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Equity Stakeholding in Homebuying: Opportunities and Challenges

This presentation by Peter Williams from the Council of Mortgage Lenders explores existing opportunities in shared equity schemes like Open Market Homebuy and Social Homebuy, discussing the context, challenges, and conclusions.

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Equity Stakeholding in Homebuying: Opportunities and Challenges

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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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