CeMAP MRT2 Arrears, Shortfalls & Lender Remedies question: high attitude to risk and proposes putting

CeMAP MRT2Arrears, Shortfalls & Lender Remedies

Rob has a £50,000 projected shortfall on his interest-only mortgage, which ends in six years. He has a high attitude to risk and proposes putting £400 a month into cryptoassets to catch up. His lender is reviewing his strategy. What should his adviser explain?

A The lender can accept it, as long as the adviser records his high attitude to risk
B The lender must not accept a speculative strategy, so a credible plan is needed
C Cryptoassets bought through an FCA-registered firm carry FSCS cover, so the plan is acceptable
D The lender can accept it, as growth of 10% a year on £400 a month would clear the £50,000

Show the answer and explanation

Answer: B. The lender must not accept a speculative strategy, so a credible plan is needed

MCOB 11.6.41R(3) bars lenders from accepting speculative repayment strategies, and recording his attitude to risk does not change that. Even steady 10% a year growth on £400 a month for six years reaches only about £39,000, and cryptoassets offer no such certainty. With a short time left, a credible option such as switching part to repayment, overpaying, or planning a sale should be explored with the lender. Cryptoassets are generally not FSCS-protected; FCA registration of cryptoasset firms is for money laundering supervision (MLR 2017), and the £85,000 investment limit (COMP, from 1 Apr 2019) applies only to protected claims against failed firms.

Common mistake

Letting a high attitude to risk override the ban on speculative strategies.

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