Tuesday, 25 October 2016

Leading Lenders say 'No' to 'Novation Contracts' via CML Handbook Changes

Image result for novation contracts

In the last 24 hours seven lenders have changed their CML Handbook requirements adjusting their instructions at section 5.1.1.

The new wording makes it clear that applications which involve ‘Assignable Contracts’, 'Fulfilment Contracts', 'Assisted Contracts', 'Assignment Contracts', 'Novation Contracts', 'Transferable Contracts' or irrevocable powers of attorney in favour of intervening sellers are not acceptable.

Law firms should  report any other structure to the transaction which has a similar effect.

The extension to reporting obligation coincides with the latest SRA report on historic insurance claims data which highlights failure to “Report to Lender” as key area for claims.

The report states :

Failure to comply with agreed requirement to report four facts about the transaction account for nearly 20% of all claim payments across all areas :

– Back to back transaction – seller is an intermediate owner who is buying and immediately
selling on (“flipping”).
– Seller has owned property for less than 6 months.
– Part of purchase money is not passing through the solicitor – allegedly paid direct.
– Variation in purchase price.