severely affected.

Penelope wishes to remortgage in order to raisefihance to repay her credit card debts. Ofwhich'particular issue should she be made aware if she follows this route?

l-

f

13.

B It is likely that the overall long-term costs will be higher.

C She will be charged an interest rate above the standard variable rate.

D The additional borrowing would be regulated under consumer credit legisiation.

r 14. Which of the following is true where a remortgage is arranged as part of a debt consolidation,programme?

A It is likely to increase the risk of the property being repossessed ..I

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B

C

D

The homeowner's overall borrowing risk will be reduced by securing the loans in this way.

The interest rate will be -higher to reflect the reason for the additional borrowing.

The lender will never impose a higher lending charge.

15. What risk is a borrowerAaking by consolidating unsecured debts into a repayment mortgage?

f

if'

A

B

C

D

July 2014

The increased risk of negative equity at some point in the future.

The risk that mortgage interest rates might be higher than for unsecured borrowing.

The risk that the associated investment vehicle will fail to repay the capital at the end of theterm.

There is no particular risk to this arrangement.

Page 25 of 50

16.

17.

CeMAP@Module 2 speCimen Paper A

Which of the following would not be eligible for benefit payment under ttie Support for MortgageInterest (SMI) scheme? Further advances to:

A carry out necessary improvements to the property.

B consolidate debts that became unmanageable.

C to carry out necessary repairs to the property.

D to buy an ex-partner's share in the home on separation.

A borrower with a low-cost endowment-linked mortgage is in financial difficulties and is consideringsurrendering their policy and switching to a capital and interest repayment mortgage. One of thedisadvantages of this approach is that:

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,-18. Joanne's property has recently been taken into possession by her mortgage lender. What are the

implications for Joanne?

A

B

C

D

A

B

C

an early repayment charge will be payable.

replacement life cover will be needed.

the mortgage term must be extended.

there will be a repayment shortfall at the end of the mortgage term,

If the lender sells the property for more than the original loan taken out by Joanne, then anydifference between the original loan and the sale price must always be immediately passed toJoanne.

!Joanne can only stop the lender selling the property by clearing the outstanding arrears.

iJoanne can reclaim her property by redeeming her loan in full befdre the property is sold.

19.

D The lender must delay the sale of the property until the sale price ~overs Joanne's originalloan.

Andy's mortgage account has recently gone into arrears. His first missed payment was on Monday1 July. His lender became aware of the missed payment on Wednesdayi3 July. When is the latestdate that the lender must write to warn Andy of the situation?

A Monday 8 July.

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-~B

C

D

July 2014

Wednesday 10 July.

Monday 15 July.

Wednesday 24 July.

Page 26 of 50

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20. The Mortgage Conduct -ofBusiness rules require a lender to maKe a record ohts dealings with aborrower whose regulated mortgage contractis in arrears. For how long must this record beretained?

A One year from the date of the dealings with the borrower.

B Three years from the date of the dealings with the borrower.

C Five years from the date of the dealings with the borrower.

o _Records of dealings with arrears must be kept indefinitely.

21. Advice given by CitizehsAdvice tda borrowerwhois having difficulty in making their mortgagepayments is:

r

,

A

B

C

o

free of charge to the borrower.

subject to a nominal charge to the borrower, payable on receiving the advi,ce.

subject to a charge to the borrower which can be added to the mortgage account.

subject to a charge which the borrower can reclaim from the lender.

22. Who has the right of subrogation as a result of a ,successful claim -under a mortgage indemnityguarantee (MIG) policy in connection with an endowment-linked mortgage?

A The borrower.

B The endowment provider.

C

o

The MIG insurer.

The lender.

23. Which of the following legal remedies is now rarely used, if at all?

o Sue on the borrower's personal covenant.

4'(

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"

A

B

C

July 2014

Appointment of a receiver.

Foreclosure.

Power of sale.

Page 27 of 50

A 14 days.

B 28 days.


1 month.C

A court has granted an outright.possession order. Within what period would the lender normally beable to take possession?

24.

D 3 months. t\.

25. Simon has a £130,000 repayment mortgage and has been claiming Support for Mortgage Interest(SMI) successfully for 26 weeks. He has the opportunity to take an eight-week work contract startingimmediately. How would this affect his SMI benefit?

i

"A

B

He will receive SMI for four weeks after starting work and will not have to serve a further SMIwaiting period when his work contract ends.

His claim will be suspended immediately, and when his contract stops he will be able to claimSMI for a further 26 weeks.

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C

D

His SMI benefit payments will continue as normal as long as his contract is for no more thaneight weeks.

His SMI benefit will end immediately and he will have to submit a new claim when his contractends.

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Answers and Justifications

Unit 3: MLPP

Q1 C K1.1A The MCOB rules are applied to the FCA definition of regulated mortgage products, which require

that at least 40% of the land is used, or is intended to be used as, or in conjunction with, adwelling by the borrower or a relative of the borrower.

B The MCOB rules are applied to the FCA definition of regulated mortgage products, which requirethat at least 40% of the land is used, or is intended to be used as, or in conjunction with, adwelling by the borrower or a relative of the borrower.

C Correct. The MCOB rules are applied to the FCA definition of regulated mortgage products,which require that at least 40% of the land is used, or is intended to be used as, or in conjunctionwith, a dwelling by the borrower or a relative of the borrower.

D The MCOB rules are applied to the FCA definition of regulated mortgage products, which requirethat at least 40% of the land is used, or is intended to be used as, or in conjunction with, adwelling by the borrower or a relative of the borrower.

Q2 D K2.1aA This would be 'good leasehold' title. Possessory title has the effect of guaranteeing good title

from the point of the property's first registration but not before.B The land could be either freehold or leasehold when possessory title applies.C 'Qualified' title would apply where there is a defect in the title, in which case good title could not

apply. Possessory title has the effect of guaranteeing good title from the point of the property'sfirst registration.

D Possessory title is commonly in place where some or all of the property's title deeds are missingwhen a property is first registered. Possessory title has the effect of guaranteeing good title fromthe point of the property's first registration but not before.

Q3 B K2.1aA As the PCC has not registered their interest in time, Graham will still have a liability but a new

owner will not.B Correct. As the PCC has not registered their interest in time, Graham will still have a liability but a

new owner will not.C As the PCC has not registered their interest in time, Graham will still have a liability but a new

owner will not.D Chancel repair liability has not been an overriding interest since 13 October 2013. As the PCC

has not registered their interest in time, Graham will still have a liability but a new owner will not.

Q4 D K2.2aA A retention would be covered as a specific condition related to a particular mortgage rather than

a standard condition.B Matters related to the completion of roads and access would be covered for particular mortgages

as a specific condition.C The requirement to redeem a mortgage would be a specific not a standard condition.D Satisfactory report on title is always a mortgage requirement and therefore would be included in

mortgage offers as a standard condition.



Q5 C K3.1A An undertaking to repair or make alterations is recommended when the property is basically a

good security, but needs certain work to be done. It is not related to the level of deposit.B An undertaking to repair or make alterations is recommended when the property is basically a

good security, but needs certain work to be done. The presence of extensive dry rot wouldnormally be seen to be too serious to fall within this definition.

C Correct. An undertaking to repair or make alterations is recommended when the property isbasically a good security, but needs certain work to be done. A typical undertaking would relateto the need for redecoration.

D An undertaking to repair or make alterations is recommended when the property is basically agood security, but needs certain work to be done.

Q6 D K3.2A Long-standing and non-progressive movement will not normally impact on the decision to lend. A

retention is generally recommended for serious defects such as progressive movement or otherproblems which, if not attended to immediately, may affect the structural integrity of the propertyor its value as security for the mortgage loan.

B Long-standing and non-progressive movement will not normally impact on the structural integrityof the property and so there should be no reason to refuse to grant a mortgage based on thisissue alone.

C The surveyor is suitably qualified to make the judgement as to whether the cracks are long-standing and whether they have worsened in recent years. Therefore, the lender will not normallyseek a report from a structural engineer in these circumstances.

D Long-standing and non-progressive movement will not normally impact on the decision to lend.

Q7 B K4.1A Exchange of contracts occurs when the deposit is paid. If Parwinder fails to complete, the seller

can keep the deposit and seek recompense from Parwinder if he later sells the property for alower price.

B Correct. Exchange of contracts occurs when the deposit is paid. If Parwinder fails to complete,the seller can keep the deposit and seek recompense from Parwinder if he later sells the propertyfor a lower price.

C Exchange of contracts occurs when the deposit is paid. If Parwinder fails to complete, the sellercan keep the deposit and seek recompense from Parwinder if he later sells the property for alower price.

D Exchange of contracts occurs when the deposit is paid, and Parwinder would usually beexpected to pay the balance within 28 days. If he fails to complete, the seller can keep thedeposit and seek recompense from Parwinder if he later sells the property for a lower price.

Q8 A K4.2A Correct. In normal circumstances, once the bid has been accepted there is no backing out

without the loss of the full deposit, as contracts are exchanged immediately and there is acontractual relationship between the vendor and the purchaser.

B In normal circumstances, once the bid has been accepted there is no backing out without the lossof the full deposit.

C In normal circumstances, once the bid has been accepted there is no backing out without the lossof the full deposit.

D In normal circumstances, once the bid has been accepted there is no backing out without the lossof the full deposit. Contracts have been exchanged and the vendor is entitled to keep the depositif the purchaser backs out.



Q9 B K5.1A Although the borrowers may choose to each pay half of the mortgage every month, both parties

are liable for the whole amount of the loan, not just their share of it (or what they perceive as theirshare of it).

B Both parties are liable for the whole amount of the loan, not just each for part of it (or what theyperceive as their share of it). This is legally referred to as being 'jointly and severally liable'.

C Neither of the parties are singly liable for the loan unless they both decide to make anamendment to the mortgage contract releasing one of the borrowers from their obligations. Bothparties are liable for the whole amount of the loan, not just each for part of it. This is legallyreferred to as being 'jointly and severally liable'.

D Both parties are liable for the whole amount of the loan, not just each their share of it (or whatthey perceive as their share of it) even if they put 50% of the deposit down and pay 50% of themortgage payment each month.

Q10A

B

C

D

Q11r_ A

B

C

D

Q12A

B

C

D

B K5.2This would not be a requirement. Trustees are able to borrow to buy property for a beneficiary,but only if the trust deed provides the power to borrow for that purpose.Correct. Trustees are able to borrow to buy property for a beneficiary, but only if the trust deedprovides the power to borrow for that purpose.The income of the trustees would not be relevant for affordability purposes. Trustees are able toborrow to buy property for a beneficiary, but only if the trust deed provides the power to borrowfor that purpose.The age of the beneficiary is not relevant. Trustees are able to borrow to buy property for abeneficiary, but only if the trust deed provides the power to borrow for that purpose.

B K5.3This is a true statement, Arnold can continue to make decisions once a property and affairs LPAhas been registered, as long as he is mentally capable.Correct. This is a false statement. A personal welfare LPA can only be registered once the donoris mentally incapacitated. Once it is registered the donor cannot make their own decisions abouttheir care.This is a true statement, Arnold can register a property and affairs LPA at any time once it hasbeen set up.This is a true statement. Under a personal welfare LPA, Arnold's attorney will only have powersonce Arnold has lost his mental capacity.

C U1.9At least 50% of the leaseholders in the block must agree to participate in the purchase, not all ofthem.No more than 25% of the internal floor area of the building can be used for non-residentialpurposes.The original term of the lease must have been more than 21 years to enable it to qualify subjectto other additional criteria.There is no need for the leaseholder to live in the flat, which means that landlords could qualify.



013 0 U1.9A Liz would be the sole legal owner and Karen would be the equitable owner of Richard's share.

Karen could not force Liz to sell, but neither could Liz sell without Karen's agreement.B Liz would be the sole legal owner and Karen would be the equitable owner of Richard's share.

Karen could not force Liz to sell, but neither could Liz sell without Karen's agreement.C Liz would be the sole legal owner and Karen would be the equitable owner of Richard's share.

Karen could not force Liz to sell, but neither could Liz sell without Karen's agreement.D Correct. Liz would be the sole legal owner and Karen would be the equitable owner of Richard's

share. Karen could not force Liz to sell, but neither could Liz sell without Karen's agreement.

014 0 U1.1A Although the cover provided by the NHBC Buildmark Scheme is more comprehensive for the first

two years, it provides a guarantee for the first 10 years of the property's life in total.B The NHBC Buildmark Scheme provides a guarantee for the first 10 years of the property's life,

not the first five years.C The NHBC Buildmark Scheme provides a guarantee for the first 10 years of the property's life,

not the first seven years.D The NHBC Buildmark Scheme provides a guarantee for the first 10 years of the property's life,

which means that the insurance will expire in 2016.

015 AU1.2A Correct. It is the estate agent's responsibility to ensure that information about a property is

correct.B It is the estate agent's responsibility to ensure that information about a property is correct.C It is the estate agent's responsibility to ensure that information about a property is correct.D It is the estate agent's responsibility to ensure that information about a property is correct.

016 DU1.3A Although both parties to a contract to purchase property must be aged 18 or over, this has

nothing to do with the principle of utmost good faith, which requires both parties to answer allquestions honestly and, with property, this is particularly relevant to the seller.

B Although the vendor must be legally able to sell the property, this will be verified by thepurchaser's solicitor, and has nothing to do with the principle of utmost good faith, which requiresboth parties to answer all questions honestly and, with property, this is particularly relevant to theseller.

C The principle of utmost good faith requires both parties to answer all questions honestly and, withproperty, this is particularly relevant to the seller. The purchaser must be able to provide therequired deposit, but this is not what the principle of utmost good faith is about.

D Correct. The principle of utmost good faith requires both parties to answer all questions honestlyand, with property, this is particularly relevant to the seller.

017 DU1.4A The principals involved in a property sale are the sellers and the buyers. Howard is the surveyor.B The principals involved in a property sale are the sellers and the buyers. Jennifer is the estate

agent.C The principals involved in a property sale are the sellers and the buyers. Mark is the solicitor.D The principals involved in a property sale are the sellers and the buyers. Nick is the seller.


018AB

C

D

019AB

C

D

020ABCD

~021A

B

CD


C U1.7The lender will require continuity of cover.Rather than taking the extreme step of calling in the loan, the lender will pay the premium andcharge it back.The lender has the right to, and to protect its interest will, pay the premium and charge it to themortgage account.The lender could consider switching cover, but would not pay the premium from reserves.

A U1.8The MCOB rules ban 'unsolicited real-time promotions'. This is commonly called 'cold calling'.The MCOB rules ban 'unsolicited real-time promotions', such as 'cold calling'. Direct mail is not a'real-time' promotion because it does not happen 'live' like a meeting or a conversation.The MCOB rules ban 'unsolicited real-time promotions', such as 'cold calling'. Off-the-pageadvertising is not a 'real-time' promotion because it does not happen 'live' like a meeting or aconversation.The MCOB rules ban 'unsolicited real-time promotions'. A request for referrals is not classed asan unsolicited promotion. An unsolicited promotion is 'cold calling', which is a 'live' conversation.

D U1.7To call in the loan in the event of a compulsory purchase order is a standard lender's right.To insure the property if the borrower fails to do so is a standard lender's right.To make further advances without creating a new mortgage deed falls within the lender's rights.A lender can transfer the mortgage to another lender, but it should be with the borrower'sconsent.

AU1.6Because an offer of advance has no legal status, it is not binding on either the lender or theapplicant and, in certain circumstances, may be withdrawn by the lender.An offer of advance is not a legal contract and, as such, has no legal status. It is not binding oneither the lender or the applicant and, in certain circumstances, may be withdrawn by the lenderwithout penalty.An offer of advance is not a legal contract and, therefore, is not binding on either party.An offer of advance is not a legal contract and is not binding on either party. If the mortgageproceeds and the property purchase completes, the terms of the offer will form part of themortgage deed which, once executed, becomes legally binding.

.,022A

B

C

D

C U2.2Although interest rate increases are used to control consumer spending and the housing market,government borrowing creates greater upward pressure on interest rates .Although commercial debt and recession may prompt a reduction in interest rates, these factorshave less influence than government borrowing levels.Correct. When a government needs to increase its borrowing, upward pressure is placed oninterest rates to enable the satisfaction of the borrowing need.Taxation revenues do not directly impact on interest rates. The level of government borrowinghas a far greater impact.


023A

B

C

D

024A

B

C

D

025ABCD

CeMAP@ Module 2 specimen Paper A

D U2.3High street lenders are prepared to lend high loan-to-value amounts for the right customers onappropriate terms.Chris would be eligible for a mainstream mortgage based on his employment, although the sizeof the loan would be related to his affordability.It is likely, all other things being equal, that someone with a 12-month employment history couldborrow from a high street lender.Correct. Sub-prime lenders deal with high(er)-risk customers such as those with county courtjudgments against them.

AU2.3Correct. If a building society wishes to devote less than a minimum of 75% of its total lendingactivities to residential mortgages, it will need to change its status to pic.A building society must devote a minimum of 75% of its total lending activities to residentialmortgages. This cannot be varied by the Prudential Regulation Authority. If it wishes to restrictresidential lending to a total of 50% of its total lending activities, it will need to change its status topic.A building society must devote a minimum of 75% of its total lending activities to residentialmortgages. This cannot be varied by application to the FCA. If it wishes to restrict residentiallending to a total of 50% of its total lending activities, it will need to change its status to pic.A building society must devote a minimum of 75% of its total lending activities to residentialmortgages. This cannot be varied even with permission of its members. If it wishes to restrictresidential lending to a total of 50% of its total lending activities, it will, need to change its status topic.

C U2.1The interest rates available will influence a borrower's decision.The lender may not be prepared to lend to an individual.Correct. The product profit margin'is not information that would be available to the customer.A customer's perception of a company does influence their decision.'

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Answers and Justifications14.I

Unit4: MAPP

01A

BC

D

02A

B

C

D

A U1.1Correct. The balance sheet will include the capital balance, which will show personal drawings inthe trading year.The business taxation computation relates to capital allowances rather than drawings.The cash flow statement will reflect the movement of money rather than the source of informationon personal drawings.A corporation tax return is completed by a limited company and not a'self-employed person.

C U1.1Consulting a credit agency will reveal a poor credit record, but a review of bank statements is thecorrect starting point.The lack of county court judgments does not necessarily mean the financial management issound.Correct. The first place to check on the ability of a customer to manage their financial affairs is toreview bank statements over, say, the last three months.Confirmation of income is usually carried out at a later stage in the process, and will not, in itself,show how well Bob manages his finances. I

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Q3 A U1.2A Correct. When assessing suitability, Polly would need to be sure that the product was appropriate

to Sean's needs and circumstances now and in the future, and that he understands and acceptsthe implications of all the terms of his mortgage, particularly early repayment penalties.

B When assessing suitability, Polly would need to be sure that the product was appropriate toSean's needs and circumstances now, and that he is satisfied that it will continue to be suitable,particularly in view of the potential penalties. Stressing the longer-term advantages will notachieve this adequately.

C When assessing suitability, Polly would need to be sure that the product was appropriate toSean's needs and circumstances now, but also that it will continue to be suitable in the future.She needs to make sure that Sean understands and accepts the implications of the penalties andshe should not make any assumptions in this regard.

o When assessing suitability, Polly would need to be sure that the product was appropriate toSean's needs and circumstances now, and that he is satisfied that it will continue to be suitable,particularly in view of the potential penalties. Referring the client to the key facts illustration doesnot ensure that he understands and accepts the implications of the penalties.

Q4 AU1.3A Correct. As long as the appropriate payments are made, taking a repayment mortgage ensures

that the mortgage is paid off by the end of the agreed term. This offers the lowest risk possible.B A mortgage that has its repayment linked to a NISA will be an interest-only mortgage during its

term. The NISA will be used to repay the capital at the end of the term, which carries with it aninvestment risk that the NISA will fall short of the objective of repaying the loan at that time.

C A low-cost endowment is dependent on investment performance to achieve the level of bonusesneeded to enable the mortgage to be repaid at the end of the term. It may fail to achieve thisobjective.

o A unit-linked endowment is dependent on investment performance to enable the mortgage to berepaid at the end of the term. It may fail to achieve this objective.

Q5 0 U1.4A The pace at which the mortgage debt reduces may be of interest, but Kevin's ability to meet the

monthly payments in retirement is of more importance.B The mortgage will run until Kevin is 69, which is likely to be past his retirement age. It is important

that the adviser checks whether Kevin is likely to have enough retirement income to cover thepayments. A shorter term would increase the monthly payments.

C While the full provision of adequate cover is important, ongoing affordability is the primary issue.Indeed, if Kevin has retired, income protection at that time would appear inappropriate.

o The mortgage will run until Kevin is 69, which is likely to be past his retirement age. It is importantthat the adviser checks whether Kevin is likely to have enough retirement income to cover thepayments. A shorter term would increase the monthly payments.

Q6 DU1.5A Always recommending the lowest-cost product, without a view on its value for money or suitability

to the client does not really reflect an ethical approach.B Where the range of products presented only 'may' be suitable, allowing the client to choose is

opting out.C An ethical adviser would treat their client's needs as paramount, with their own needs

subordinated.o Correct. An ethical approach is best served by ensuring that the client fully understands their

purchase. To this end, plain and customer-friendly language is essential.


~---~-----------~---------------~}~;~

CeMApQj)Module 2 specimen Paper A

Q7A

BCD

Q8A

B

C

D

Q9A

BC

D

Q10A

BC

D

Q11A

B

C

D

B U1.6Self~assessment tax calculations, suitably supported, identify a self-employed person's taxliability and any outstanding tax payments. They are useful tool to confirm net income levels andability to pay.Correct. An accountant's reference confirms income for self-employed applicants.An employer's reference is useful to a lender as it can provide an up-to-date perspective.Bank statements are a useful tool if they were issued recently, providing an up-to-date picture ofthe applicant's current cash flow and income.

AUt.7Correct. It is essential that the customer makes an informed decision before going ahead with themortgage. The content of the illustration is an essential part of this process.Provided that the information on which the illustration is based is correct, the illustration shouldbe a proper reflector of the terms. The customer should read the illustration.The customer should read the illustration as this is part of the process of making an informeddecision.The requirement is for the customer to read the illustration as part of the process of making aninformed decision.

B U1.1This is categorised as 'basic quality of life expenditure'. Council tax is!considered to be 'basicessential' expenditure.Correct. Council taxis considered to be 'basic essential' expenditure.This is categorised as 'committed expenditure'. Council tax is considered to be 'basic essential'expenditure .. This is categorised as basic quality of life expenditure'. Council tax is considered to be 'basicessential' expenditure.

A U3.1Correct. MCOB rules require the lender to assess whether a guarantor can afford to take on themortgage payments if the guarantee is invoked ..A limited guarantee means that Alan's commitment is to a defined amount of the mortgage.Alan would not be required to become a party to the mortgage. The lender has sufficient securitythrough the guarantee arrangement..This is not necessary when standing as a guarantor.

C U3.2A collateral deposit is usually asum of money put up as additional security and held bylhelender. It needs to be of sufficient value to provide security for the loan, and it will be held by thelender, not a third party.A collateral deposit is held until the debt is repaid. It will not be used to support periodicrepayments.Correct. A collateral deposit is a sum of money put up as additional security. It is deposited withthe lender and is held until the debt is repaid.A collateral deposit is, itself, an additional security. It is held by the lender until the debt is repaid.It is not 'secured on the property to be mortgaged' - the loan is secured on the property to bemortgaged and on the collateral deposit.

"',~i

{i


1j,~~.

----------------------~---------


Q12A

BC

D

Q13A

B

C

D

Q14A

B

C

D

Q15A

BCD

Q16A

B

C

.•... D

C U3.2Depositing an endowment policy document with a mortgage lender does not create a legal rightfor the lender to benefit from the proceeds. It creates an equitable right, evidencing an agreementbetween the parties.An assignment is the legal method of transfer from the insured to the lender.Correct. As an alternative to a formal assignment, some lenders will accept an endowmentassurance document being deposited with them. This creates an equitable right, evidencing anagreement between the parties.An endowment assurance can be expected to have a surrender value in well under five years,often within 18-24 months.

C U4.9The correct rate of SDLT is 3% on the whole amount. This answer assumes 1% on the whole£287,000.The correct rate of SDLT is 3% on the whole amount. This answer assumes the first £125,000 @0% and the balance of £162,000 @ 3%.Correct. The 3% SDLT rate is applied to the whole purchase price of £287,000 (£287,000 @ 3%= £8,610).The correct rate of SDLT is 3% on the whole amount. This answer assumes 4% on the whole£287,000 = £11,480.C U4.13An environmental search would check for a history of flooding in the area as well as for miningsubsidence, radon gas, etc.An environmental search would check for mining subsidence as well as for a history of flooding,the presence of radon gas, etc.An environmental search does not relate to planned development in the area. This should berevealed by carrying out a local authority search. An environmental search will check for a historyof flooding, mining subsidence, the presence of radon gas, etc.An environmental search would check for the presence of radon gas, as well as for a history offlooding or mining subsidence.

D U4.5£40 would be payable on a property worth £50,000. The fee on a property over £ 1m would be£910.The fee on a property over £1m would be £910.The fee on a property over £1m would be £910.Correct. The fee on a property over £1m would be £910.

B U4.16Title indemnity is required where the title cannot be fully guaranteed. It protects the owner andthe lender from ownership claims made by other parties; it is not intended to protect Shirley fromlegal action by the Land Registry in the event of a solicitor's error.Correct. Title indemnity is required where the title cannot be fully guaranteed. It protects theowner and the lender from ownership claims made by other parties.Title indemnity is required where the title cannot be fully guaranteed. It protects the owner andthe lender from ownership claims made by other parties. Shirley would not be expected to pay toprotect her solicitor from the consequences of their own negligence .Title indemnity is required where the title cannot be fully guaranteed. It protects the owner andthe lender from ownership claims made by other parties. Shirley cannot take out insurance.toprotect against her own default and subsequent dispute with the lender over their claim over theproperty.



017 D U4.17A Higher lending charges may be imposed where the loan-to-value ratio exceeds a certain level

(usually 75% or greater) irrespective of the mortgage amount.S Higher lending charges relate to the loan-to-value ratio. It is not a protection for poor credit risk.C Higher lending charges relate to the loan-to-value ratio and not to any specific affordability

criteria.D Correct. Higher lending charges may be imposed where the loan-to-value ratio exceeds a certain

level, usually 75% or greater.

018 B U5.8A Felicity cannot be forced to take over the agreement. In any event, most lenders will want vacant

possession (which means that they will have unrestricted use of the property and no (sitting)tenants), and few lenders will lend on properties without vacant possession.

S Felicity is likely to be turned down by most lenders because they will only lend on properties withvacant possession (which means that they will have unrestricted use of the property and no(sitting) tenants). The fact that the flat has a tenant with a tenancy agreement with the vendormeans that it cannot be offered with vacant possession.

C Most lenders will want vacant possession, which means that they will have unrestricted use of theproperty and no (sitting) tenants. Few lenders will lend on properties without vacant possession.Felicity's proposal does not fit the criteria for a commercial mortgage.

D Far from paying a premium price for the flat, it is actually less marketable, and much more difficultto get a mortgage on, with a sitting tenant. Most lenders will want vacant possession, whichmeans that they will have unrestricted use of the property and no (sitting) tenants. Few lenderswill lend on properties without vacant possession.

019 C U5.9A The reinstatement value of a property is the valuer's estimate of the cost of rebuilding the

property from scratch in the event of destruction by fire or a similar catastrophe.S The reinstatement value of a property is the valuer's estimate of the cost of rebuilding the

property from scratch in the event of destruction by fire or a similar catastrophe. It cannot beassumed that this will be about the same as the property's market value, because the rebuildingcost does not have to include the cost of the land it stands on and takes no account of thedesirability of the location, among other factors.

C The reinstatement value of a property is the valuer's estimate of the cost of rebuilding theproperty from scratch in the event of destruction by fire or a similar catastrophe.

D The reinstatement value of a property is the valuer's estimate of the cost of rebuilding theproperty from scratch in the event of destruction by fire or a similar catastrophe. This figure isestablished by the valuer in the case of a mortgaged property.

020A

SC

D

B U5.14New owners are responsible for previous unauthorised alterations and so should check carefullythat permission had been given before they buy the property. Proposed changes to a Grade 1 or2 building will require National Heritage involvement.Correct. Proposed changes to a Grade 1 or 2 building will require National Heritage involvement.The local authority has the power to dictate repairs an owner must make to listed buildings.Proposed changes to a Grade 1 or 2 building will require National Heritage involvement.The Secretary of State will not be informed of any local authority decision to allow alterations toGrade 1 or 2 listed buildings. Proposed changes to a Grade 1 or 2 building will require NationalHeritage involvement.


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Q21A

B

c

D

Q22.A '"'-I

B

C

D

Q23AB

CD

Q24AB

CD


C U5.11The lender will wish to ensure that planning permission has been granted. Failure to obtainnecessary consents could seriously devalue the prope.rtyand, as such, an indemnity againstaction from the:local authority would not satisfy the lender:The lender will wish to ensure that planning permission has been granted. Failure to obtainnecessary consents could seriously devalue the property and, as such, is likely to result inlenders choosing not to lend on the property as it cannot be guaranteed that planning permissionwill be granted retrospectively. 'Correct. Thelen'der will wish to ensure that planning permission has been granted. Failure to ,obtain necessary consents could seriously devalue the property and, as such, is likely to result inlenders choosing not to lend on the property.Whether or nbtplanning permission has been granted is of paramount importance to the lenderbecause failure to obtain necessary consents could seriously devalue the property. The absenceof the relevant planning permission is likely to result inlenders choosing not to lend on theproperty.

C U6.1Itis not 'a full survey and the valuer will only identify obvio'usproblems.A basic valuation report assesses the adequacy of the property as security for mortgagepurposes. This does not relate to the reasonableness or otherwise of the purchase price.Correct. A mortgage valuation willbe'made to ensure sufficient security andan,insurancevaluation to ensure adequacy of cover. ., ". ~.A basic valuation is a relatively cursory view of the property and by design could not be termedas thorough.

B U6.2There is no laid-down formula for indicating when a building survey is specifically required.Correct. A contract exists between the borrower and the surveyor, creating ob'ligations on the.surveyor.The lend~r will always reserve the right to seek furthehnformation orvaluation.The vendor has no responsibility to commission a survey,:

B U6.3Both reports.provide advice on certain issues for the buyer's solicitor.Correct. The HomeBuyer Report provides advice on repairs and ongoing maintenance, while theCondition Report merely identifies problems.Both reports identify issues for furtherinvestigation.Both reports identify serious issues orthose needing attention.

'1~.---!1 July 2014 Page 39 of 50


025 B U7.1A Neighbours will have 21 days to object after receiving the notice.B Correct. Neighbours will have 21 days to object after receiving the notice.C Neighbours will have 21 days to object after receiving the notice.D Neighbours will have 21 days to object after receiving the notice.


Unit5: MPMP

01 B U1.1A Endowments are designed to run alongside an interest-only mortgage and do not provide any

certainty that the mortgage will be repaid.B Correct. As long as the payments are maintained as required on a capital repayment mortgage,

there is a guarantee that the mortgage will be paid off. In addition, a mortgage protection policyreduces in line with the capital outstanding offering the cheapest life cover.

C A NISA is an investment vehicle with no guarantee to repay the mortgage at the end of the term.Decreasing term assurance is cheap life assurance, but inappropriate if linked to an interest-onlymortgage.

D Level term assurance is a cheap form of life cover, but without a repayment vehicle in place it isdifficult to see how the loan can be repaid.

02 CU1.2A Today, there is no difference in interest rates offered between interest-only and capital repayment

mortgages.B FCA rules require lenders to ensure that the borrower has a 'credible' repayment strategy in

place. Potential inheritance is not 'credible'.C Correct. Because the monthly payments do not include the repayment of part of the capital, they

are lower for interest-only mortgages than for capital repayment mortgages. However, the newFCA rules require lenders to take the cost of a repayment vehicle into account when assessingaffordability, or to assess the arrangement as a repayment mortgage.

D Because of the issue of ensuring that repayment can be made at the end of the mortgage-termand with appropriate guaranteed vehicles being very expensive, this type of loan is notappropriate for the risk-averse.

03 D U1.2A Borrowers must usually have a 'credible' repayment strategy in place, and cannot normally opt for

pure interest-only. Although pure interest-only is very much the exception, it might be consideredif the loan- to-value is very low and the lender is confident that the value of the property will besufficient to repay the loan when due.

B Borrowers must usually have a 'credible' repayment strategy in place, and cannot normally opt forpure interest-only. Although pure interest-only is very much the exception, it might be consideredif the loan-to-value is very low and the lender is confident that the value of the property will besufficient to repay the loan when due.

C Borrowers must usually have a 'credible' repayment strategy in place, and cannot normally opt forpure interest-only; relying on house price inflation is not 'credible'. Although pure interest-only isvery much the exception, it might be considered if the loan-to-value is very low and the lender isconfident that the value of the property will be sufficient to repay the loan when due.

D Correct. Although pure interest-only is very much the exception, it might be considered if theloan-to-value is very low and the lender is confident that the value of the property will be sufficientto repay the loan when due.



Q4 A U1.4A Modern with-profits endowment policies usually have annual bonuses, called 'reversionary

bonuses', added to them, although these are not guaranteed. Both reversionary bonuses and thepossible terminal bonus at maturity rely on the investment performance of the underlying lifefund; they cannot be guaranteed.

B The terminology is used incorrectly. Annual bonuses are reversionary, not terminal, and finalbonuses are terminal not reversionary.

C The terminology is used incorrectly. Although added to the guaranteed sum assured, annualreversionary bonuses are not guaranteed.

D Any terminal bonus at maturity is not guaranteed. Modern with-profits endowment policies usuallyhave annual bonuses, called 'reversionary bonuses', added to them, and a terminal bonus atmaturity. As both of these rely on the investment performance of the underlying life fund, theycannot be guaranteed.

Q5 C U1.4A That would have been the case before the pension rules changed in the 2014 Budget.B Changes to the rules in the 2014 Budget mean that he can take up to 25% as a tax-free lump

sum and, because he has at least £12,000 guaranteed income, he qualifies for flexibledrawdown. This means he can withdraw unlimited further amounts, but they would be subject totax.

C Correct. Changes to the rules in the 2014 Budget mean that he can take up to 25% as a tax-freelump sum and, because he has at least £12,000 guaranteed income, he qualifies for flexibledrawdown. This means he can withdraw unlimited further amounts, subject to tax.

D He will be able to take 25% tax-free cash from each arrangement.

Q6 D U2.1A The capped-rate mortgage is effectively a variable-rate mortgage with a guarantee that a certain

ceiling cannot be breached. This can be a slightly complicated arrangement for borrowers tounderstand.

B Libor is the London Inter-Bank offered rate, something with which the general public is unfamiliar.C An offset mortgage is quite a complex product.D Correct. The variable rate mortgage is very simple, with the rate changing as the Bank of

England base rate changes. Although rate changes are not guaranteed to move in line, they willfollow the trend.

Q7 C U2.2A A lender can impose an arrangement fee on any of its mortgage products, if it so wishes.B It is common for early repayment charges to be part of a base rate tracker mortgage deal.C The interest rate charged on base rate trackers is commonly substantially lower than the lender's

standard variable rate.D No cap is placed on base rate trackers. They are designed to follow the Bank of England base

rate - whether it goes up or down.

Q8 B U2.3A Fixed-rate mortgages can usually be redeemed within the fixed-rate period, but are usually

subject to an early repayment charge.B Arrangement fees are commonly charged on fixed-rate mortgage deals.C As this is a fixed rate mortgage, there will be no rate changes, but the rate that is fixed could be

higher or lower than the lender's standard variable rate at that time.D Fixed-rate mortgages are not linked to Libor. They relate to the ability of the lender to secure

sufficient funds in the market at an attractive rate.


09A

8C

D

010A8

CD

011A

8

CD

012A

8

C

D

013A

8

C

D


o U2.4Capped-rate mortgages can be stand-alone products and do not necessarily have a 'collar' (or'floor') in place.The interest rate may be slightly higher than the standard variable rate until itreaches the cap.8y nature of the fact that the rate cannot exceed the cap, a capped-rate mortgage cannot trackthe Bank of England base rate.Correct. A capped-rate mortgage is essentially a variable-rate mortgage moving freely below thecap, but being limited to a maximum rate. ,

o U2.480th arrangements carry' early repayment charges.A collar is the lowest rate the lender will charge, and is sometimes applied to a capped-ratemortgage.80th arrangements usually require an arrangement fee.Correct. Capped-rate mortgages move up and down with the variable rate, up to the cap.

B U3.2 .f

No interestis paid on a home reversion plan, as the ownership of the property is transferred tothe home reversion company. These days, interest on lifetime mortgages is often rolled up.Correct. Under a home reversion plan, the property ownership passes to the home reversioncompany. Under a lifetime mortgage, the property remains in the ownership of the borrower.The right to remain in the property applies to both schemes. I .Either plan can provide cashand/orincome.

AU2.6Correct. Under an offset mortgage, the interest will be calculated on the net amount, hence£150,000 less £,15,000 =£135,000 @ 4.5% = £6,075.Under an offset mortgage, the interest will be calculated on the net amount, hence £150,000 less£15,000 = £135,000 @ 4.5%% = £6,075. £6,375 assumes £150,0001@ 4.5% less £15,000 @2.5%.Under an offset mortgage, the interest will be calculated on the net amount, hence £150,000 less£15,000 = £135,000@ 4.5% = £6,075. £6,210 assumes £150,000 @ 4.5% less £15,000 @ 4.5%less 20% tax. No interest is paid on the savings so no tax is due. .Under an offset mortgage the interest will be calculated on the net amount hence £150,000 less£15,000 = £135,000 @ 4.5% = £6,075. £6,750 makes no allowance for the offsetting amount of£15,000.

BU2.7Daily interest calculation and no MIG fees apply to all CAT mortgages. The arrangement fee for afixed-rate mortgage cannot exceed £150. The lender can charge an early repayment charge,within limits.Correct. Daily interest calculation and no MIG fees apply to all CAT mortgages. The lender cancharge an early repayment charge, within limits.Daily interest calculation and no MIG fees apply to all CAT mortgages. The arrangement fee for afixed-rate mortgage cannot exceed £150. The lender can charge an early repayment charge,within limits.The lender can charge an early repayment charge, within limits. Daily interest calculation and noMIG fees apply to all CAT mortgages. The arrangement fee for a fixed-rate mortgage cannotexceed £150.



014 C U2.9A Fixed-rate mortgages commonly have early redemption penalties.B The selection of a fixed rate should not influence the overall mortgage repayment period.C Because rates are fixed for a pre-agreed period, the mortgage is, for that time, free from the

impact of interest-rate movements.D The borrower's state of health will not have a significant impact on the choice between fixed and

variable-rate mortgages.

015A

B

C

D

D U3.1Commercial mortgages are available to those who wish to purchase non-residential property. Theborrower could be an individual, a partnership or a company.Commercial mortgages are available to those who wish to purchase non-residential property. Theborrower could have any employment status.Commercial mortgages are available to those who wish to purchase non-residential property. Theborrower could be an individual, a partnership or a company.Commercial mortgages are available to those who wish to purchase non-residential property. Theborrower could be an individual, a partnership or a company.

016 C U3.2A Under a roll-up facility, no interest is paid until the property is sold.B Lifetime mortgages are designed to cease at death or when the owner enters long-term care.

They are not expected to have a capital repayment vehicle in place other than the property value.C Correct. No interest is paid but is accumulated and repaid from the proceeds of the property sale,

often on the death of the owner.D The Equity Release Council offers a no negative-equity guarantee.

017 B U3.11A The maximum possible discount is £16,000, depending on the location of the property. A Social

HomeBuy provider can charge up to 3% per year of the equity it still holds.B Correct. The maximum possible discount is £16,000, depending on the location of the property.C The maximum possible discount is £16,000, depending on the location of the property. A Social

HomeBuy applicant can buy up to 100% of the property, with a minimum initial purchase of 25%.D The maximum possible discount is £16,000, depending on the location of the property. Social

HomeBuy is only available to qualifying tenants of a social landlord offering the scheme.

018 C U3.7A A lender will usually consider the applicant's income when lending on a share ownership basis,

as it is from income that repayments will be paid.B A lender will usually consider the applicant's income under a right-to-buy mortgage, as it is from

income that repayments will be paid.C As it is expected that rental income will pay the mortgage payments on a buy-to-Iet property, the

applicant's income is of less importance.D A lender will usually consider the applicant's income when lending on an equity share mortgage,

as it is from income that payments will be paid.

019 DU3.10A Deferred interest mortgages entail the full purchase of the property, so no rent will be paid.B Equity share mortgages offer a reduction in the effective interest rate or payment in exchange for

the lender retaining a proportion of the equity when the property is sold.C A Libor mortgage usually entails the full purchase of a property with no rent to be paid.D Shared ownership entails partial purchase of a property with rent to be paid on the remaining

part.


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020AB

C

D

021A

B

C

D

022ABCD

023A

BCD

024A

B

C

D

o U3.14Only rent and capital are paid under the Ijara method.No rent is paid under the Murabaha method, which involves only payment of capital based on theprice of sale from lender to buyer.Under the Ijara method, the bank buys the property and enters into a 'promise to purchase', anagreement by which the buyer pays capital and rent over the term. Ownership is transferred tothe buyer at the end of the term.Under the Murabaha method, the bank buys the property at an agreed price and then sells itimmediately to the client at a higher price.

B U4.1A convertible term assurance is a term assurance offering level cover and including a conversionoption to an endowment or whole-of-life assurance, if required. As a repayment mortgage hasreducing capital, convertible term assurance is not a direct match.Correct. A decreasing term assurance can be effected, which is designed to reduce in line withthe reduction in capital under a repayment mortgage.Level term assurance, by definition, offers level cover. As a repayment mortgage has reducingcapital, the level term assurance is not a direct match.Pension term assurance is a term assurance offering level cover. As a repayment mortgage hasreducing capital, the pension term assurance is not a direct match.

o U4.3Critical illness lump sums are paid tax-free.Critical illness plans typically provide a lump sum payment.The benefit under an income protection policy is linked to the insured's earnings.Correct. As long as an income protection policy is kept in force by payment of premiums, anindividual can claim on any number of occasions, as long as the conditions are satisfied at eachclaim.

B U4.4Corrosion to a heating system is effectively wear and.tear and is usually an exclusion underbuildings insurance.Subsidence and landslip are among the standard perils covered under buildings insurance.Theft or attempted theft if the property is left unoccupied is a standard exclusion.Damage caused by falling trees and branches to gates, fences and hedges is a standardexclusion under buildings insurance.

B U4.5In the event of a claim being made, it is usual that a deferred period of at least 13 weeks mustelapse before the waiver option takes effect.In the event of a claim being made, it is usual that a deferred period of at least 13 weeks mustelapse before the waiver option takes effect.In the event of a claim being made, it is "usual that a deferred period of at least 13 weeks mustelapse before the waiver option takes effect.In the event of a claim being made, it is usual that a deferred period of at least 13 weeks mustelapse before the waiver option takes effect.

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!July 2014 Page 44 of 50

Unit 6: MAPC


CeMAP@Module 2 specimen PapetA

Q25 A U4.2A Correct. All benefitpaymentsunder MPPI are tax4ree .B Incorrect. All benefit payments under MPPI are.tax-free.C Incorrect. All benefit payments under MPPlare tax-free,D Incorrect. All benefit payments under MJ=>Plaretax-free.

Page 45 of 50

Q2 B U1.1A It is under home reversion plans that ownership is transferred, not lifetime mortgages.B Correct. Any income or capital-arising from home reversion plans or lifetime mortgages, including

home income plans, can affect state benefits, eg Pension Credit. .C Equity Release Council-compliant lifetime mortgages, including home income' plans, contains a

'no negative equity' guarantee.D AS.ownership is noltransferred under lifetime mortgages, inCluding home income plans, the

continuing owner, the planholder, will enjoy the right to increases in the property value.

Q1 AU1.1A . Correct. Although theoretically all equity release-mortgage could be used to buy a property this is

very unusual and many lenderstnaynotconsiderit.B This,is a very popular use of equity release.C This is a very popular use of equity'release.D This is a very popular use of equity release.

Q4 DU1.5A Asa second mortgage ranks behind the first charge as a priority against the property, it can be

registered without consent.B IUhe first mortgagee sells in possession, it will take what is owed to it and the balance will initially

be available to the holder of the second charge:.:C The rates of interest are not linked. As a second charge is a higher risk, it will normally carry a

higher interest rate.D Correct. As a second charge is a higher risk than a first charge, it will normally carrY a higher

interest rate.

Q3 B U1.2A Deeds of postponement relate to the priority of charges, not to the term of a mortgage .B If the original mortgage deed did not oblige the lender to make subsequent loans, and a ,second

charge has been established, the original lender may wish to set this aside. This is achieved by adeed of postponement.

C A second charge is made-by a further lender and the first charge will remain in place. No deed ofpostponement will be required.

D Deeds of postponement relate to the priority of charges, not to the original borrowers.

July 2014

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B U1.6There seems to be no reason for a requirement of any type of bridging finance here. No propertyis being purchased by the seller of the land.Open bridging finance applies when a.purchaser of a new property has yet to find a purchaser forthe existing property, but intends to proceed immediately.Closed bridging finance would apply where there is already a firm buyer for an existing property.There is no evidence that Mary is selling an existing property, so bridging does not appear to bean issue.

B U1.7Tacking relates to charges against a property where there are multiple loans. The way interest iscalculated is not relevant.Drawdown allows further tranches of money to be taken by the borrower, eliminating the need formultiple borrowing and priority of charges to which tacking relates.Early repayment charges relate to payments contracted with the borrower, to be made if a loan isrepaid early. Tacking relates to charges against a property where there are multiple loans.Fixed rates of interest are not relevant. The tacking is concerned with changed priorities wheremultiple loans are taken out.

C U2.1Even though the new rate is lower than the existing rate; Shaun will not benefit immediately as hehas had to pay £750 in costs. It will be 6 months before he will be better off.Shaun will save £150 a month on the new arrangement. After 5 months he will have recoupedthe £750 charge and will benefit from 6 months onwards.Shaun will save £150 a month on the new arrangement. After 5 months he will have recoupedthe £750 charge and will benefit from 6 months onwards.Shaun will save £150 a month on the new arrangement. After 5 months he will have recoupedthe £750 charge and will benefit from 6 months onwards.

D U2.2As circumstances are always fluid, there would be no reason for the lender's checks to be anyless stringent.The existence of life policies is independent of mortgage arrangements, even if used inconjunction with them.The higher lending charge (mortgage indemnity guarantee single payment) is not refundable.Moving home is an expensive exercise, including costs for solicitors, surveys and othermortgage-related costs.

A U2.3Whilst lenders often impose charges when borrowers switch from their existing deal, it is stilllikely to be cheaper than going through the full purchase process and costs with a new lender.Lenders often impose charges when borrowers switch from their existing deal, such asarrangement fees, early redemption charges and a valuation fee.As they are staying with their existing lender, Harry and Rebecca would not be expected to pay afurther higher lending charge.As there is no change of lender, any charge imposed by the lender would not relate to additionalconveyancing costs.

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B U2.4If a joint borrower wishes to be released from a mortgage contract, the lender has the right to thefinal say as to whether this is acceptable or not.The lender's primary interest is that the mortgage continues to be serviced. If the lender hasdoubts about the remaining borrower achieving this, then the request for release is likely to berefused.Whilst this mayor may not be a solution for the borrower, the lender's interest relates primarily toensuring that the existing mortgage is properly serviced.The lender is guided by the financial realities and is not obliged legally to await the decreeabsolute.

..B

C

D

C U2.6A 'clog on the equity of redemption' does not relate to default by the borrower and the lender'sattempt to force repayment. It is a legal term used by a court if it considers that a condition hasbeen imposed by the lender to prevent or discourage the borrower from paying back a loan. Thiscan often relate to redemption penalties.A 'clog on the equity of redemption' is not where a borrower refuses a request from the lender torepay the mortgage. It is a legal term used by a court if it considers that a condition has beenimposed by the lender to prevent or discourage the borrower from paying back a loan. This canoften relate to redemption penalties.A 'clog on the equity of redemption' is a legal term used by a court if it considers that a conditionhas been imposed by the lender to prevent or discourage the borrower from paying back a loan.This can often relate to redemption penalties.A 'clog on the equity of redemption' is a legal term used by a court if it considers that a conditionhas been imposed by the lender to prevent or discourage the borrower from paying back a loan.This can often relate to redemption penalties. Delays in providing a redemption statement mayhave the effect of discouraging a borrower from paying back the loan, but it does not constitute a'clog on the equity of redemption' because it is not a mortgage condition.

Q12 D U2.6A Where a partial repayment represents part of a special deal mortgage, a proportional penalty

may apply.B On a partial repayment, the monthly payment can be maintained, with the mortgage term

shortened.C On a partial repayment, the monthly payment can be reduced, with the mortgage ending on the

original contract date.D Lenders can, and do, commonly set down a minimum amount that can be accepted as a partial

repayment.

Q13A

B

CD

B U3.1Repayment of credit card debts is likely to be positive for her personal credit rating as long as shemaintains mortgage payments.Whilst credit card interest is high, the mortgage will last much longer, probably meaning that,overall, more interest will be paid.There is no reason for the lender to impose punitive interest rates on debt consolidation.A remortgage would not be regulated under consumer credit legislation, it would fall under theFSMA 2000.


014A

B

C

D

015A

B

C

D

016A

BCD

017A

B

C

D

018A

B

C

D


A U3.2Correct. As the second. debt has i,ncreased the mortgage, this will increase payments and therebypotentially increase the chance of the borrower defaulting and of repossession occurring.The borrowing risk arguably increases because the chances of defaylting exist with subsequentrepossession a possibility.The interest rate effectively reflects the lender's risk. Borrowing to consolidate, in itself, is not aparticular risk and will not necessarily result in a higher rate. The lender, however, will not lend ifthe risk is disproportionate.A higher lending charge is a function ofthe loan-to-value percentage. Debt consolidation willincrease the amount to be borrowed, which could therefore lead to such a charge being required.

A U3.3Consolidating debts into a mortgage increases the capital outstanding within the mortgage. Ifhouse prices should fall, a negative equity situation can be triggered more quickly if the loan-to-value ratio has been increased.Because unsecured debts are by their nature riskier to the lender than secured debts, they willcarry a higher interest rate .•Neither unsecured debts nor repayment mortgages are linked to repayment by use of aninvestment vehicle.Consolidating unsecured debts within a second mortgage can increase the risk of subsequentdefault if payments are increased and cannot be met. Default can lead to repossession.

B U6.1SMI claims may be accepted on further advances to carry out necessary improvements to theproperty.Correct. SMI is not payable on loans that have consolidated unmanageable debt. -SMI claims may be accepted on further advances to carry out necessary repairs to the property.SMI claims may be accepted on further advances to buy an ex-partner's share in the home onseparation.

B U4.2An early repayment charge could, not will, be charged depending on the terms of the originalmortgage contract.Correct. The low-cost endowment mortgage will have built-in life cover and usually a guaranteethat the mortgage will be repaid on death. If the policy is surrendered, this life cover will becancelled, and need to be replaced.The terms of the replacement mortgage are subject to agreement between the lender and theborrower. There is no necessity to extend the term.The main advantage of a repayment mortgage is that provided payments are made when due,the scheduled last payment will repay the last element of outstanding capital.

C U4.2Joanne will only be entitled to any surplus over the forced sale price after all other costs,expenses, other secured loans and arrears have been cleared.Once the possession order is granted, repayment of arrears is not legally sufficient. All themortgage account must be cleared.Even after the date that possession has been granted to the lender, Joanne can still return to thelender to settle the mortgage account right up until the disposal of the property.The lender has no obligation to cover Joanne's loan from the sale but is obliged to seek the bestprice.

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)4•

1


1.

019A

B

C

D


o U4.1Under MCOB rule 13.7, the lender must write to the borrower within 15 business days ofbecoming aware that the account is in arrears, which is Wednesday 24 July, not Monday 8 July.Under MCOB rule 13.7, the lender must write to the borrower within 15 business days ofbecoming aware that the account is in arrears, which is Wednesday 24 July, not Wednesday 10July.Under MCOB rule 13.7, the lender must write to the borrower within 15 business days ofbecoming aware that the account is in arrears, which is Wednesday 24 July, not Monday 15 July.Under MCOB rule 13.7, the lender must write to the borrower within 15 business days ofbecoming aware that the account is in arrears, which is Wednesday 24 July.

020 B U4.3A Under MCOB 13, the lender must keep records of its dealings with borrowers who are in arrears

or have a shortfall debt. The record must be retained for three years from the date of thedealings.

B Under MCOB 13, the lender must keep records of its dealings with borrowers who are in arrearsor have a shortfall debt. The record must be retained for three years from the date of thedealings.

C Under MCOB 13, the lender must keep records of its dealings with borrowers who are in arrearsor have a shortfall debt. The record must be retained for three years from the date of thedealings, not five years, although many lenders keep records beyond the minimum period.

D Under MCOB 13, the lender must keep records of its dealings with borrowers who are in arrearsor have a shortfall debt. The record must be retained for three years from the date of thedealings, not five years, although many lenders keep records beyond the minimum period.

•

021AB

C

D

A U5.1Advice given by Citizens Advice is free.Advice given by Citizens Advice is free: there is no nominal charge. It is a free service to thosewho need help with various matters, not just financial, and who may not be able to afford theservices of a solicitor.Advice given by Citizens Advice is free: there is no charge. It is a free service to those who needhelp with various matters, not just financial, and who may not be able to afford the services of asolicitor.Advice given by Citizens Advice is free: there is no charge. It is a free service to those who needhelp with various matters, not just financial, and who may not be able to afford the services of asolicitor.

022 C U5.2A The borrower is the party who can potentially be sued if the rights of subrogation are used.B The endowment provider's only role is the provision of the investment vehicle. It is not a party to

the mortgage contract or any fall-out from it.C Correct. The insurance company underwriting a mortgage indemnity guarantee policy (MIG) can

sue the former borrower for the amount that has been paid to the lender under its right ofsubrogation.

D The insurance company underwriting a mortgage indemnity guarantee policy (MIG) can sue theformer borrower for the amount that has been paid to the lender under its right of subrogation.


July 2014

Q23A

B

C

D

Q24A

B

C

D

Q25A

B

C

D


B U5.3In England and Wales there are five legal remedies that a lender can take against a borrower indefault. Foreclosure is one of these but is not used as it is considered unfair to the borrower. Theappointment of a receiver is another of these five remedies and is used today.Correct. In England.and Wales there are five legal remedies that a lender can take against aborrower in default. Foreclosure is one of these but is not used as it is considered unfair to theborrower.In England and Wales there are five legal remedies that a lender can take against a borrower indefault. The exercise of the power of sale is one of these five remedies and is used today.In England and Wales there are five legal remedies that a lender can take against a borrower indefault. To sue on the borrower's personal covenant for recovery of the debt is one of these fiveremedies and is used today.

B U5.3A county court can grant an outright possession order enabling the lender to take possession,normally within 28 days. To expect a borrower to be able to vacate the property, and arrangealternative accommodation, within 14 days would be considered unreasonable.A county court can grant an outright possession order enabling the lender to take possession,normally within 28 days.A county court can grant an outright possession order enabling the lender to take possession,normally within 28 days, not 'one month' (which could be ambiguous).A county court can grant an outright possession order enabling the lender to take possession,normally within 28 days, notthree months.

AU6.1Correct. A combination of mortgage interest 'run-on' and '52 linking' rules means that he willreceive SMI for four weeks after starting work and will not have to serve a further SMI waitingperiod when his work contract ends.A combination of mortgage interest 'run~on' and '52 linking' rules means that he will receive SMIfor four weeks after starting work and will not have to serve a further SMI waiting period when hiswork contract ends.A combination of mortgage interest 'run-on' and '52 linking' rules means that he will receive SMIfor four weeks after starting work and will not have to serve a further SMI waiting period when hiswork contract ends.A combination of mortgage interest 'run-on' and '52 linking' rules means that he will receive SMIfor four weeks after starting work and will not have to serve a further SMI waiting period when hiswork contract ends.

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