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MORTGAGE ARREARS AND REPOSSESSIONS IN SCOTLAND
Annex One: Glossary
GLOSSARY - GENERAL TERMS
Apr
Annual Percentage Rate of charge. The true rate of interest charged on a loan taking into account the total cost of interest and other charges e.g. brokers fees/legal fees. The calculation is set out in statutory regulations.
(Life) Assurance
A Specific type of life insurance policy often linked with a mortgage or loan. A portion of premium goes toward insuring your life, and will pay off loan in the event of death. The rest is invested and will pay a lump sum at the end of the term.
(Level Term) Assurance
Life assurance which pays out a lump sum if you die during the term. Suitable for interest only loans as the amount owed on the loan remains the same throughout the life of the loan.
(Mortgage/Finance) Broker
An intermediary who identifies, and places, customers requiring a loan or mortgage etc. with a company (Lender) able to provide it. The broker often carries out the administration to do with processing the loan.
Cashback
A type of loan where the borrower is given back a sum of money (usually a percentage of the loan). Used by lenders as an incentive to promote their products.
Conveyancer
A person, used as an alternative to a solicitor, to carry out the legal work involved in buying and/or selling a property. Note: It should be checked that they are licensed to carry out this function.
Discounted Rate
A discounted rate gives you a reduction of, for example, 2% off the standard variable rate (SVR) for a specific period. So, during this period should the SVR rise and fall, you will still qualify for the discount and therefore pay a lower rate.
Endowment
A life assurance policy that is designed to produce a lump sum to pay off an interest only mortgage. There are a number of different kinds of endowment policies: 'with-profits', 'unit-linked' etc.
Fixed Rate
The rate is fixed for a specific number of years, so you know what your payments will be over that period. Following this period, the rate will usually revert to the lender's standard variable rate.
Flexible mortgages
A more recent innovation, these give various benefits which usually include the ability to vary payments in line with your circumstances. They may also allow you to take "payment holidays" and to borrow back any overpayment you may have made.
For Pursuer (Undefended)
This shows that the decree was granted in favour of the pursuer (the lender) and was not defended.
IFA
Independent Financial Advisor.
(Term) Insurance
A life insurance policy often linked with a mortgage or loan. The premium goes towards insuring your life, and will pay off loan in the event of death. No benefits are received after the policy expires.
Interest Only Mortgage
With this type of product, your monthly repayments will only cover the interest element of the loan. You will typically set up another repayment vehicle eg an endowment or ISA to repay the capital element of the loan.
Income Replacement
An insurance policy that will provide an income in the event of job loss or illness.
Lender
The actual company that provides the finance to satisfy a loan or mortgage request.
(Secured) Loan
A loan to be used for any purpose. The equity in the property is put up as security against not paying the loan back.
(Unsecured) Loan
A loan to be used for any purpose. The credit rating or financial position of the applicant is such that no security for the loan is required.
LTV
Loan to value. This is the size of the loan or mortgage as a percentage of the value of the property or price being paid for the property e.g. A property valued at ?50,000 with a mortgage of ?45,000 would have an LTV of 90%.
MCRI
Mortgage Code Register of Intermediaries. A register maintained by the Council of Mortgage Lenders of the names of mortgage brokers subscribing to the Mortgage Code.
MGI
Mortgage Guarantee Insurance. An insurance policy designed to make good any shortfall between the amount owed on a mortgage and the value of the mortgaged property. Provides a benefit to the lender in the event of repossession resulting from non-payment.
MIG
Mortgage Indemnity Guarantee. See MGI
MIRAS
Mortgage Interest Relief at Source. This is tax relief on mortgage interest payments. Currently 10% on the first ?30,000 of the loan. However, it was phased out in April 2000.
Mortgage
A loan to purchase a home where the property is used as security in the event of non-payment of the mortgage.
Negative Equity
The situation where the amount owed on a mortgage exceeds the value of the property.
No Date Given (Case abandoned?)
No date given was entered into the database by MVA when the case had no end date recorded in the registers. This normally indicated that no decree was granted and the case was abandoned, but it is possible that the date was just not entered into the registers by the court staff. This could only be checked in the cases where processes where sampled.
(Capped) Rate
Usually for a set number of months/years where the interest rate can go up and down but there is a maximum (capped) interest rate which it can not go above.
(Variable) Rate
A rate of interest which may vary up or down during the lifetime of a loan. The circumstances causing any change are outlined in the loan conditions.
Remortgage
Loan taken out by a borrower to replace another one secured on the same property. Typically taken out by borrowers switching lenders to achieve a better rate.
Repayment Mortgage
With a repayment mortgage you pay part interest and part capital repayments to the lender each month and in this way the capital that you borrowed is reduced until the loan is repaid.
RTB
A term associated with legislation that gives council house tenants the Right to Buy their homes.
Redemption Penalties
When a loan is redeemed (paid off) early, either in full or in part, many lenders will charge a fee. This particularly applies to Fixed, Discounted or Capped rate loans or mortgages.
Second Charge
Mortgage ranking behind a first mortgage ie a second loan.
Second Mortgages
Company or building society who have registered a charge or mortgage directly behind that of the first mortgages.
Secured Loan
Mortgage ranking behind a first mortgage ie a second loan.
Security
When a loan is taken out it is 'secured' on a property, the borrower agrees to the lender creating a charge over the property; the deed makes reference to the rights and obligations of both parties as detailed in the Legal Charge (England), Standard Security (Scotland) r Loan Agreement. Thus the property is known as the 'security'.
Security Address
When taking a secured loan or mortgage, the security address is the address of the property which is being offered as collateral for the loan. Where property is offered as security in this way, lenders are generally prepared to offer more flexible terms and lower interest rates.
Self - Certified
Lenders that operate this type of scheme allow the applicant to confirm how much they earn by "Self-certifying" their income. Schemes are available to both employed and self employed applicants. Typically for the employed, the schemes are designed to help those applicants with incomes that incorporate a large element of bonus or where they derive income from a number of jobs. Where as for self employed there is no need for full 3 years audited accounts to be provided.
Structural Survey
A detailed survey of the structure of a building carried out by a Structural Engineer or Chartered Building Surveyor. Surveyors are liable for negligence.
Sub-prime Mortgage
Mortgage granted to a person who is unable to borrow money secured on a property from a normal lending source. The reasons the applicant may not be granted a mortgage by a high street lender, could fall into one of three categories:-
Adverse Credit information registered against them Existing arrears on current mortgage facilities An inability to satisfactorily prove the level of income required by a high street lender.
Term
Period of a loan expressed in months or years.
Title Deeds
Set of documents relevant to present and past ownership of a property. Details names of owners and details of institutions that have registered a charge against the property. Held by the first mortgagee lender whilst their charge remains in existence.
Underwriting
The process by which the ability of a prospective borrower to repay a loan is assessed (also the name of the department that undertakes this work). The process takes into account various factors including employment history, financial status, previous credit history and current earnings.
Unsecured Loan
A loan to be used for any purpose. The credit rating or financial position of the applicant is such that no security for the loan is required.
Valuation
A brief inspection of a property for mortgage purposes. Whilst it is for the lenders use it is often paid for by the loan applicant.
Note
Glossary based on http://www.easy-loans.co.uk/jargon3.html
GLOSSARY FOR LEGAL TERMINOLGY
Absolvitor
Absolvitor is an order of the court granted in favour of the defender, absolving him/her of the claim. When a decree of absolvitor has been granted, the pursuer cannot take the same matter to court again. In mortgage repossession cases, absolvitor is often granted where an out of court settlement has been agreed. However, absolvitor can also be granted where a defender has successfully defended the action.
Decree
An order granted by the sheriff court in favour of either the pursuer or the defender, granting the remedy sought or disposing of the case.
Decree by default
A decree granted by the court where a party fails to comply with an order of the court or with the provisions of the court rules. This may happen where the defender fails to lodge a defence or fails to appear or be represented at any hearing.
Defender
The person against whom a claim is made ie. the mortgagor or borrower.
Dismissed
Where a decree of dismissal is granted (which would be normal in repossession cases), further action in relation to the same matter can be raised in the future. This happens frequently with repossession because borrowers often establish a pattern of arrears accumulation.
NID 'Notice of Intention to defend'
The NID notifies the pursuer and the court that the defender intends to defend the action, but does not contain any details of the proposed defence. The defender must then lodge defences with the court within 14 days of the expiry of the period of notice (which is usually 21 days after service of the initial court application).
Ordinary cause action
A court action where the pursuer claims more than ?1500, or services of the same value, from the defender. Ordinary cause procedure also includes family cases, such as divorce and access to/residence of children.
Repossession applications under Part II of the Conveyancing and Feudal Reform Act must proceed as ordinary cause actions.
Pursuer
The person making a claim ie. the lender.
Remit to the Court of Session
A decision by the sheriff to transfer the case to the Court of Session. This might happen where a case is particularly complex or important.
Standard Security
The legal term for a loan secured on heritable property in Scotland. The equivalent of the Legal Charge in Scotland (see 'Security').
Sist
The temporary suspension of a case by the court. This usually happens when a party or both parties decide that the case does not require to go back to court until a particular matter has been resolved. The party/parties must make application to the court for a sist to be granted. For example, a party may wish to sist the case to enable them seek legal aid. Or both parties may think there is a possibility of settlement, so rather than have the action continued on a number of occasions- this might increase the overall cost of expenses- they would ask the court to sist the action until a settlement has been reached. Once the matter has been resolved, either party would then apply to the court to recall the sist.
Summary application
A Summary application is a special kind of action which is used generally to get an order under a specific statutory provision - for example an order under Section 2 of the Mortgage Rights (Scotland) Act.
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