Lending Manual February 2014

Transcription

1 Lending Manual February 2014 Main office: Magellan Homeloans Ashcombe House 5 The Crescent Leatherhead Surrey KT22 8DY Tel: Fax: Web: newbusiness@magellanhomeloans.co.uk

2 Lending Manual February 2014 Page 2 Contents Introduction... 4 Applications... 4 Our target customers... 4 Application Process Network (Intermediary)... 5 Application Process Directly Authorised Broker (Intermediary)... 5 A-Z Contents Guide... 6 Administration Orders... 6 Adverse credit... 6 ACE Register... 7 Advice... 7 Affordability calculator... 7 Applicants... 7 Arrears... 8 Assessment... 8 Bankruptcy... 9 Buildings Insurance... 9 Certified documents... 9 Commercial Premises Contact with applicant Contract Workers County Court Judgements (CCJs) Credit Searches Debt consolidation Debt Relief Orders Defaults Deposits Direct Debit Mandates Early Repayment Charges Ex-Council properties Fees Geographic Concentration Income all income must be verified Other acceptable forms of income are:... 13

3 Lending Manual February 2014 Page 3 Unacceptable forms of income are: Income and Expenditure review with the borrower(s) Interest Rates IVA Land Registry Searches Legal Title Life Assurance / Endowments Loan Purpose Loan Size New Build Properties Packaging Services Payment Protection Insurance Power of Attorney & Guarantors Proof of ID Proof of Residency Property References Repayment Method Repossessions Responsible Lending Solicitors Treating Customers Fairly (TCF) Term Undue Influence Unsecured Credit Valuations... 20

4 Lending Manual February 2014 Page 4 Introduction It is our policy that all of our customers must be advised by a mortgage broker that is either an appointed representative (a Network AR ) of a mortgage network (a Network ) on the firm s Distribution Register or is a directly authorised broker (a DA Broker ) on our Distribution Register (each of a Network and DA Broker an Intermediary ). We will pre-approve Intermediaries and any packagers to which a Network has delegated packaging services (a Network Approved Packager ) through a process following due diligence. Subject to passing due diligence, all Intermediaries and Network Approved Packagers must complete training about our product, target market and processes before being added to the firm s Distribution Register. All Intermediaries will be subject to periodic compliance reviews. This manual should be read in conjunction with the current Magellan Product Guide. This manual has been designed with the aim of assisting you in the preparation of applications to be submitted to Magellan. You will be aware that quality of case preparation can affect the turnaround time. It is vital that the manual is followed as this will ensure that Magellan considers the customer s ability to repay and has due regard to the customer s interests, thereby protecting the customer and the quality of the security. Applications On receipt of a fully completed application form with all relevant supporting documentation, our underwriters will review the application to ensure it fully complies with our lending policies. The application will then be processed and you will be advised of the references we have requested and what additional information, if any, will be required before a formal offer can be produced. Magellan will require the following documents: Fully completed application form including confirmation of identity of the client(s) and proof of residency Valuation report Magellan to instruct in every instance. The valuation report will be valid for a period of 4 months from the date of the inspection Latest P60 within last 3 months/last 3 months consecutive payslips (printed by a pay bureau) SA302 s/audited accounts Latest 3 months bank statements Signed Direct Debit and Declaration form Original Certified Copies, in black and white, can be accepted for the following documents: Identity documents certified to be a true copy and likeness by packager / intermediary. References Magellan to instruct in every instance(see Reference section) Our target customers Our customers are defined as those that have experienced life events which appear on the ACE Register that have led to an evidenced adverse credit history, but from which they have demonstrably recovered. Evidence of an adverse credit history means that the adverse credit event must show up on CAIS or on another recognised credit reference agency system or the Individual Insolvency Register or the Register of Judgements, Orders and fines. Evidence of an adverse credit history means one or more of the following: Evidence of a default Evidence of one or more missed mortgage payments

5 Lending Manual February 2014 Page 5 Evidence of one or more CCJs Evidence of bankruptcy Evidence of IVA Evidence of a debt management plan Evidence of a debt relief order We are not looking to lend to customers that have a history of on-going financial mismanagement, overspending or systematic abuse of credit. We are looking to lend to: Customers that have had a one off credit event, over 12 months ago, that now excludes them from obtaining mainstream finance Customers that have had a clean credit history for the last 12 months Magellan will check this by obtaining a full CAIS credit search on each applicant Customers that are able to provide a plausible explanation as to the cause of the adverse credit event, and provide documentary evidence, where applicable, to support it Customers that are able to provide documentary evidence to support the adverse credit registered against them Customers that are able to provide a plausible explanation confirming that their adverse credit history is behind them and that there is no foreseeable reason why it should re-occur Customers that can prove that the product chosen is affordable to them on a capital & repayment basis Customers that cannot access cheaper sources of finance from other mortgage providers The intermediary is to sanity check the information and supporting documentation provided to support the application form in this respect. Application Process Network (Intermediary) The application process from initial Intermediary meeting with customer through to mortgage offer: Intermediary completes customer fact find and ascertains customer s requirements Intermediary advises the most suitable product to the customer and if Magellan is the best option, runs online affordability calculator and submits DIP to Magellan via a Network approved packager CAIS search requested by Magellan Magellan approves/declines DIP Network approved packager collates remaining documentary requirements and full application form submitted for underwriting by Magellan after receipt of satisfactory replies to references and valuation report Magellan makes pre-offer customer call appropriateness checks and confirmations Offer approved or declined, or additional information requested by Magellan if applicable Offer sent to solicitor, applicant, Intermediary and copied to the Network approved panel packager for information only Application Process Directly Authorised Broker (Intermediary) The application process from initial Intermediary meeting with customer through to mortgage offer: Intermediary completes customer fact find and ascertains customer(s) requirements Intermediary researches the market for a suitable product

6 Lending Manual February 2014 Page 6 Intermediary advises the most suitable product to the customer and if Magellan is the best option, runs affordability calculator and submits DIP to Magellan CAIS search requested by Magellan Magellan approves/declines DIP and advises the Intermediary Intermediary collates remaining documentary requirements and submits a full application form for underwriting by Magellan after receipt of satisfactory replies to references and a valuation report Magellan makes pre-offer customer call appropriateness checks and confirmations Offer approved or declined, or additional information requested by Magellan if applicable Offer sent to solicitor, applicant and Intermediary A-Z Contents Guide Administration Orders This is an order made in a county court to arrange and administer the payment of debts by an individual. The basis of this arrangement is to try to avert the bankruptcy of debtors who owe (in the court s opinion) a small amount. Applicants who have an Administration Order registered against them are normally unacceptable to Magellan. Refer to Magellan Underwriters if the Administration Order was cleared or satisfied more than one year ago. Adverse credit Magellan mortgage products are designed for, inter alia, applicants that have experienced one off credit events. Magellan is not looking or expecting to lend to customers that have a history of ongoing financial mismanagement, overspending or systematic abuse of credit. Magellan requires that the applicant(s) demonstrate that the event(s) causing any adverse credit is/are historic, and that the Magellan mortgage loan is affordable. Magellan will not accept applications from customers who over the prior 12 months: have defaulted on any credit payment have a CCJ awarded against them have missed a mortgage payment have failed to maintain a satisfactory IVA have been discharged from bankruptcy have been the subject of a mortgage repossession have exhibited any dependency on short term credit including pay day loans The supporting evidence required to substantiate the historic and non continuing nature of any adverse credit will vary and be specific to each applicant. Examples of life events that Magellan is likely to accept are as follows.

7 Lending Manual February 2014 Page 7 ACE Register Life event Pregnancy Maternity leave Divorce Separation Serious illness or accident Stabilised reduction in income Unemployment or redundancy Death of close family member Serious illness or accident of close family member Business interruption caused by counterparty failure or default Business failure Errors or system failures of the banking system Victim of stolen identity or fraud by a third party Example of acceptable evidence Birth certificate or hospital note Birth certificate Decree, solicitor s letter Evidence of change from joint to sole addresses Hospital or doctors note Pay slips or accounts showing reduction P45, redundancy notice Death certificate Hospital or doctors note Insolvency practitioners report, insolvency notice, proof of counterparty failure or default (insolvency/administration notice, claim for costs/damages awarded) Insolvency practitioners report, insolvency notice Bank letter Solicitor s letter, bank letter Every applicant with an adverse credit history will be required to document and evidence the reason behind the credit adversity and that it is no longer continuing. The declared cause of the adverse credit will be aligned with the actual adverse credit history evidenced by the credit search. Advice All applicants must have received independent financial advice on their mortgage application from an FSA authorised intermediary Affordability calculator This enables you to calculate the amount your client can afford to borrow and is situated on our website Magellan will not lend on the basis that the total debt to income ratio is greater than 35% of household net income Applicants Maximum number of applicants is two Employer Related or Employer Connection: Employees or a family member will be acceptable subject to the following: Evidence of income will be required.

8 Lending Manual February 2014 Page 8 The external Company Accountant will be required to validate the level of income in writing. Where it is identified that an applicant is employed by one of the following, the accountant acting for the employing company will be required to validate the level of income by way of accountant s certificate; A relation One of the joint borrowers The selling agent The vendor Unacceptable applicants: Persons under 25 years of age Applicants who cannot prove 12 months residence in the UK Persons who have diplomatic immunity Current bankrupts and individuals discharged from bankruptcy less than 1 year ago IVA/ Administration Order pending or registered applicant(s) Non-UK taxpayers Persons convicted of fraud Applicants who cannot display a willingness and ability to repay Applicants who do not have indefinite rights to live and work in the UK Applicant(s) over the age of 75 at the end of the mortgage term Applicants with pending repossession/ litigation Applicants who have been in receipt of Housing Benefits in the last 12 months Applicants who do not have a UK bank account that will accept a direct debit mandate Single name applications from married persons for residential mortgages (unless there is a Transfer of Equity or Equity Buyout taking place as part of the mortgage transaction) More than two applicants Applicants seeking to refinance a bridging loan Magellan reserves the right to refuse to offer mortgage terms to any applicant that they deem to be unsuitable. Arrears All mortgage arrears noted by the borrower on the application form or evidenced by a credit reference agency search/lenders reference, satisfied or not, must be considered. A written explanation for the mortgage arrears together with supporting evidence as above from the applicant(s) will be required Arrears (defined for avoidance of doubt) a contractual monthly payment is counted as a missed payment if the payment due was not made within the month in which it was due i.e. for a payment due 10th January, if no payment is made during the month of January then it is counted as one missed Assessment Magellan s team of experienced Underwriters will use a variety of information available to them when assessing a new mortgage application. This will include: Information from a credit reference agency

9 Lending Manual February 2014 Page 9 ID check and bank account validation Details contained within the mortgage application Explanations of previous credit problems provided by the client Latest 3 months bank statements Valuation report Affordability assessed through Magellan s Income/Expenditure checker (Affordability Calculator) Other references Bankruptcy Applications from undischarged bankrupts will not be considered Applications from discharged bankrupts may be considered after 12 months Discharged bankrupts will be considered subject to a Certificate of Discharge A written explanation for bankruptcy together with supporting evidence as above from the applicant(s) will be required LTV restrictions may apply to applicants who have experienced bankruptcy, please refer to product guide Buildings Insurance Buildings Insurance cover must be in place at completion. The sum insured must be no less than the reinstatement figure supplied by the valuer. All cases must have a minimum of 1 month insurance cover remaining at the completion date. We do not accept temporary cover or cover subject to. In cases where the valuer has confirmed a loading to the buildings insurance premium, we will require a minimum of 6 months insurance cover remaining at the date of completion. We will also require confirmation from the insurer that they have seen sight of the valuation report and the cover is available on normal terms and conditions, and a statement of account in respect of ground rent and service charges paid. Where Magellan does not have sufficient evidence of buildings insurance at any point post completion, it reserves the right to place the property on its own buildings insurance policy and charge the customer accordingly. Certified documents Original Certified Copies, can be accepted for the following documents: Identity documents certified to be a true copy and likeness by packager / intermediary. Please note that the person certifying any documentation must include the following signature, printed name, company name, date and statement confirming it is a true copy of the original document. If it is not stamped with the above it will not be acceptable.

10 Lending Manual February 2014 Page 10 Commercial Premises Properties above or adjacent to what are deemed as adverse commercial premises will not be considered Contact with applicant All applicants will be required to note daytime, evening and mobile telephone numbers on the application form. Magellan reserves the right to establish contact with the borrower(s) on one of the numbers provided as part of the income/expenditure review should the underwriter deem it necessary. The applicant will also undergo a pre-offer telephone call to verify certain details of the application before a formal offer is made. Contract Workers We will consider applicants who are employed on a contract basis subject to the following: A minimum contract term of six months A minimum of 50% of the contract term remaining A minimum 12 months in continuous employment in contracting roles Experience within the relevant industry County Court Judgements (CCJs) All CCJs, satisfied or not, should be noted on the application form.. A borrower promise that a CCJ will be satisfied post completion will not be accepted unless the creditor is settled as part of the debt consolidation. A written explanation for each CCJ together with supporting evidence as above from the applicant(s) will be required Applicants who have had more than 5 CCJs awarded against them will not be considered Applicants with CCJs registered in the last 12 months will not be considered Credit Searches For all applicants, a full credit reference agency search will be obtained from a Credit Reference Agency. The CRA search will remain valid for a period of 4 months after which a new search may be carried out and any new information arising taken into account Magellan Homeloans will apply for a full CAIS search on the applicant(s) full name(s) which will cover: Voters Roll - It is expected that all parties eligible to vote will be registered on the electoral roll at the current listed address. If this is not the case 1 item of satisfactory proof of residency, dated within 3 months of the date of the application, will be required. An explanation will be required if the applicants are not registered on the voters roll Associations & Aliases Public Information (CCJs/bankruptcy etc.) Previous Searches Company Director flag Linked addresses

11 Lending Manual February 2014 Page 11 An explanation should be provided for any person showing on the voters roll who will not be party to the mortgage. The requirement for credit searches where an applicant has existing investment properties up to 10 properties search on all properties 20% (minimum 10 required) 50+ properties 20% of the portfolio Debt consolidation In cases of debt consolidation it must be confirmed by the introducing broker that the total cost of debt service will reduce after the loan is advanced. Where the total cost of debt service does not reduce after the loan is advanced, the broker confirmation that the loan is suitable to the borrower s circumstances must specifically address this issue. Where funds raised are to be used for consolidating existing debts, Magellan will settle amounts directly with the finance company(ies) Debt consolidation is not available where the applicant has been subject to a Bankruptcy order or an IVA. Debt Relief Orders Applications from applicants the subject of a Debt Relief Order(DRO) which is or was in force within the last 12 months will not be considered A written explanation for the DRO together with supporting evidence from the applicant(s) will be required LTV and criteria restrictions may apply to applicants who have experienced a DRO, please refer to the product guide Defaults Applicants with any defaults in the last 12 months will not be considered All defaults noted by the borrower on the application form or evidenced by a credit search/lenders reference that have been incurred, satisfied or not, must be considered Deposits Proof of deposit will not normally be required, unless otherwise indicated. Vendor gifted or builder gifted deposits are not permitted. Direct Debit Mandates Loans will only be made to individuals who have a private UK Bank or Building Society account with Direct Debit payment facilities. Direct Debits submitted in the name of non-applicants or limited companies are not acceptable. A fully completed Direct Debit Mandate is required in all cases without exception. In the case of joint borrower(s) either applicant may nominate a personal UK Bank or Building Society which accepts a Direct Debit payment facility. At least one of the borrower s must be party to the Bank Account.

12 Lending Manual February 2014 Page 12 Amendments to the details on a mandate form are not acceptable under banking rules. Therefore a new mandate will always be requested where any such amendments are evident. Early Repayment Charges Please refer to the Product Guide. Ex-Council properties Outside pre-emption: Acceptable under normal terms for houses Within pre-emption: Not acceptable Ex local authority flats - not acceptable Fees Refer to Product Guide and website Geographic Concentration Magellan will not accept an exposure, by way of advances, on more than 10% in any one development/postcode (first part of the postcode plus the first digit of the second part)subject to a maximum of 5 units. For all new build developments, Magellan will obtain details of the development including number of units from the valuer in order to ascertain the true exposure. Income all income must be verified Minimum income per application, single or joint is 25,000 In making the assessment of the application and considering all known facts, the underwriter must be satisfied that the applicant(s) is willing and has the ability to repay the mortgage In instances where Magellan is concerned about the authenticity of evidential documentation, it may use the HMRC Mortgage Verification Scheme to corroborate declared income Retired applicants must disclose the source of all of their income upon which Magellan is to rely in assessing affordability Proof of Income employed Evidence may take the form of Last 3 months consecutive payslips or P60 within last 3 months printed by a pay bureau Latest 3 months personal bank statements in every instance Employers reference in every instance Proof of Income self employed

13 Lending Manual February 2014 Page 13 Income for the self employed will be considered as their proportion of the company/firm net profit for the last 12 month period plus any income or distribution deducted in favour of the applicant in arriving at net profit Accountant s Certificate confirming the amount of income taken for a minimum of 12 months (no bookkeepers) The latest 3 months business bank statements. Other eligible forms of income proof: Original annual accounts not more than 12 months old Original annual HMRC tax return not more than 4 months old The accountant providing an Accountants Certificate must hold one of the following qualifications: Institute of Chartered Accountants (ACA/FCA) Chartered Association of Certified Accountants (ACCA/FCMA) Chartered Institute of Management Accountants (ACCMA/FCMA) Chartered Institute of Public Finance Accountants (CIPFA) Associate of Chartered Management Accountants (ACMA) Association of Accounting Technicians: MAA/MAAT/FMAA/AAT Association of International Accountants (AIA) Magellan will check the registers of the relevant professional body to confirm qualification and that the individual has a licence to practice. Other acceptable forms of income are: Pension income, maintenance with more than 5 years left to run, long term state benefits, rental income, dividend income, investment income documentary evidence required in all instances Unacceptable forms of income are: DWP payments including Job Seekers Allowance and Support for Mortgage Interest, Housing benefit, unemployment benefit, Income support, Travel and car subsistence allowance or expenses and unverifiable income. Income and Expenditure review with the borrower(s) Magellan reserve the right to contact the borrower(s) to discuss the income and expenditure details completed in the application form. Where there is evidence of historic credit impairment the borrower(s) responses in the review discussion must support the original reasons given for that credit impairment, and as a consequence further documentary evidence may be requested. A properly completed Income and Expenditure form is required before Magellan Homeloans can assess an application Interest Rates Interest is charged based upon the prevailing 3 month LIBOR rate plus the loading for the product (see Product Guide).

14 Lending Manual February 2014 Page 14 IVA Applicants subject to a current IVA will need to provide a letter from the IVA administrator confirming that the IVA is performing satisfactorily (a minimum of 12 months) Applicants subject to a completed IVA will need to provide a letter confirming completion from the IVA administrator A written explanation for the IVA together with supporting documentation as above from the applicant(s) will be required LTV and criteria restrictions may apply to applicants who have experienced an IVA, please refer to the product guide Land Registry Searches Additional searches of Land Registry information may be obtained by Magellan where the Underwriter requires verification of the ownership of properties given as current/previous addresses by the applicant(s). Legal Title The title to the relevant property must be good and marketable, and free from onerous restrictions and conditions. Magellan s security must be a first legal mortgage in England & Wales over the property. All borrowers must be legal owners of the property and similarly all legal owners must be joint borrowers and party to the mortgage. Life Assurance / Endowments Magellan does not require life assurance as a condition of mortgage, nor does it require assignment of existing life / endowment policies. However, Magellan expects an intermediary to consider their customers needs upon entering into a mortgage agreement and to explain to joint borrowers their responsibilities in the event of the death of one borrower. Loan Purpose Magellan will lend for purchase and re-mortgage for any legal purpose on a first charge owner occupied basis only, except for the following: We will not consider loans for bridging finance We will not consider capital raising for investments of financial speculation or capital injection into a new business We will not consider loans for the supply of goods and services (also known as Debtor, Creditor Supplier (DCS) arrangement) We will not consider capital raising for repayment of a debt incurred as a result of bankruptcy, if the applicant is still not discharged We will not consider loans that will be used to purchase a Timeshare We will not consider loans that will be used to pay a tax bill or settle an HMRC demand We will not consider loans on properties that were purchased with a mortgage or re-mortgaged less than 6 months ago

15 Lending Manual February 2014 Page 15 The purpose of the loan must be clearly stated on the Application Form. Magellan will allow re-mortgages with a capital raise for purposes of debt consolidation, and it will be a condition of the mortgage offer that Magellan settles the debts from the completion monies directly. Where the stated purpose is for home improvements please provide detailed information as to intended works e.g. replacement kitchen, renew bathroom etc. Where Magellan considers that not all borrowers will obtain equal benefit from a mortgage Magellan will insist that the potentially disadvantaged [vulnerable] borrower obtains independent legal advice. Loan Size Minimum 50,000 - Maximum 400,000.The loan will be based on the Purchase Price or Valuation (whichever is the lower). New Build Properties A property will be considered a new build where constructed in the last 36 months. Properties built within the last 10 years must be covered by one of the following building certificates: NHBC, Zurich Municipal Premier Guarantee, Buildzone, BLP,LABC and Checkmate Packaging Services The packaging services to be provided in relation to mortgages offered by Magellan comprise: Receiving fully completed mortgage application forms from Magellan s approved panel of intermediaries and ensuring all necessary information as set out in this manual has been completed Collating the full suite of supporting documentation and supplementary information required by Magellan as set out in this manual in order to process a mortgage application Forwarding on the full suite of information and documentation to Magellan. We are obliged to consider all information that we receive e.g. when bank statements are submitted we are obliged to consider all information on the statements when underwriting the application Once a fully packaged mortgage application has been sent to Magellan, the packaging services will deemed to be complete For avoidance of doubt the packaging services do not, nor are intended to, result in the outsourcing of any regulatory responsibilities by Magellan, and Magellan in particular remains responsible for carrying out suitability and affordability checks on applicants Payment Protection Insurance Magellan does not require payment protection insurance as a condition of mortgage. However, Magellan expects an intermediary to consider their customers needs upon entering into a mortgage agreement and to explain to them their responsibility to maintain mortgage payments, even if their circumstances change.

16 Lending Manual February 2014 Page 16 Guarantors Persons acting as Guarantors may be acceptable subject to referral. Proof of ID Proof of Identity will be required in each case in order to comply with the current Money Laundering legislation and must be provided for each applicant who is a party to the mortgage Proof of Identity must be provided at the outset and a mortgage offer will not be issued without acceptable ID having been provided or otherwise verified by Magellan (via EID verification). For all applicants a check against the most recent version of the consolidated list of financial sanctions targets will be carried out. All applicants will be checked against an Electronic Identification System. All applicants failing the Electronic Identification System will be subjected to a referral and manual verification process for which the customers will be required to provide additional evidence of ID to the satisfaction of Magellan Magellan will require one of the following items for each applicant - originals or original certified copies: Current valid signed passport Current full UK driving licence (both counterparts if applicable) Current provisional photocard UK driving licence (both counterparts) Current police warrant card with photo ID Current HM Customs and Excise card with photo ID A recognised employer s ID card with photograph and signature Current firearms certificate or shotgun licence Current Inland Revenue Tax notification Current Inland Revenue tax Assessment statement of account EU Residential Permit issued by the Home Office State Pension or Benefit Notification letter (Original) Proof of Residency In the event that the applicant is not listed on the voters roll for their present address Magellan will require proof of current residency covering the last 3 months. The following items are acceptable as proof of residency: Bank reference confirming name and address Benefit book Recent utility bills (not mobile phone) Council Tax bill current year Current full UK Driving Licence (if not used for ID) Current provisional photocard UK driving licence (if not used for ID) Inland Revenue Tax Notification (if not used for ID) Bank/Building Society statement Medical cards HP agreements Lender statements Credit card statements

17 Lending Manual February 2014 Page 17 Benefit letter (original, if not used for ID) Reference from Commanding Officer (Armed Forces) Property Magellan s valuers will follow the RICS Valuation Professional Standards otherwise known as the Red Book. Magellan s overriding requirement is that the valuer represents that the property is mortgageable and saleable Magellan will lend on properties in England and Wales. The tenure of the property must be Freehold or Leasehold. Leasehold properties must have an unexpired term of at least 70 years A property will be considered a New Build where constructed within the past 36 months. Ex council properties within pre-emption are not acceptable Where the applicant(s) own both the freehold and leasehold interests refer to Magellan Homeloans underwriter Unacceptable tenures are: Freehold flats or maisonettes Leasehold properties with less than 70 years remaining on the term of the lease Unacceptable Property Types The following list contains property types/usages that are not acceptable to Magellan. Properties determined by the valuer as unacceptable security Steel frame properties Properties of 100% timber construction. Properties of 100% concrete construction Properties designated as defective under the Housing Defects Act 1984 or the Housing Act Repaired properties may be considered as an exception. Properties containing Mundic Block materials. Properties with agricultural restrictions. Properties built up to 10 years previously without an NHBC or Architect s certificate, a Zurich Guarantee, Premier Guarantee, Buildzone, BLP, LABC or Checkmate warranty. Properties not wholly owned by the borrower(s) - For example where equity is retained by a builder/ developer, housing association or third party (shared ownership). Studio flats. Freehold Flats or maisonettes Flats in blocks of more than 5 floors unless built post 1990 and not ex local authority Flats over some types of commercial premises. Flats higher than the third floor with no lift access Commercial premises and properties directly above or adjacent to adverse commercial premises Properties designated as defective. PRC properties not repaired under an approved PRC [Homes] Ltd scheme. Properties with onerous restrictions e.g. retirement flats, listed buildings, specialised properties Flying freehold -unless the valuer can confirm that the element constitutes less than 20% of the total property Properties underpinned in the last 12 months or where monitoring is required following under pinning works.

18 Lending Manual February 2014 Page 18 Local authority properties within pre-emption References Shall remain valid for a period of 4 months from the date of the reference and will be requested by Magellan Homeloans in every instance: Employers reference A minimum of 12 months employment history is required. see also Income section Self employed reference Self employed applicants must have been self employed for at least 12 consecutive months, and confirmed by way of an accountants certificate also verifiying the last three years profits (or length of period of self employment) see also Income section Landlord reference Where the applicant(s) is a local authority tenant or private tenant with a corporate landlord, a reference will be required covering at least the 12 months prior to the month of the application. The month prior to the month of application may be disregarded if not covered by the reference Where the applicant(s) is a private tenant that makes payments through an ARLA registered letting agent, a reference will be required covering at least the 12 months prior to the month of application Where the applicant(s) is a private tenant that makes payments directly to their landlord, evidence of the last 12months payments will be required. This may take the form of 12 months bank statements Where the applicant is re-mortgaging a leasehold property a reference from the freeholder will be required confirming the amount of ground rent and service charge and what part of those amounts is outstanding if any Lender reference Where the applicant(s) payments on a mortgage(s) are noted up to at least the month before the month in which the offer is dated on the credit reference agency search, a lenders reference will not be required Where payments are not noted on the credit reference agency search, the applicant(s) may provide a mortgage statement that covers at least the 12 months prior to the month of the application. The month of the application may be disregarded if not covered on the statement Where neither of the above satisfies proof of payment against secured loans, Magellan will require a lenders reference requesting details concerning the performance of the account over the last 12 months If an applicant has had more than one mortgage within the last 12 months then a previous lenders reference will also be required Magellan will require a reference or statement on all second charges and other secured loans Where the applicant is remortgaging a leasehold property a reference from the freeholder will be required confirming the amount of ground rent and service charge and what part of those amounts is outstanding if any.

19 Lending Manual February 2014 Page 19 Repayment Method Capital and Repayment basis only Repossessions Applications from applicants that have been repossessed within the last year before the date of the application will not be considered. Any applicant with a prior repossession earlier than this may be considered subject to confirmation that any shortfall has been or is being made good or has been forgiven. Any such repayments will be considered in the affordability calculation If at any time during the underwriting/completion process Magellan becomes aware of any repossession proceeding against their proposed borrower(s), Magellan will be unable to proceed with the application A written explanation for repossession together with supporting evidence as above from the applicant(s) will be required Responsible Lending Lending into Retirement Where up to 20% of the term of the mortgage extends beyond the state pension age, evidence of the applicant s income post-retirement, especially pension provision, must be obtained. This may take the form of a pension statement dated within the last 12 months, payslips or bank statements that specifically show amounts of contributions to a pension. Note that the pension payments must be included in the affordability assessment Where the applicant is within 15 years of reaching retirement age or where more than 20% of the mortgage term extends beyond the state pension age a formal pension valuation within the last 12 months must be obtained, evidencing the expected income that can be realised from the pension. This income should be used in the affordability assessment Solicitors Magellan will agree to use the applicant s solicitor for its own interests provided it has a minimum of 4 partners and is registered with the Solicitors Regulation Authority. Magellan will not accept sole practitioners or Licenced Conveyancers. Treating Customers Fairly (TCF) Magellan is committed to ensuring fair treatment of its customers at all stages of its product life cycle. Our mortgage products have been designed for a specific target market as stated above in the section Our Target Customer. We have carefully selected the accredited distribution partners as part of our business strategy to ensure that the TCF objectives are achieved at point of sale. Magellan will always communicate with its distributors and the customers in a way that is clear, fair and not misleading. The firm will adhere to this principle by way of active communication and meaningful engagement with the distributors by developing all necessary product related literature and documentation as appropriate, besides conducting a one to one intermediary training programme with the help of this manual. Our Responsible Lending Policy, the underwriting processes and the measures set out in this manual reinforce the TCF objective which we will seek to achieve with the support and a similar TCF commitment from all our

20 Lending Manual February 2014 Page 20 mortgage distributors. TCF delivery and review will accordingly form an integral part of our ongoing business relationship with all intermediaries. Term Minimum term - 5 years. Maximum term - 30 years (the loan must be repaid by the applicant(s) 75th birthday) Undue Influence Where Magellan has a suspicion or has been notified of a suspicion by a third party that one of the joint applicants or guarantors has exercised undue influence on the other party such that the loan may not be to the equal benefit or in the interest of both applicants, Magellan shall not proceed until such time as it has received confirmation that the potentially disadvantaged party has received independent legal advice. Examples of this are: Joint application for business purposes and the joint applicant has no interest in the business for which the funds are being raised Single application in which one applicant is raising funds to assist in the clearance of debts incurred and registered in the name of another person Unsecured Credit Applications from borrowers who have exhibited a dependence upon short term credit will not be considered. A dependence on short term credit will be indicated by the following non exhaustive list: Pay day loans Rising credit card balances Rising store card balances Valuations All valuations will be instructed by Magellan and the cost borne from the proceeds of the appropriate application fee Magellan valuers will follow the RICS Professional Standards otherwise known as the Red Book Magellan overriding requirement is that the valuer represents that the property is mortgageable and saleable Each security will be formally valued on an Open Market Value from a valuer appointed to the panel. The report will be valid for 4 months from the date of the inspection In certain circumstances an additional valuation may be required by Magellan in these instances Magellan will bear the cost of the second valuation