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Repayment Vehicles, Rates and Schemes

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Phoebus Support

on 15 May 2018

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Transcript of Repayment Vehicles, Rates and Schemes

Repayment Vehicles
Mortgage Rate and Schemes

Mortgage
Rates

Standard Variable Rates (SVR).
Discounted Rate.
Fixed Rate.
Base Rate Tracker.
Capped Rate and Collared Rate.
Endowment Polices
An endowment policy is where you can make regular monthly payments each month in addition to your monthly payments on your interest only mortgage.

The plan is that by the end of the mortgage term, the endowment will be equal to the mortgage balance.

All endowments have built in life insurance, so if the policy holder dies during the term, the full mortgage balance will be paid off.

Capital Repayment Mortgage
Each month the borrower pays an specified amount which has an element of
interest and capital.

This will reduce the loan balance, decreasing all of the time.

In the early years, the biggest element of the instalment is
interest
with this imbalance being reversed over time.

If all monthly payments are made the loan will be repaid in full at the end of the term.

Standard Variable Rate (SVR)
This rate of interest is set by each individual lender as their standard product.
This rate will vary from lender to lender.
The rate is a variable rate of interest so that when rates go up the SVR will tend to go up also.
Interest Only
Mortgages with a Repayment Vehicle
The borrower pays
only the interest due
each month.
No capital is repaid
at all
during the term.

The repayment of the capital is dealt with by capital repayment vehicle, such as an endowment.

Under the rules that have come into force under the Mortgage Market Review (MMR) an interest only mortgage, can now only be taken if the lender is satisfied that there is a ‘credible’ repayment strategy.
Repayment
Vehicles

Discounted Rate
The discounted rate is a discount off the SVR rate for a specific period of time. For example: 2% off SVR for 3 years.

It is a variable rate so if interest rates rise or fall the rate will change, however will always be better than the SVR rate.

After the discounted rate ends the rate will revert to SVR which will always be an increase in rate.


Fixed Rate
The rate the borrower is offered is fixed for a period of time.

The rate will not be affected if interest rates rise or fall during your fixed rate period.

When the fixed rate period has ended, your rate will revert to the SVR which might be higher or lower.
Base Rate Tracker
This interest rate is variable and is line with the Bank of England Base Rate who announces any changes in interest monthly.

Example: BoEBR + 0.50%. Which means: Base Rate plus 0.50% for the period stated.
Capped Rate and Collared Rate
Capped Rate:

An interest rate that is allowed to fluctuate, but cannot go above a stated interest cap.

For example, a 10-year loan may be issued to a borrower at 6%, but with a capped rate of 9%. The interest rate can fluctuate up and down, but can never go higher than the 9% capped rate.

Collared Rate:

The same rules apply that the interest rate is allowed to decrease, however a collared rate is also put into place, whereby the rate charged cannot go lower than.

For example, a 10-year loan may be issued to a borrower at 6%, but with a collared rate of 3%. The interest rate can go down, but can never go lower than the 3% collared rate.

Current Account Mortgage
A variation of the flexible mortgage, whereby the borrower can:

Carry out all of their personal and financial transactions, within the one account.

Combination of salary credits and daily interest considerably reduces the amount of interest payable and the term of the mortgage.
Offset Mortgage
The borrower will have to have a savings account with the same lender. This enables the interest payable on the savings account to be offset against the mortgage interest that is charged.

For example: If the borrower has a mortgage for £100,000 and has £25,000 in a savings account, they can opt to wave the interest in the savings account enabling interest to be charged on a net loan of £75,000.
Low Start Mortgage
Keeps the costs low during the early years of the mortgage, by offering the repayment of any capital.

For example: If the borrower has a 25 year repayment mortgage with a 5 year deferred capital period, the borrower will just be paying the interest for the first 5 years. Then the capital will be paid for the remaining 20 years.



Phoebus Products & Modules
Assessment
Congratulations on completing this module.

Please can you now kindly complete this multiple choice assessment, to check your knowledge and understanding.

Your results will be automatically sent to the PSL Training department, where we will assess and then discuss your results with you.

Your results can then form part of your evidence in your monthly reviews with your manager.

Any problems please do not hesitate to contact the PSL Training department. Good Luck...
Repayment Vehicles
Mortgage Rates
Mortgage Schemes
Phoebus Products & Modules
Assessment

Mortgage
Schemes

Unsecured Loans
Second Mortgage
Equity Release Loan
Bridging Loan
Development Finance Loan
Commercial Loan
Secured First Mortgage
Asset Finance
Pension Deficits
System Experts:
SAP: Rubix: Chris Frost. Virtus: Manni Basi. Earth: Daniel Foxhall.
Ares: Sameer Khan.
BA: Jane/Rachel/Tej.

(For info on the team responsible for each client- View the confluence space for: Client health checks)
Finance Module
Deposits
Web Module
Unsecured KFI (Key Facts Illustration) creation via our web portal. This is a legal document that starts the loan process. Our web portal allows brokers to create them. They then get imported into Phoebus.
Clients: Masthaven/Pure/M2L/Saffron/L&G.
PDI - Phoebus Deposit Interface: Web service that receives external deposit applications and imports into P4. CCB/Hampshire Trust.
System Experts:
Team - Virtus - SAP: Manni Basi
BA: Jane/Rachel/Tej.

System Experts:
Team - Earth - SAP: Daniel Foxhall
BA: Jane/Rachel/Tej.

System Experts:
SAP: Ares: Martin Webster - Web and Automated testing tool (Jemmy)
Ares - SAP: Sameer Khan. BA:Jane/Rachel/Tej.

System Experts:
Team - Virtus - SAP: Manni Basi
BA: Jane/Rachel.
System Experts:
Team - Virtus - SAP: Manni Basi
BA: Rachel/Tej.
System Experts:
SAP - Virtus: Manni Basi. Ares: Sameer Khan
BA: Jane.
System Experts:
SAP: Virtus: Manni Basi. Earth: Daniel Foxhall. Ares:SAP: Sameer Khan.
BA: Jane/Rachel.
System Experts:
SME: Keith Rogers
BA: Jane/Tej.
Shared Ownership
Servicing Module
The full range of Product solutions we offer to our clients.
Who in PSL has knowledge of each Product.
Recap and some new terminology on: Secured/Unsecured/Second Mortgage/Equity Release/Commercial/Development Finance/Asset Finance/Pension Deficits/Deposits/Bridging loan all mean.
Module Contents
The borrower can:

Overpay/Underpay and request payment holidays.
Request additional borrowing facilities up to agreed limit eg 80% Loan to value (LTV).
Interest is calculated on a daily basis.
Flexible Mortgages
For first mortgages and other secured lending providers, Phoebus fulfills all business requirements of front office origination's and back office servicing.

Web functionality: Transact business with KFI/ESIS/CCA documentation issued instantaneously. Case tracking and commission management is also catered for.

The borrower offers an asset such as the property as collateral for the loan, which then becomes a secured debt. In the event the borrower defaults on the loan the creditor takes possession of that asset.
Phoebus provides front office origination's and back office servicing for a number of niche unsecured lending providers:

Unsecured loans are monetary loans that are NOT secured against the borrower's assets.

Generally for short terms.

Interest rates are fixed and remains unchanged throughout the term.

Interest rates on unsecured loans are nearly always higher than for secured loans, because an unsecured lender's options for re-payment against the borrower in the event of default are severely limited.
Phoebus provides front office origination's and back office servicing for a number of Second Mortgage lending providers:

Borrower uses the property again as security for a loan to a new lender.

It is a secured loan, which means they use the borrowers home as security. If the property is sold the first lender has the first claim to the proceeds, passing and surplus onto the second lender.

People may take on a second mortgage loan for large expenditures, for example: Funds a child university fees/Purchase a new vehicle/Consolidating debt.
Using the same core modules that support Residential Mortgages. Phoebus provides a fully compliant Equity Release origination and serving solution with web capability.

Available to borrowers who have retired and/or over a certain age and have paid off their mortgage.

A type of loan where you can retain the use of your house or other object which has capital value, while also obtaining a lump sum or a steady stream of income, using the value of the house. The borrower is entitled to stay in their home for the rest of their lives.

No repayments are made during the lifetime of the borrower. The interest is rolled up and added to the capital borrowed which is paid when the borrower dies or goes into long term care

The lender will place a limit on the LTV – 25% to 55%. The younger the person applying the lower the LTV. This is because a person who takes it out at 60 will accrue more unpaid interest than an 80 year old as they are likely to live longer.
Phoebus provides a end to end mortgage origination and servicing solution for commercial loans with web capability.

A loan where the purpose of the loan has some commercial activity, for example: For business,shop,factory, often taken out by a company.

The proceeds from a commercial mortgage are typically used to acquire, refinance or redevelop a commercial property.

Phoebus provides an end to end mortgage origination and servicing solution for Development finance.

Borrowed funds to buy real estate, prepare it for construction, and erect buildings.
The loan balance is split into three tranches: Land/Development/Interest roll up with further sub account for sundry items. Each tranche is monitored against the facility applicable to that tranche.
Phobus manages Hire Purchase and Lease assets, collecting instalments, amortising upfront income and expenditure. Providing rental invoices, arrears and collections

Hire Purchase: Hire an asset over a fixed period of time, for a regular monthly installment. You will own the asset once the repayment period is over.

Lease: Allow the asset to be used for a fixed period of time in return for regular payments. You will not own the the asset at the end of the term.
Phoebus provides a solution to import and service the pension deficits accounts.

Some Employers have pension deficits i.e. their staff pension pot is not sufficient to cover all staff pensions.

These deficits needs to be repaid and can be repaid over a period of time.
Phoebus has a fully integrated General Ledger together with a Fixed Asset Register/Purchase Ledger and Sales Ledger.

Alternatively Phoebus can integrate with other General Ledgers. Phoebus always maintains a double entry accounting system in order to ensure financial integrity.

Treassury/Securitisation/Asset Management functionality of Phoebus can be used to monitor cost of funding at group and divisional level. Loans can be securitised with Phoebus providing cash allocation (Waterfall) & Reporting.

Majority of clients ask for this module. They can request for the module independently or together with any of the other products.

Selection of some of the Functions available:

Full and Partial Redemptions
Retentions
Deeds Management
Collections/Letters/Reports & Statements
Special servicing module: Litigation/Sale of Security/Recording shortfall.



Phoebus provides a end to end Deposit origination and servicing solution for with web capability.

Money placed into a banking institution for safekeeping. Bank deposits are made to deposit accounts.

The account holder has the right to withdraw/add funds to their account as long as they meet the rules within the terms and conditions of their policy.
Phoebus provides a end to end Bridging origination and servicing solution for with web capability.

As the term implies, these loans 'Bridge the Gap' between times when financing is needed.

This type of financing allows the borrower to meet current obligations by providing immediate cash flow.

Short term loans and predominantly first charge secured loans (max term tends to be 12 months), secured against one or more properties.
Phoebus provides a loan import and servicing solution.

Shared ownership schemes are to help those on low income to become home owners.

This type of mortgage is provided through local authority/ housing associations via the lender.
A borrower will buy a share, 25% for example in a property and pay rent on the remaining 75%.
The borrower then has the right to buy further shares of the property from the housing association until the entire property is owned. When the property is sold the equity is then split according to the proportion of ownership.
MI & Reporting
Phoebus holds data in a relational SQL database that allows it to be reported using either Phoebus report generator, SQL queries, data warehouse or any SQL report generator such as Crystal Reports.

Data is held in transactional format to allow historic reporting.

Phoebus maintains data for regulatory: CCA/FCA/DPA/MLAR/MCOB etc. The reports can the be reported from Phoebus or via another reporting package.

Letters & Workflow
Any event can trigger Phoebus to generate a letter or document. The letters can be view and be reported via the admin history area.

Workflow can manage any activity which requires a diarised future action which will logically lead on to another action.

For example: Prompt user action/Generate a letter if an account is in arrears/Run another Phoebus program/ Provide information to a third party system.
All of the following modules can be customised for our clients.
For example: Clients requesting to: Use a selection of screens within the module/ Amend/Add to the functionality within the existing screens OR Request new screens to be added.

Web Experts: Team Ares- Martin Webster & Ashley Tappin. Team Earth - Matthew Blackford. Team Virtus - Catalin Cretu. Team Rubix - Sanjay Hallan.

System Experts: Robert Lintonbon/Andrew Middleton
System Expert: Keith Rogers
Deferred Interest Mortgage
During the early years, some of the interest is capitalised (added to the loan balance) rather than being paid by the borrower

• This can be unattractive to both lender and borrower where the borrowing requirement is of a high LTV, for example, 90% since the lender’s security will be gradually erased as will the borrower’s equity. The result is an increased danger of negative equity.

• Attractive to those who need a high LTV (low deposit) but want to keep repayments low during the early years.

• Again, this may be appropriate for those currently on low earnings, but with realistic expectations of higher earnings by the end of the initial period, for example, a soon to be qualified professional.

CAT Standard Mortgages
CAT stands for: Charges/Access/Terms.

A CAT mortgage is one that abides by a number of standards defined by the government.

Charges:
Must be daily interest. No separate charge for a higher lending charge. All other fees disclosed as up-front cash. Intermediary such as brokers, cannot charge fees.

Arrangement fees:
No arrangement fee for a variable rate mortgage and a Maximum arrangement fee of £150 for a fixed or capped rate.

Interest rate
cannot be more than 2% more than the BoEBR on a variable rate mortgage.

The minimum amount of borrowing is no more than £10,0000 and there are no early repayment charges for over payments.
Lifetime Mortgages
Allows a person usually retired and over a certain age who own their home outright to mortgage their property.

• No repayments are made to the lender during the lifetime of the borrower

• The interest is ‘rolled up’ and added to the capital which is repaid after the death of the borrower when the property is sold

• The lender will place a limit on the LTV – 25% to 55%. The younger the person applying the lower the LTV. This is because a person who takes it out at 60 will accrue more unpaid interest than an 80 year old as they are likely to live longer.

• Due to the vulnerable nature of the people that this is aimed at, the main lenders in this area have formed the Equity Release Council for advice.
Home Reversion Schemes
The owner sells part or all of the equity to a lender in return for a lump sum.

• The lender will normally ask for a discount on the value of the property. If a homeowner was looking to sell 100% of the property to a provider and the property was worth £200,000, the planholder would receive less than £200,000 for selling that 100% equity stake.

• No mortgage is created here and therefore no interest is charged

• The lender will take life expectancy into consideration before deciding how much of a lump sum to award for what proportion of equity.

• The provider will have to wait until the death or second death before they can recover their capital when the property is sold.

Shared Ownership Mortgage
This combines rental with owner occupation to help those on low incomes to become owner-occupiers.

Involves borrowers, the lender and the local authority or housing association.

A borrower will buy a share, 25% for example in a property and pay rent on the remaining 75%.

The borrower also has the chance to buy further shares in the property from the housing association until the whole property is owned – ‘stair-casing’.

When the property is sold the equity is split according to the proportion of ownership that each party holds.

Second Mortgages/Secured Loans
Borrower uses the property again as security for a loan to a new lender. Would have to be sufficient equity in the property to make the lender comfortable. The first lender retains the mortgage deeds

If the property is sold the first lender has the first claim to the proceeds, passing any surplus onto the second lender.

As there is therefore a higher risk of the second lender not recovering their loan higher rates of interest are charged on second and subsequent mortgages.

As of March 2016 under the Mortgage Credit Directive, these second charges are now regulated under the Mortgage Conduct of Business rules (MCOB) as most other mortgages are.

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