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Equity Stakeholding: the new right to buy?

Equity Stakeholding: the new right to buy?. Peter Williams Council of Mortgage Lenders peter.williams@cml.org.uk. My Presentation. The Context Existing opportunities Shared Equity – Open Market Homebuy Social Homebuy Conclusions/Questions Treading a careful path!. The Context.

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Equity Stakeholding: the new right to buy?

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  1. Equity Stakeholding: the new right to buy? Peter Williams Council of Mortgage Lenders peter.williams@cml.org.uk COUNCIL of MORTGAGELENDERS

  2. My Presentation • The Context • Existing opportunities • Shared Equity – Open Market Homebuy • Social Homebuy • Conclusions/Questions • Treading a careful path! COUNCIL of MORTGAGELENDERS

  3. The Context • Government commitment to growing home ownership – choice, mobility, asset based welfare • Home Ownership Task Force concerns re existing low cost home ownership programmes • Recognise impact of MCOB, Responsible Lending, Treating Customers Fairly via FSA plus Basel 2 and HIPS • Experience of the RRO on Home Improvement • CML study of demand for Equity Loans (The potential market for equity loans in the UK, Glen Bramley, CML research report, 2004) COUNCIL of MORTGAGELENDERS

  4. Existing Opportunities • RTB performed well from a lender perspective • Shared Ownership – some difficulties re arrears, performance of some HAs. Concern re low value shares. Joint Guidance issued to help overcome this (Shared ownership: joint guidance, Housing Corporation, CML, NHF, September 2004) • Number of lenders shrinking/stable • Homebuy performed well and preferred by lenders/borrowers • Right to Acquire – limited take-up COUNCIL of MORTGAGELENDERS

  5. Shared Equity – Open Market Homebuy • Extending Homebuy – October 2006 and within current parameters re £ income, property price, repairs etc as per Capital Funding Guide • Splitting the equity share –lenders/govt • Process complicated by the Key Facts Illustration (KFI) – advice to customers • 3 lenders participating in pilot • Flexibility/portability on the agenda but … • Debt not equity; risks for lenders and borrowers COUNCIL of MORTGAGELENDERS

  6. Social Homebuy • Limited detail – in principle support but … • Voluntary with a pilot • Property may already be charged – SO model/Security Trustee • Minimum loan size; legal/survey costs • Loan will be first charge but enforceable? • Repairing obligations – real concerns? • Resale? What is the market? COUNCIL of MORTGAGELENDERS

  7. Conclusions/Questions • Lender appetite for equity stakes limited • Costs of equity stakes – legals/surveys/effective interest rate etc and demand/return • Questions of best advice? • Customer appetite? • Issue now complicated by MCOB, Basel 2 • Portability/flexibility – ideal but … • Explore in detail..time/resource consequences • Need effective partnership with landlords • Support aspiration but in practice? COUNCIL of MORTGAGELENDERS

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