LIBF CeMAP (Certificate in Mortgage Advice and Practice) — All Questions

A lender agreeing that a struggling borrower may pay interest only for a short period, or make reduced payments, is exercising:

• a.an early repayment charge on the account
• b.forbearance under MCOB 13✓
• c.a further advance to the borrower
• d.its right to repossess the property

Temporary concessions such as a switch to interest-only, reduced payments or a short payment arrangement are forbearance measures the firm must consider before enforcement. MCOB 13 requires firms to consider whether it is appropriate to allow such changes to help the customer recover.

Where a lender repossesses and sells a property, MCOB 13.6 requires it to:

• a.sell to the very first bidder regardless of the price offered
• b.take reasonable steps to obtain the best price reasonably obtainable and account to the borrower for the proceeds✓
• c.delay the sale indefinitely until property prices recover
• d.keep any surplus remaining after the debt has been repaid in full, in line with the lender's normal administrative practice

On taking possession, the firm must market and sell the property to obtain the best price reasonably obtainable, and must account to the customer for the net proceeds, applying them to the debt and returning any surplus. Reasonable steps and fair treatment continue to apply throughout.

If a repossessed property sells for less than the outstanding mortgage debt, the borrower:

• a.is automatically refunded the difference by the lender, as it is set out in the mortgage offer document
• b.keeps ownership of the property despite the sale
• c.may remain liable for the shortfall, which the lender can pursue subject to time limits✓
• d.owes nothing further once the property has been sold

A sale shortfall (mortgage shortfall debt) leaves the borrower owing the difference between the sale proceeds and the debt. Lenders can pursue it, though limitation rules apply and the lender should begin recovery within a set number of years, and MCOB requires fair treatment in doing so.

MCOB and good practice encourage lenders to signpost customers in payment difficulty to:

• a.free debt advice, such as MoneyHelper, StepChange or National Debtline✓
• b.payday lenders who can provide short-term emergency cash
• c.estate agents who can arrange a quick sale of the property
• d.the freeholder of the property for assistance with the debt, whatever the borrower's own individual circumstances happen to be

Firms should direct struggling borrowers to free, independent money-advice services (for example MoneyHelper, StepChange or National Debtline), and the FCA's arrears information sheet includes such signposting. Independent advice can help the customer manage wider debts and engage constructively with the lender.

Before starting court action for possession of a home, a mortgage lender in England and Wales is expected to follow the:

• a.pre-action protocol, treating court action as a last resort after exploring alternatives✓
• b.same fast-track process used for evicting commercial tenants
• c.immediate eviction procedure with no prior notice to the borrower, as a standard part of the way the arrangement operates
• d.rules that apply only to unsecured personal loan defaults

The Pre-Action Protocol for Possession Claims based on Mortgage Arrears requires lenders to try to resolve arrears without court action, to communicate clearly and to treat possession proceedings as a last resort. Courts expect compliance and can penalise lenders who ignore it.

A court granting a 'suspended possession order' in a mortgage case typically:

• a.requires the borrower to leave the property immediately
• b.transfers ownership of the property to the local council
• c.cancels the mortgage and writes off the outstanding debt, unless the borrower and lender later agree otherwise
• d.allows the borrower to stay provided they keep to agreed payments, including clearing arrears over time✓

A suspended (or postponed) possession order lets the borrower remain in the home as long as they maintain the normal payment plus an agreed amount towards the arrears. If the borrower keeps to the terms the lender cannot enforce possession; a breach can allow enforcement.

Level term assurance is most appropriate to protect an:

• a.interest-only mortgage, where the capital owed stays the same throughout the term✓
• b.unsecured car loan taken out over a short repayment period
• c.repayment mortgage, where the balance falls steadily over time
• d.insurance need for the building's structure against fire damage, according to the relevant contract and policy documentation

Level term assurance pays a fixed sum on death within the term, matching an interest-only mortgage where the capital owed does not reduce. Decreasing term assurance, by contrast, suits a repayment mortgage whose balance falls over time.

Family income benefit, on the death of the life assured within the term, pays:

• a.a single large lump sum on the date of death
• b.a refund of all the premiums that have been paid, unless the borrower and lender later agree otherwise
• c.a regular income to the beneficiaries for the remainder of the policy term✓
• d.only the mortgage lender's administrative costs

Family income benefit is a form of decreasing term assurance that provides a regular income (rather than a lump sum) from the date of death until the end of the term, helping replace lost earnings for a family. Because the total payout falls as the term shortens, premiums are relatively low.

The defining feature of a whole-of-life assurance policy is that it:

• a.is limited strictly to repaying a residential mortgage
• b.covers the life assured for a fixed term only, then ends, according to the relevant contract and policy documentation
• c.pays out whenever the life assured dies, provided premiums are maintained✓
• d.never pays out any death benefit under its terms

Whole-of-life cover has no fixed end date and pays out on death whenever it occurs, making it suitable for needs such as funeral costs or inheritance-tax provision rather than a time-limited mortgage. It is generally more expensive than term assurance because a claim is certain.

A 'convertible' term assurance policy gives the policyholder the option to:

• a.convert it to a whole-of-life or endowment policy later without further medical evidence✓
• b.reduce the premium automatically at the end of each year, unless the borrower and lender later agree otherwise
• c.increase the size of the mortgage that it protects
• d.cash the policy in at any time for a guaranteed profit

Convertible term assurance includes an option to convert to a permanent policy (such as whole-of-life) later without re-evidencing health, protecting the insured against becoming uninsurable. The premium reflects the value of that option.

Increasing (index-linked) term assurance is designed to:

• a.pay the beneficiaries a regular monthly income instead, according to the relevant contract and policy documentation
• b.reduce the sum assured a little each and every year
• c.keep the level of cover rising over time, for example in line with inflation✓
• d.provide cover for only the first year of the mortgage

Increasing term assurance raises the sum assured over time (often linked to an index such as RPI), helping cover keep pace with inflation or a growing liability. Premiums rise accordingly. It contrasts with level cover, which stays fixed, and decreasing cover, which falls.

A 'renewable' term assurance policy allows the policyholder to:

• a.borrow money against the value built up in the policy, according to the relevant contract and policy documentation
• b.convert the cover into a buildings insurance policy
• c.renew for a further term at the end without providing new medical evidence✓
• d.receive a maturity value if they survive the term

Renewable term assurance grants an option to take out a further term policy when the original ends, without providing fresh health evidence, though at the then-current age-related premium. It protects continuity of cover for someone whose health may have deteriorated.

Critical illness cover (CIC) pays out:

• a.a tax-free lump sum on diagnosis of a specified serious condition covered by the policy✓
• b.a monthly income right up to retirement in every case, as it is set out in the mortgage offer document
• c.only on the death of the person who is insured
• d.the settlement due under a buildings insurance claim

CIC pays a lump sum if the policyholder is diagnosed with one of the specific serious conditions listed in the policy (such as certain cancers, heart attack or stroke), usually subject to a short survival period. It can repay a mortgage or meet costs during illness; definitions vary between insurers.

Where critical illness cover is added to a life policy on an 'accelerated' basis, the policy will:

• a.never make any payment for a critical illness claim
• b.pay out once, on the earlier of a critical illness claim or death, and then end✓
• c.pay double the sum assured on a valid claim
• d.pay separately for a critical illness and again on later death, subject to the usual terms and conditions that apply

Accelerated (combined) CIC pays the sum assured on the earlier of a valid critical-illness diagnosis or death, and the cover then ceases, so there is a single payout. Standalone CIC, by contrast, pays only on critical illness and leaves any separate life cover intact.

Income protection insurance (IP) is designed to:

• a.pay off the borrower's credit cards on their death
• b.repay the whole mortgage capital as a single lump sum
• c.provide a regular replacement income if the policyholder cannot work due to illness or injury✓
• d.cover the structure of the building against storm damage, in line with the lender's normal administrative practice

Income protection pays a regular, usually tax-free, income after a chosen deferred period if the insured is unable to work through illness or injury, typically continuing until recovery, the end of the policy term or retirement. It protects the household's wider budget, not just the mortgage.

The 'deferred period' on an income protection policy is the:

• a.waiting period after incapacity before benefit payments begin✓
• b.time the policyholder has in which to pay the first premium, as it is set out in the mortgage offer document
• c.period that must pass before the policy can be cancelled
• d.length of time for which the benefit will actually be paid

The deferred period is the gap between becoming unable to work and the start of benefit; longer deferred periods (aligned with any sick pay or savings) reduce the premium. Choosing it to dovetail with employer sick pay avoids paying for cover that overlaps.

An income protection policy written on an 'own occupation' basis pays out if the insured cannot perform:

• a.any job whatsoever, even one they are well suited to, in line with the lender's normal administrative practice
• b.ordinary household chores around their own home
• c.their own specific occupation due to illness or injury✓
• d.a set number of basic activities of daily living

'Own occupation' is the most favourable definition of incapacity: it pays if the insured cannot do their own job, even if they could do another. Weaker definitions ('suited occupation' or 'activities of daily living') make claims harder, so the basis materially affects the value of the cover.

Income protection benefit is usually capped at a proportion of the insured's earnings because:

• a.the benefit paid is always taxable in the hands of the insured, as a standard part of the way the arrangement operates
• b.insurers are legally required to pay exactly 100% of earnings
• c.paying too high a percentage could remove the incentive to return to work✓
• d.the mortgage must be repaid in full before any benefit is paid

Insurers cap IP benefit (commonly around half to two-thirds of gross earnings) so that the tax-free income does not exceed take-home pay, preserving the incentive to return to work and reflecting the moral-hazard concern. The exact maximum varies between providers.

Mortgage payment protection insurance (MPPI) is designed to cover the:

• a.lender's legal fees incurred in a repossession action
• b.cost of insuring both the buildings and their contents
• c.full mortgage capital in one lump sum on the borrower's death, and this remains the position for the whole of the mortgage term
• d.borrower's monthly mortgage payments for a limited period following accident, sickness or unemployment✓

MPPI (a form of accident, sickness and unemployment cover) meets the monthly mortgage payment, usually for up to 12 to 24 months, if the borrower cannot work due to accident or sickness, or becomes involuntarily unemployed. It is short-term and payment-focused, unlike income protection.

A common feature of MPPI policies that advisers must explain is that:

• a.the policy repays the entire mortgage loan on a claim, for the full duration of the mortgage agreement
• b.pre-existing medical conditions and voluntary or known redundancy are typically excluded✓
• c.the policy will continue to pay benefit indefinitely
• d.there are no exclusions of any kind under the policy

MPPI commonly excludes pre-existing conditions and situations such as voluntary redundancy or redundancy the borrower was already aware of, and the self-employed may find unemployment cover restricted. Past mis-selling makes clear disclosure of terms and exclusions essential.

An MPPI policy described as 'back to day one' means that, once the deferred period is served, benefit is paid:

• a.for one single day of the claim and no more
• b.at half of the normal monthly benefit rate
• c.only from the end of the deferred period onwards, for the full duration of the mortgage agreement
• d.from the first day of incapacity or unemployment, including the deferred weeks✓

With a 'back-to-day-one' (retrospective) policy, meeting the deferred period triggers benefit backdated to the first day of the claim, rather than only from the end of the waiting period. It gives more generous cover than a purely 'deferred' basis where the waiting weeks are not paid.

A 'waiver of premium' benefit added to a protection policy ensures that:

• a.premiums are paid by the insurer if the policyholder cannot work through illness, keeping cover in force✓
• b.the sum assured is automatically doubled on any claim
• c.the mortgage itself is repaid in full by the insurer
• d.the policy is cashed in and the value paid to the insured, as it is set out in the mortgage offer document

Waiver of premium maintains a policy by covering the premiums during a period of incapacity, so cover does not lapse when the policyholder most needs it and can least afford it. It is a low-cost add-on to life, critical illness or other protection policies.

Buildings insurance should be arranged for a sum insured based on the:

• a.value of the household contents inside the property
• b.outstanding balance of the mortgage on the property, and this remains the position for the whole of the mortgage term
• c.cost of rebuilding the property, known as the reinstatement cost✓
• d.market value or purchase price of the property

Buildings cover should reflect the full rebuilding (reinstatement) cost, which can differ significantly from the market value, since the latter includes land. Insuring for market value can leave the property under- or over-insured; lenders require adequate reinstatement cover.

If a property is insured for less than its full rebuilding cost, the insurer may apply the 'average' clause, meaning a claim is:

• a.paid in full regardless of the sum insured chosen
• b.reduced in proportion to the degree of underinsurance✓
• c.refused outright in every case without exception
• d.increased so that it covers the full rebuilding cost, provided the account is otherwise kept up to date

Under the principle of average, if the sum insured is, say, only 80% of the true rebuild cost, the insurer can scale a claim down by that proportion. This is why keeping the sum insured accurate, often by index-linking, matters so that partial claims are not reduced.

Index-linking a buildings insurance policy helps to:

• a.keep the sum insured rising in line with building-cost inflation, reducing underinsurance✓
• b.reduce the premium payable a little every year
• c.guarantee that the policy will never have a claim
• d.extend the buildings cover to include the contents, for the full duration of the mortgage agreement

Index-linking automatically adjusts the sum insured in line with a construction-cost index, helping cover keep pace with rising rebuild costs and reducing the risk of underinsurance and an average deduction at claim time. The premium adjusts with the sum insured.

Contents insurance, unlike buildings insurance, covers the:

• a.garden walls, foundations and load-bearing structure
• b.borrower's household possessions and personal belongings✓
• c.structure of the property and its permanent fixtures, and this remains the position for the whole of the mortgage term
• d.outstanding mortgage loan owed to the lender

Contents insurance protects moveable possessions (furniture, electronics, clothing and similar), whereas buildings insurance covers the structure and permanent fixtures. Lenders require buildings cover as a condition of the mortgage, but contents cover is the borrower's own choice.

Writing a life assurance policy in trust for the intended beneficiaries can allow the proceeds to:

• a.be paid directly to the lender ahead of the family
• b.pass to beneficiaries quickly, outside the estate and generally free of inheritance tax✓
• c.increase automatically to a much larger guaranteed sum
• d.be paid only after the whole estate has been administered, as a standard part of the way the arrangement operates

Placing a policy in trust means the payout is made to the trustees for the beneficiaries rather than into the deceased's estate, so it usually avoids the delay of probate and falls outside the estate for inheritance-tax purposes. It also lets the policyholder direct who benefits.

A key practical advantage of writing a mortgage-protection life policy in trust is that the proceeds:

• a.can be paid to the beneficiaries without waiting for probate✓
• b.must be paid to the mortgage lender before anyone else, as a standard part of the way the arrangement operates
• c.are always taxed at a flat rate of 40% on payment
• d.are paid only once the estate is fully administered

Because a policy in trust does not form part of the estate, the trustees can receive and distribute the proceeds without waiting for a grant of probate, giving beneficiaries faster access to funds, which is helpful when a mortgage or living costs must be met promptly.

If a person dies without making a valid will, their estate is distributed:

• a.entirely to the Crown in every single case
• b.according to the statutory rules of intestacy✓
• c.in whatever way the deceased's bank decides
• d.equally between all of the deceased's friends

Dying intestate means the estate passes under the intestacy rules, which set a fixed order of entitlement (spouse or civil partner and then blood relatives) that may not match the deceased's wishes. Making a will lets a person choose beneficiaries and appoint executors and guardians.

Making a will is particularly important for an unmarried cohabiting couple because:

• a.a will is a legal requirement for every property owner
• b.the intestacy rules automatically provide fully for a cohabitant
• c.cohabiting couples are not legally allowed to own property jointly, in line with the lender's normal administrative practice
• d.a surviving unmarried partner has no automatic entitlement under the intestacy rules✓

The intestacy rules do not recognise a cohabiting partner, so without a will a surviving unmarried partner could inherit nothing, regardless of the length of the relationship. A will, together with appropriate ownership and protection planning, is therefore essential for such couples.

Stamp Duty Land Tax (SDLT) in England and Northern Ireland is generally:

• a.paid by the buyer, based on the purchase price, on a completed property transaction✓
• b.levied annually for the whole time the mortgage runs, subject to the usual terms and conditions that apply
• c.paid by the seller of the property on completion
• d.a tax charged on the mortgage interest each year

SDLT is a tax paid by the buyer on land and property purchases above the relevant threshold, calculated by reference to the price. Scotland charges Land and Buildings Transaction Tax (LBTT) and Wales the Land Transaction Tax (LTT) instead, each with its own bands.

SDLT is charged on a 'slice' basis, which means:

• a.the tax is simply a flat cash sum on every purchase
• b.only first-time buyers are ever required to pay the tax
• c.each portion of the price falling within a band is taxed at that band's rate✓
• d.the whole price is taxed at the single rate of the top band reached, whatever the borrower's own individual circumstances happen to be

SDLT works progressively: like income tax, each slice of the price falling within a band is taxed at that band's rate, rather than the whole price being taxed at one rate. This 'slice' system avoids the old 'slab' cliff-edges at the thresholds.

A higher rate of SDLT generally applies when a buyer purchases an:

• a.any property at all that is bought below the tax threshold, for the full duration of the mortgage agreement
• b.only or main residence that they will live in themselves
• c.any property that happens to be bought using a mortgage
• d.additional residential property, such as a second home or a buy-to-let✓

An additional-property surcharge adds a higher rate of SDLT on purchases of second homes and buy-to-lets where the buyer will own more than one dwelling. It is relevant to let-to-buy and buy-to-let planning; equivalent surcharges exist under LBTT and LTT.

First-time buyer relief from SDLT (in England and Northern Ireland) works by:

• a.reducing or removing SDLT on eligible first-time purchases up to a set price limit✓
• b.waiving the lender's mortgage arrangement fee on the loan
• c.exempting all first-time buyers whatever the price of the property, for the full duration of the mortgage agreement
• d.refunding the borrower's deposit once the purchase completes

First-time buyer relief reduces or removes SDLT for qualifying first purchases up to a maximum property price, tapering out above it. Because the thresholds and limits change over time, advisers should confirm the current figures rather than rely on memory.

When a borrower wants to repay their mortgage in full, the exact amount required is set out in a:

• a.copy of the title deeds held at the Land Registry
• b.mortgage offer issued at the start of the loan
• c.buildings insurance schedule for the property
• d.redemption statement provided by the lender✓

A redemption statement gives the precise figure to clear the mortgage on a stated date, including the outstanding capital, interest to that date, and any early repayment charge or discharge fee. It is essential for remortgaging, selling or full repayment.

A borrower with a portable mortgage who moves house part-way through a fixed deal can usually:

• a.double the size of the loan with no further assessment
• b.keep the mortgage secured on the old property they have sold, whatever the borrower's own individual circumstances happen to be
• c.transfer the existing rate to the new property, subject to the lender's checks, avoiding an ERC✓
• d.never move house at all until the fixed period has ended

Porting allows the borrower to move the existing product to the new property, subject to a fresh affordability check and valuation, which can preserve a favourable rate and avoid the ERC. Extra borrowing for a pricier home is arranged separately, often at a different rate.

A borrower in negative equity who wishes to remortgage to a new lender will usually find that it is:

• a.very difficult, because the loan exceeds the property's value✓
• b.a route to qualifying automatically for the best rates, for the full duration of the mortgage agreement
• c.straightforward and noticeably cheaper than before
• d.an obligation on the lender to write off the debt

Negative equity, where the mortgage exceeds the property value, makes remortgaging to a new lender difficult, as there is insufficient security and the LTV is above 100%. Such borrowers often have to stay with their existing lender, perhaps on the SVR or through a product transfer.

For a couple protecting a repayment mortgage, a joint-life first-death policy will pay out on the:

• a.second death only, once both of the insured have died
• b.death of each of the two lives, paying out twice in total, provided the account is otherwise kept up to date
• c.condition that both of the insured die at the same time
• d.first death of the two lives assured, after which the policy ends✓

A joint-life first-death policy pays the sum assured when the first of the two insured lives dies, and cover then ceases, which is appropriate for clearing a mortgage so the survivor is not left with the debt. Two single-life policies can offer more flexibility but usually cost more.

If the borrower under a guarantor mortgage defaults, the lender may:

• a.seize the guarantor's own home instantly with no legal process, in line with the lender's normal administrative practice
• b.take no action at all against the guarantor
• c.simply cancel the loan and write off the debt
• d.pursue the guarantor for the outstanding payments under the terms of the guarantee✓

The guarantor has given a legally binding promise, so on the borrower's default the lender can require the guarantor to meet the payments or shortfall in accordance with the guarantee's terms. Because this is a serious commitment, guarantors should understand it fully and consider independent advice.

When a client increases their mortgage through a further advance, a good adviser will:

• a.cancel all of the client's existing protection cover
• b.review whether existing life and other protection cover remains adequate for the higher debt✓
• c.insist that the client takes out income protection only
• d.ignore the client's existing protection arrangements entirely, provided the account is otherwise kept up to date

A larger mortgage means a larger liability, so protection needs should be reassessed to ensure life cover (and, where relevant, critical illness or income protection) is sufficient to clear or service the increased debt. Reviewing cover at each material change supports good customer outcomes.

The FCA's Consumer Duty is relevant to arrears handling because it requires firms to:

• a.treat every customer identically regardless of their needs
• b.maximise the arrears charges they apply to the account
• c.avoid making any contact with customers who are struggling, according to the relevant contract and policy documentation
• d.act to deliver good outcomes, supporting customers in financial difficulty appropriately✓

The Consumer Duty reinforces MCOB 13, requiring firms to support customers, especially those in vulnerable circumstances or financial difficulty, and to act to deliver good outcomes, including through appropriate forbearance and clear communication. It raises the standard expected in arrears cases.

When dealing with a borrower in arrears who has recently been bereaved and is struggling, the firm should:

• a.recognise the customer's vulnerability and adapt its approach to their needs✓
• b.begin repossession proceedings against the borrower immediately, provided the account is otherwise kept up to date
• c.apply its standard collections pressure without any change
• d.refuse to consider any form of payment arrangement

FCA guidance on vulnerable customers, reinforced by the Consumer Duty, expects firms to identify vulnerability (such as recent bereavement) and respond with appropriate care and flexibility. In arrears cases this means considering suitable forbearance and clear, supportive communication.

Under MCOB 13, a firm should not commence or continue repossession proceedings where the:

• a.customer has any level of arrears on the account at all, in line with the lender's normal administrative practice
• b.customer has arranged the required buildings insurance
• c.customer is keeping to a reasonable and sustainable repayment arrangement✓
• d.property has risen in value since it was purchased

MCOB 13 treats repossession as a last resort; if the customer is adhering to an agreed, realistic arrangement to clear the shortfall, the firm should not pursue possession. Enforcement should follow only when other reasonable attempts to resolve the arrears have failed.

A borrower with a £180,000 interest-only mortgage over 20 years wants the cheapest cover to repay the debt on death. The most suitable is generally:

• a.level term assurance for £180,000 over 20 years✓
• b.whole-of-life assurance for the sum of £180,000
• c.family income benefit paying a monthly income
• d.decreasing term assurance over the 20-year term

Because an interest-only balance stays at 180,000 throughout, level term assurance keeps the sum assured constant to match it, and it is cheaper than whole-of-life for a defined term. Decreasing term would leave a growing gap, as its payout falls while the debt does not.

Many critical illness policies include a 'survival period', meaning the insured must:

• a.survive right up to the end of the mortgage term
• b.have survived at least one full year before a claim, as it is set out in the mortgage offer document
• c.never make a claim on the policy during its term
• d.survive a short set period, for example 14 days, after diagnosis for the claim to be paid✓

A survival period requires the policyholder to live for a specified short time (commonly 10 to 14 days) after diagnosis or surgery before the lump sum is paid, distinguishing CIC from life cover. If death occurs first, any linked life cover, rather than the CIC element, would respond.

Standard buildings insurance typically covers damage caused by:

• a.a fall in the market value of the property
• b.insured perils such as fire, flood, storm and subsidence✓
• c.the borrower losing their job and their income
• d.the general wear and tear of the property over time, provided the account is otherwise kept up to date

Buildings policies cover the structure against specified perils, such as fire, flood, storm, escape of water and subsidence, subject to the policy terms and any excess. They do not cover gradual wear and tear, nor economic risks such as falling values or unemployment.

The key difference between MPPI and income protection is that MPPI:

• a.pays out a lump sum on the death of the borrower
• b.insures the building and its contents against damage, as it is set out in the mortgage offer document, in line with the lender's normal administrative practice
• c.lasts for the whole of the borrower's working life
• d.covers only the mortgage payment and pays for a limited period, whereas income protection replaces a wider income, often to retirement✓

MPPI is a short-term, mortgage-payment-focused product (typically paying up to 12 to 24 months) covering accident, sickness and unemployment, whereas income protection provides a broader replacement income for as long as incapacity lasts, up to the policy term or retirement. IP does not usually cover unemployment.

Where a life policy is formally 'assigned' to a lender as security for a mortgage, the effect is that the:

• a.policy is cancelled as soon as the assignment takes effect, unless the borrower and lender later agree otherwise
• b.premiums on the policy are paid by the lender from then on
• c.lender gains rights over the policy proceeds to the extent of the debt✓
• d.borrower can no longer be the life assured on the policy

Assignment transfers rights in the policy to the lender as collateral, so on a claim the proceeds are first applied to repay the mortgage debt, with any balance to the borrower or estate. This is less common now than simply writing cover in trust, but the concept still appears.

MCOB 13 requires that a firm dealing with a customer in arrears must not:

• a.provide the customer with the FCA's arrears information sheet, subject to the usual terms and conditions that apply
• b.discuss any of the available repayment options with them
• c.consider offering the customer any form of forbearance
• d.put pressure on the customer through excessive contact or press them into a hasty sale✓

MCOB 13 prohibits firms from applying undue pressure, for example through oppressive contact or by pressing a customer into a distress sale, and requires fair, proportionate engagement. The aim is to help the customer resolve the arrears, not to harass them.

When conducting a protection needs analysis for a new homeowner, the adviser should first:

• a.recommend the most expensive protection policy available, whatever the borrower's own individual circumstances happen to be
• b.assume that the client needs no protection at all
• c.establish the client's needs, existing cover and budget before recommending suitable protection✓
• d.sell the client critical illness cover and nothing else

A sound protection recommendation starts with fact-finding: identifying the liabilities (the mortgage), dependants, existing cover, employer benefits, and the client's budget and priorities. Only then can the adviser recommend suitable, affordable cover, consistent with MCOB and Consumer Duty suitability expectations.