CeMAP Mortgage Law and Practice Questions and Answers

Question 1

A client has a mortgage on their property with Lender A (a 'first charge') and later takes out a secured loan for home improvements with Lender B (a 'second charge').
If the client defaults and the property is repossessed and sold, what is the order of repayment from the sale proceeds?

Accepted Answer

Lender A is repaid in full, then Lender B is repaid from any remaining funds.

Answer

Lender B is repaid in full, then Lender A is repaid from any remaining funds.

Answer

Both lenders are repaid on a pro-rata basis according to the amount owed.

Answer

The legal costs are paid first, and then both lenders share the remaining funds equally.

Question 2

Under the Law of Property Act 1925, which of the following is the most common method for creating a legal mortgage on a registered freehold property in the modern conveyancing process?

Accepted Answer

By a charge by deed expressed to be by way of legal mortgage.

Answer

By granting the lender a 3,000-year lease on the property.

Answer

By physical deposit of the property's title deeds with the lender.

Answer

By an oral agreement witnessed by a solicitor.

Question 3

A lender is initiating repossession proceedings against a borrower in arrears. According to the FCA's MCOB (Mortgage Conduct of Business) rules, what is a key principle the lender must follow before taking court action?

Accepted Answer

Repossession must be treated as a last resort after all other reasonable options have been considered.

Answer

The lender must have made at least ten attempts to contact the borrower by phone.

Answer

The borrower must be at least six months in arrears before proceedings can begin.

Answer

The lender must offer to buy the property from the borrower at the current market value.

Question 4

The Mortgage Credit Directive (MCD) was implemented into UK law in March 2016. What was one of the most significant impacts of this directive on the UK mortgage market?

Accepted Answer

It brought the regulation of first charge and second charge mortgages under the same FCA regime.

Answer

It introduced the requirement for all mortgage advisers to hold a university degree.

Answer

It banned the sale of all interest-only mortgages across the UK.

Answer

It mandated that all mortgage offers must be valid for a minimum of 12 months.

Question 5

A borrower wishes to repay their fixed-rate mortgage in full during the initial benefit period. The lender applies an Early Repayment Charge (ERC). According to MCOB rules, this charge must be:

Accepted Answer

A reasonable pre-estimate of the costs the lender incurs due to the early repayment.

Answer

A fixed percentage set by the Bank of England.

Answer

No more than three months' interest.

Answer

Calculated using the 'Rule of 78' to determine the outstanding interest.

Question 6

When a legal mortgage is created on a property with a registered title, the lender's interest is recorded at HM Land Registry. Historically, what document was issued to the lender as proof of their charge over the property?

Accepted Answer

A Charge Certificate.

Answer

A Share Certificate.

Answer

A Debenture Certificate.

Answer

A Title Insurance Policy.

A client has a mortgage on their property with Lender A (a 'first charge') and later takes out a secured loan for home improvements with Lender B (a 'second charge').If the client defaults and the property is repossessed and sold, what is the order of repayment from the sale proceeds?

A client has a mortgage on their property with Lender A (a 'first charge') and later takes out a secured loan for home improvements with Lender B (a 'second charge').
If the client defaults and the property is repossessed and sold, what is the order of repayment from the sale proceeds?