Tuesday, 24 May 2016

Significant number of conveyancing cases to be impacted by LBG CML Handbook change

With “Bank of Mum and Dad” currently helping finance 25% of UK mortgages the latest change to the CML Lenders’ Handbook for four banks within LBG is particularly significant.

Earlier this month the Guardian (excuse the pun) revealed that parents are set to lend their children £5bn to help them on to the property ladder. If the lending power of these parents was combined, it would be a top 10 mortgage provider. It is worth noting that the article reflects that parents are ‘lending’ rather than gifting. In many cases the loan is protected by way of a deed of trust.

In the last few hours the likes of Lloyds and BOS have made their position a lot clearer via the CML Handbook by changing their answer to Question 5.13.1: “If different from 1.11, contact point if borrower is not providing balance of purchase price from funds/proposing to give second charge”.

For many lenders the answer to the question simply sets out the contact details for the relevant department at the said lender.

Just look at what BOS now have to say:

‘You should report any circumstances where the balance of the purchase price is not being provided in accordance with Part 1 and in doing so must wait for our written instructions prior to proceeding. Please write to our Customer Services Centre (see offer for address and fax number).

Gifted deposits are only acceptable where all the following apply;

The gift is from an immediate family member(s), who confirms it is not repayable. Gifts from unrelated third parties, including friends and employers are not acceptable.

The family member(s) must be related to one of the borrower(s) by any of the following (see also the definition in Part 1, paragraph 1.13);

• birth/blood relative

• spouse or civil partner, child, step children, adopted children and in-laws

• A co-habitee

A Deed of Trust or Second Charge to protect the gifted deposit is not acceptable.

Note we do not accept family gifted deposits in Buy to Let transactions where the Vendor is a family member.

When reporting a gifted deposit ensure your letter confirms the gift complies with our requirements.

Where a gifted deposit is acceptable you must obtain and retain on your file a letter, addressed to you, signed by each individual family member(s) gifting the deposit which confirms the following information;

• The name address of the family member gifting the deposit

• Their relationship to the borrower(s)

• The name and current address of the borrower(s)

• The address of the property being purchased

• The amount being gifted and the source of the funds

• That the gift is not repayable and the family member(s) providing the gift will not acquire an interest in the property

• The letter must be dated with 3 months of completion

You must ensure clear bankruptcy searches are carried out against the borrower and all parties contributing to the balance of the purchase price. You must notify us if you cannot obtain clear searches’.

This importance of this change is significant especially given the percentage of cases that this applies to. If lenders in the LBG are shedding light on this area should your firm be taking head on all purchase cases where there is a lender as well as a 3rd party ‘helping out’?

Four of LBG lenders have made changes whilst  at the same time also making  important amendments to other sections of the CML Handbook. For full details of the changes and to receive notifications as to future changes your firm should subscribe to lendermonitor.com.