Document to be published to Employees and ARs Project Manager

Transcription

1 Debt Consolidation Horizon Guidance AR Document Information Document Purpose Debt Consolidation Horizon Guidance Document Name Debt Consolidation Horizon Guidance Date of Adoption January 2017 Target Audience ARs Description Horizon System Process Guide for Debt Consolidation Mortgages Cross Reference Mortgage Advice and Debt Consolidation Policy AR Process Guide for Debt Consolidation Mortgages AR Debt Consolidation Guidance Q&A Debt Consolidation Non-Horizon Suitability Letter Text Debt Consolidation Calculators and Guidance Customer Debt Information Record Template Action Required Author Glossary Document to be published to Employees and ARs Project Manager AR EAD RoS Document Status Appointed Representative Estate Agency Division Record of Suitability This is a controlled document. Whilst this document may be printed, the electronic version posted on the Network website is the controlled copy. Any printed copies of this document are not controlled. As a controlled document, this document should not be saved onto local or network drives but should always be accessed from the Policy folder within the P drive. 1

2 Fact Find Debt Consolidation Horizon Guidance Details of pre-existing debts need to be individually recorded within the Liabilities section of the Fact Find and record that the new mortgage borrowing is going to be used to repay or reduce the debts in the dropdown provided. After using the Debt Consolidation Calculator to establish the impact of consolidation for each debt and having agreed with the customer the appropriate course of action record the sum of the debts that will be consolidated in the new mortgage within theproduct Requirement. 2

3 Sourcing & Supporting Documentation Source and produce two Mortgage Illustrations for the recommended product, one with the debts consolidated and one without. Save these to Horizon using either the built in integration or attach document function. Using the Attach Document function upload a pdf of the completed output from thedebt Consolidation Calculatorto the appropriate mortgage quotation. Complete the usual steps to record a quotation as Recommended. 3

4 Record of Suitability letters Within the Horizon generated RoS letter template the following sections need to be edited in order to record discussions with and decisions made with regard to a debt consolidation mortgage transaction. Remortgage Debt Consolidation RoS Content Section headed Lender Notes for ARs: This section should be used to remind the customer of the discussion held as to why (1) they were looking to potentially consolidate pre-existing unsecured debts into their mortgage arrangements and (2) why it was not considered appropriate for the customer to take out a personal loan to achieve this aim. This section must be tailored to the actual circumstances of the customer and the issues the AR has discussed. Some common reasons for each of (1) and (2) above are suggested below, however these must only be incorporated into the text of the Suitability Letter if they are relevant to the customer s circumstances (which must be capable of verification from the information held within the Horizon fact-find) and have been discussed with the customer. 4

5 Possible reasons discussed with the customer: Section (1) above During our initial meeting you indicated that it is your intention to consolidate your existing liabilities onto your mortgage utilising the equity available in your property because You are concerned with the level of repayments on your pre-existing debts and require a solution to improve the degree of control that you have over your financial situation; and/or You wished to review the interest rates you are being charged on your pre-existing debt as the rates appear uncompetitive when compared to the interest rates on mortgages that may be available to you; and/or You were keen to explore whether there was a quicker or more cost effective way for you to repay your pre-existing debts; and/or Your financial situation and level of disposable income has been placed under material pressure due to [DETAIL WHY HERE] and you have an urgent need to reduce your outgoings and increase your monthly disposable income. Section (2) above We discussed alternative options such as taking out a personal loan over a shorter period of time therefore repaying these debts sooner, however after consideration you did not wish to pursue this course of action because The value of the debt you were seeking to consolidate was too large; and/or Due to your circumstances you were unlikely to be eligible for a personal loan or other credit agreement such as a 0% rated credit card which could have been used for this purpose; and/or You have previously attempted to ask your creditors to reduce the interest rate on your debts and/or extend the period of time over which the debt is to be repaid and this was unsuccessful; and/or Consolidating the debt into a personal loan prior to taking out a re-mortgage would have limited the amount and number of lenders willing to offer you terms for a re-mortgage and your priority was to ensure that you could re-mortgage to a lower rate of interest at the earliest opportunity. ARs will be subject to a file review grading of advice fail if the Suitability Letter issued to the customer simply contains these reasons without any attempt to personalise for the customer and/or where there is no clear linkage of these reasons to the circumstances of the customer contained in the Horizon fact-find or otherwise supplied to the Network during the course of the file review. 5

6 Section headed Debt Consolidation The standard text should be deleted in its entirety and replaced with the following to be amended and tailored to the circumstances of the customer. During the establishment of your needs and circumstances it was identified that you had some pre-existing unsecured debts. We discussed the advantages and disadvantages of consolidating each of these debts into your new mortgage and the additional costs that may arise by spreading the repayment of the debt over the mortgage term. I discussed each of these calculations with you. I have also provided you with two Mortgage Illustrations, one including your pre-existing unsecured debts being consolidated and one excluding. This will enable you to clearly see the overall cost in adding this amount to your mortgage. The result of this exercise is that I advised you to consolidate the following debts into your new mortgage: [list the debts to be consolidated here and detail the reasons why it is appropriate for the customer to consolidate] I have advised you that there is a risk involved in consolidating these outstanding debts as part of your mortgage. These debts are not currently secured on the property and failure to make these payments may therefore result in your property being repossessed. [Where the customer has payment difficulties] We discussed the possibility of negotiating an arrangement with your creditors and the outcome of that discussion was [insert details here]. On balance you seem comfortable to proceed because [reference back to the stated reasons discussed with the customer that have been inserted into the Lender section (see notes above) and why, taking into account all relevant factors, it is appropriate for the customer to take on the risks associated with the debt consolidation]. Overall, I therefore consider it appropriate for you to consolidate the debts I have indicated above. 6

7 Purchase Debt Consolidation RoS Content Section headed Other relevant information Immediately following the wording I advised you to confirm these costs before you proceed with my recommendation Notes for ARs: The text below must be inserted into the Suitability Letter when a customer is seeking to consolidate pre-existing unsecured debts into their mortgage arrangements when purchasing a new residential property. During the establishment of your needs and circumstances it was identified that you had some preexisting unsecured debts. During our initial meeting you indicated that it is your intention to consolidate your existing liabilities onto your mortgage utilising the equity available in your property because You are concerned with the level of repayments on your pre-existing debts and require a solution to improve the degree of control that you have over your financial situation; and/or You wished to review the interest rates you are being charged on your pre-existing debt as the rates appear uncompetitive when compared to the interest rates on mortgages that may be available to you; and/or You were keen to explore whether there was a quicker or more cost effective way for you to repay your pre-existing debts; and/or Your financial situation and level of disposable income has been placed under material pressure due to [DETAIL WHY HERE] and you have an urgent need to reduce your outgoings and increase your monthly disposable income. We discussed alternative options such as taking out a personal loan over a shorter period of time therefore repaying these debts sooner, however after consideration you did not wish to pursue this course of action because The value of the debt you were seeking to consolidate was too large; and/or Due to your circumstances you were unlikely to be eligible for a personal loan or other credit agreement such as a 0% rated credit card which could have been used for this purpose; and/or 7

8 You have previously attempted to ask your creditors to reduce the interest rate on your debts and/or extend the period of time over which the debt is to be repaid and this was unsuccessful; and/or Consolidating the debt into a personal loan prior to taking out a new mortgage would have limited the amount and number of lenders willing to offer you terms for a new mortgage and your priority was to ensure that you could secure a competitive rate of interest on your new mortgageby considering products available from as wide a selection of lenders as was possible. We discussed the advantages and disadvantages of consolidating each of your debts into your new mortgage and the additional costs that may give rise to by spreading the repayment of the debt over the mortgage term. I discussed these calculations with you. I have also provided you with two Mortgage Illustrations, one including your pre-existing unsecured debts being consolidated and one excluding. This will enable you to clearly see the overall cost in adding this amount to your mortgage. The result of this exercise is that I advised you to consolidate the following debts into your new mortgage: [list the debts to be consolidated here and detail the reasons why it is appropriate for the customer to consolidate] I have advised you that there is a risk involved in consolidating these outstanding debts as part of your mortgage. These debts are not currently secured on the property and failure to make these payments may therefore result in your property being repossessed. [Where the customer has payment difficulties] We discussed the possibility of negotiating an arrangement with your creditors and the outcome of that discussion was [insert details here]. On balance you seem comfortable to proceed because [reference back to the stated reasons discussed with the customer that have been inserted above and why, taking into account all relevant factors, it is appropriate for the customer to take on the risks associated with the debt consolidation]. Overall, I therefore consider it appropriate for you to consolidate the debts I have indicated above. ARs will be subject to a file review grading of advice fail if the Suitability Letter issued to the customer simply contains these reasons without any attempt to personalise for the customer and/or where there is no clear linkage of these reasons to the circumstances of the customer contained in the Horizon fact-find or otherwise supplied to the Network during the course of the file review. 8