General policy

General policy | Income | Property | Special lending situations

 

Index

• Overview
• Age
• Term
• Personal deposit
• Family and gifted deposits
• Use of funds
• Maximum LTV 
• New C&G mortgage customers
• Existing customer conversions
• Additional borrowing
• Income used
• Income verification
• Identification of the customer
• Lending into retirement
• Credit scoring
• Repayment methods for interest only mortgages
• Remortgages
• Residence in the UK
• Porting
• Separate legal representation for loans more than £1m

 

Lending policy for C&G mortgages

Overview

 

C&G mortgages are provided by Lloyds TSB Bank plc and administered by us. We both commit to providing you with all the information you need to enable your client to make an informed choice about a mortgage or, if they have already made up their mind, all the information about the mortgage they have chosen.

 

C&G mortgages are also available through C&G and Lloyds TSB branches and direct to customers over the phone and the Internet. Different offers may be available through each of these different outlets.

 

All cases are bureau scored, so a search is performed prior to confirmation of the ability to lend.

 

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Age

Customers who will be 75 before the end of the term

 

• The maximum age at the end of the term is 75. 
• For joint customers this is based on the age of the oldest customer/guarantor.
• Where a customer would be over 75 at the end of the term, the term must be reduced or the application will be declined. 
• This also applies to Homeowner Loans, so where a customers existing term exceeds their 75th birthday you cannot choose a term to match.

This policy also applies to guarantors.

 

Customers over 65 at the point of application

 

• Where any customer is 65 or over at the time of application the maximum LTV is 75%.
• Homeowner Loans for debt consolidation are not acceptable for customers over 65.

Customers within five years of retirement

 

• If the customer is within five years of their planned retirement or the default retirement age of 65 (whichever is lower) and the term exceeds their planned retirement age, only the retirement income will be taken into account.

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Term

A mortgage term must always be recommended based on the individual customer’s needs.

 

Maximum Term

 

The maximum term is 40 years, although any term exceeding 25 years should be considered carefully.

 

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Personal Deposit

The customer must have a personal stake in the property which is not represented by a loan.

 

 

Family and gifted deposits

The following means of deposit are acceptable providing they are not repayable: 

 

• Genuine gifts from family.
• Local Authority/Housing Association Discount Purchase (Right to Buy).

• Local Authority/Housing Association Tenancy Incentive Scheme

  (not private sales).

• Builder's incentive (offered by a major national/regional builder for brand new properties).

  • A builder’s incentive must not be a loan, be repayable or protected by way of a second charge.
  • Maximum LTV for new build properties of 80%, customers may use a 5% deposit in the form of a builder's incentive, but must also provide a 15% personal deposit

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Use of funds

Unacceptable use of funds:

 

• Timeshares

 

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Maximum LTV

 

Application Type	Maximum LTV
House purchase*	Interest only – 75% Repayment – 90%
Main residence remortgages*	Interest only – 75% Repayment borrowing: £5,000-£1,000,000 – 85% £1,000,001-£2,000,000 – 80%
Additional borrowing*	Interest only – 75% Repayment – 80%
New builds (including flats)	Interest only - 75% Repayment - 80%
Holiday/Second Home	Interest only – 75% Repayment – 75%
Holiday/Second Home (New build)	Interest Only – 65% Repayment – 65%
Expatriate	Interest only – 75% Repayment – 75%

 

*Interest Only / Repayment Allowances

 

Please see our current product range for full details of our maximum LTV.

 

New C&G mortgage customers

• Maximum LTV on interest only loans is 75%
• For house purchase and remortgage where the total LTV is over 75% all borrowing must be on repayment
• A mix of interest only and repayment is allowed only where the total borrowing is less than 75% LTV.

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Existing Customer Conversions

• Like for like conversions above 75% LTV can remain on interest only.
• For conversions with homeowner loans if the homeowner loan takes the total borrowing over 75% LTV then the homeowner loan must be on repayment.
• Conversions from repayment to interest only are not allowed above 75% LTV

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Additional borrowing

• A homeowner loan cannot be taken out within 6 months of the mortgage starting or a previous homeowner loan on the same mortgage starting
• Neither can a term extension be requested within 6 months of the mortgage or loan starting.
• For all additional borrowing the maximum LTV is 80%.
• For additional borrowing that takes the total borrowing above 75%, the new borrowing must be on repayment

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Income used

This section should be read in conjunction with the Income Assessment chapter.  Click on this link to go to the income assessment chapter.

 

When entering any ‘additional income’ only 60% of the total amount entered is used within the affordability calculation.

 

Income due to change in the future

 

Some employed customers know that their income will change within the next three months. If this is the case and you have evidence to support it, you may enter their future income. An example of this would be a supply teacher, who has a letter to confirm a position they are due to start.

 

Examples include:

 

• Due to be promoted
• Salary increase within their current position, eg when relocating (relocating allowance is not to be included)
• Currently on maternity leave, returning to work within the next three months
• Due to start a new job

Evidence can be an employment contract, employer's reference or a confirmation letter from the employer.  If entering onto Caseflow put today's date as the date employment commenced.

 

If there will be a gap in employment of fewer than 3 months, the customer must have adequate financial resources to rely upon. If the gap will be more than 3 months, the application will be referred to mortgage underwriters.

 

Where the customer is currently working but due to go on maternity leave, the current income is used – click on this link to go to this topic in the Income chapter.

 

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Income verification

Every customer must be able to prove their income and employment details and we reserve the right to verify this via documents and references.

 

• Employer’s contract or reference can be used to confirm the customer’s income where they have been employed for fewer than 3 months
• References must be dated within the last 3 months
• The latest payslip must be dated within the last 30 days.  When 3 payslips are required they must be consecutive and the oldest one must be dated within the last 4 months.
• Payslips to confirm annual/half yearly bonuses can be dated within the last 12 months.
• SA302s must be originals, on headed paper and dated within the last 18 months. Online prints of tax returns (SA302s) are not acceptable.

Bank statements

 

• Bank statements and pension statements/references must be dated within the last 12 months.
• They can be used to verify additional, pension.
• Bank statements sent to the customer in the post are acceptable, as are statements provided from the Internet.

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Identification of the customer

Documents required for new customers

 

Each new customer must be positively identified in accordance with the Money Laundering guidelines (JMLSG). It is a legal requirement for every new customer to be identified, by providing appropriate documents. Usually two documents are required, one to confirm the customer’s name and the other to confirm their address – although there are certain documents that are acceptable on their own for proof of both identity and address. We’ve detailed documents that are acceptable later in this section.

 

Your role

 

You must see the original document(s), make a copy which you check and certify as a true copy of the original. Any documents which contain a photograph appears to be that of the person presenting it. Send the certified copy(ies) to C&G with the application form. We will retain the copy(ies) for future reference.

 

To simplify the process, it may be possible for you to complete an Identity Verification Certificate (IVC), which places the responsibility on you to retain certified copies of the customer’s identification documents. Again, please see later for more on this.

 

Single items of identification

 

The documents that we can accept on their own for proof of both identity and address are listed in the ‘Single items of identification’ table below. For example, you may accept either a current UK Full Passport or a current UK Photocard Driving Licence (please note: the counterpart licence is not acceptable on its own).

 

If you can provide one of these documents, there is no need to give a secondary form of ID.

 

Single items of identification - acceptable documents

 

Document	Identification	Address Verification
EU/EEA Driving Licence
EU/EEA Identity Card
Firearms/Shotgun Certificate
Northern Ireland Voters Card
UK and Non UK Passport
UK Driving Licence
Young Scot Card

Two items of identification

 

Where a customer is unable to provide one of the documents from the single item list above, you must continue to request two forms of identification. Acceptable documents are shown in the ‘Two items of identification’ list below.

 

For joint customers who are living at the same address, proof of name is needed for both applicants, but address ID is needed only for the first-named applicant.

 

A document can only be used once throughout the whole application process; ie. used once for either address verification or for identification.

 

Two items of identification - acceptable documents

 

Document	Identification	Address Verification
Bank, Building Society or Credit union Statement
Benefits/State Pension Notification Letter
Blue Disable Driver’s Pass
HM Revenue & Customers Correspondence
HM Revenue & Customs Tax Notification
Local Authority Tax Bill
Local Council Rent Card / Statement
Mortgage Statement
Utility Bill / Utility Statement or a certificate / Letter from a Supplier of Utilities

Guidance on how to check and certify the documents:

 

Check the

 

• photograph appears to be that of the person presenting it
• date of birth appears to match the appearance of the person presenting it
• name and date of birth match details on the mortgage application form
• signature appears to be the same
• document has not been tampered with
• document is valid and had not expired
• address matches that held on the mortgage application form

To certify

 

1. Stamp the photocopy with your company stamp
2. Write ‘original seen’
3. Date the photocopy
4. Sign over the stamp

Retain a copy of the identification documents as evidence as they may be required for law enforcement or audit purposes.

 

Identity Verification Certificate (IVC)

 

To simplify the process you can complete an Identity Verification Certificate (IVC) which places the responsibility on you to retain the certified copy(ies) of the customer’s identification document(s).

 

An IVC is not acceptable in the following circumstances and certified copies of the identity documents need to be submitted with the application:

 

• First time buyers
• When identity documents are requested as part of the application process.

Please note you will be asked to provide copies of the identification taken if Lloyds TSB receives a court order, or request made by audit. Copies will be required within 7 days.

 

Click here to view the IVC.

 

Identification required for existing customers

 

If your client(s) already have a Lloyds TSB / C&G account additional identification is not usually required, however please record their existing account numbers.

 

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Lending into retirement

Scenario	Affordability assessment
Customer has selected a mortgage term that is within their anticipated retirement age	Current income
Customer has selected a mortgage term that exceeds their anticipated retirement age and is more than five years away from their retirement date     Exceptions   1) Customer can demonstrate that their retirement income is likely to exceed approximately two thirds of their current income	A proportion of the current income (approximately two thirds) + a single person’s state pension income. (For a joint application for a married couple, the lending decision would take into account a couple’s state pension allowance.)   1) Reviewed by Underwriters on an individual basis
2) Customers aged 65 years or less at the date of application but who are within five years of their planned retirement age or 65 (whichever is the lower) and the selected term exceeds retirement.	2) Actual/expected retirement income
Customer coded as Retired	Actual/expected retirement income
Customer over 65 at date of application	Actual/expected retirement income

Examples:

 

1. If a customer who is 41 at the time of application requests a 25 year term for their mortgage, because the term would exceed their anticipated retirement age of 65, their income would be assessed on the basis of a proportion of the current income (approximately two thirds) plus a single person’s state income.
2. If a customer who is 41 at the time of application requests a 24 year term for their mortgage, their income would be assessed on the basis of current income as the term would not exceed their anticipated retirement age of 65.

Cases must not be referred to Underwriters unless the criteria below are met and this evidence must be obtained before the case is referred:

 

• Future pension income - Pension illustration or a projected pension plan
• Employed customers – A letter from their employer confirming the customer’s ability to work beyond their retirement age
• Self employed customers -  The latest set of accounts (not more than 18 months old or an accountant's reference)

 

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Credit scoring

Credit scoring takes account of information from three sources: the information provided in your client's application; information provided by credit reference agencies; and information that may already be held about your client by companies in the Lloyds Banking Group.

The credit scoring system will consider a range of information from these sources to make an overall assessment of your client's application. This assessment is based on an individual's repayment history and experience that has been gathered over many years of providing credit to customers.

The types of information that will be considered before agreeing a mortgage include:

• your client's occupation
• employment history
• income
• conduct of previous loans with companies in the Lloyds Banking Group
• information obtained from credit reference agencies.

The Lloyds Banking Group believes that credit scoring is a fair and impartial system because it does not single out a specific piece of data as the reason for declining your client's application. The credit scoring methods used are regularly tested to ensure they remain fair, effective and unbiased.

For further information about credit scoring for your client you can download our guide to credit scoring.

 

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Repayment methods for interest only mortgages

The customer must have a plausible repayment method in place when they take out an interest only mortgage.

 

Types of repayment plans for interest only mortgages

 

Acceptable means of payment for all lending types are:

 

Repayment Vehicle	Evidence Required
Endowments	Copy of latest projection statement dated within last 12 months
Stocks & Shares ISA (only UK - based investments quoted within the FTSE index held in sterling will be permitted)	Copy of latest investment statement dated within last 12 months
Unit trusts/OEICs	Copy of latest investment statement dated within last 12 months
Pensions	Copy of latest projection statement dated within last 12 months
Investment bonds	Copy of investment statement dated within the last 12 months
Stocks & shares (only UK - based investments quoted within the FTSE index held in sterling will be permitted)	Share valuation/and or number of shares on date of assessment
Savings (only sterling based accounts offered by UK based banks will be permitted)	Copy of passbook/statement of balance within last 12 months
Sale of second home (UK)	Property details, confirmation of ownership, amount of any mortgage debt       (Property valuation and land registry search carried out by us if needed)

Additional acceptable repayment strategies available for Buy to Lets, Further Advances, Transfers of Equity (standard - no property change), existing customers changing repayment method or term and Ported cases only are:

 

• Change to a repayment loan in the future
• Put a future repayment plan in place
• Sale of a business - a customer who has their own business and plans to use the proceeds of the sale of this to repay their loan.
• Sale of this property (main residence only) - customers can repay their mortgage by selling their home and moving to a smaller lower value property at a later date. The downsizing must be plausible i.e. it is plausible if the customer anticipates retaining equity. If a customer has a one-bedroom property, it is unlikely that they could trade down to anything smaller and the customer needs to have somewhere else to live at the end of the loan term.
• 'Other' repayment plan - where customer has more than one acceptable repayment vehicle or a mix of repayment and interest only this should be noted.

NB: Inheritance is not an acceptable repayment plan.

 

If you have discussed a plan with the customer that you feel is plausible and it is not on this list, contact your Business Development Manager.

 

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Remortgages

For all remortgages including unencumbered applications, we insist that one of the customers has owned the property for at least six months. There are no exceptions to this and applications where the customers have not owned the property for this period of time will not be accepted.

 

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Residence in the UK

Customers should live in the UK (apart from the occasional business trip abroad). Consideration will be given to expatriates and foreign nationals see Special Lending Situations.

 

Where the customer has been living abroad, any overseas addresses must be input if using Caseflow and a full three years' history provided up to a maximum of three addresses.

 

Irrespective of nationality, UK residents include:

 

• Individuals permanently resident in the UK.
• Individuals normally resident in the UK who are temporarily overseas for less than a year.
• Members of the UK armed forces and established officials of HM Government (and their dependants) serving abroad in military bases, embassies etc (individuals serving in the UK armed forces who are not British nationals must have permanent rights to reside, or be an EU citizen).
• Temporary residents from a country outside the UK who have stayed or who intend to stay in the UK for a year or more. The customer must have permanent rights to reside, or be an EU citizen.

Non-UK:

 

• Individuals permanently residing outside the UK, including those resident in the Channel Islands, Isle of Man and Republic of Ireland.
• All temporary residents from the UK who have stayed or intend to stay in a country outside the UK for a year or more (except members of the UK armed forces and established officials of HM Government).

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Porting

LTV Limits

 

Existing customers porting like for like with no additional borrowing are able to exceed 90% LTV maximum, subject to referral to underwriters.

 

Existing customers porting their current terms and conditions and taking additional borrowing that will take the total LTV over 75% must have the additional borrowing on a repayment basis. If the combined borrowing is less than 75% LTV, then it can be either interest only or repayment or a combination of both.

 

The following applies to all porting requests:

 

Where the current mortgage completed on or after 1 November 2008

 

• Customers porting their product must take out another C&G mortgage within an eight week period.
• Where the customer chooses to port their product and their new mortgage completes on the same day as their old mortgage redeems, then no Early Repayment Charge (ERC) will be charged.
• If the customer’s new mortgage doesn’t complete on the day their old mortgage redeems, then any ERC payable must be paid on redemption of the old mortgage. The ERC will be refunded on completion of the new mortgage. Provided this takes place within the eight week period.
• If the customer moves house within the last 12 months of their ERC period, the customer must pay any ERC due in full.

Where the current mortgage completed before 1 November 2008

 

• Customers porting their product will be allowed a 12 month period to return within.
• The ERC will be waived for any customers moving house within the last 12 months of their ERC period, as long as they are porting the same amount or greater.
• Sub accounts - If the customer has a number of sub-accounts and one of these sub-accounts completed before 1 November 2008, then the total amount ported will benefit from the concessions given in the two bullets directly above.

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Separate legal representation for loans more than £1m

Where the new loan is for more than £1m, a solicitor will be appointed to act on behalf of the Bank and the customer will appoint a solicitor as they do today, to act on their behalf for the purchase of the property.

 

This provides a higher level of security for both our customer and the Bank where we are making large mortgage advances.

 

There are three firms of solicitors who have been appointed to act for the Bank in these transactions and the appropriate solicitor will be appointed based on property location:

• The customer will still provide details of their own solicitor.
• The customer should be made aware that their solicitor will be contacted directly by the Bank's solicitor at offer stage and all documentation will be dealt with by them eg Mortgage Loan Agreement, advance of funds at completion.

 

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