Security Valuation - Brokers Ireland · What is a Security Valuation •The process of determining how much a security is worth. Security valuation is highly subjective, but it is

Security Valuation

A Presentation by Joanne Lavelle BSc

MIPAV AssocSCSI REV Mediator

Michael Lavelle Estate Agents

What we will cover today

• Security Valuation – what is it?

• The Valuer – who is s/he?

• Considerations for the Valuer

• The Valuer’s Duty of Care

• The Process

• The Issues

• The ‘Risk’

What is a Security Valuation

• The process of determining how much a security is worth. Security valuation is highly subjective, but it is easiest when one is considering the value of tangible assets, level of debt, and other quantifiable data of the company issuing a security.

• The Valuer boils it down to this:

The day you buys is the day you sell…

Who is your Valuer?

• Someone with a ‘nose’ for value • Someone who will ‘sort it out’• Someone who is qualified and accredited • Someone who knew the previous owner’s

godparents’ neighbours – or

• Someone who negotiates / sells property all the time

• Someone who can credibly stand over their work• Someone who knows what sold, when, and for

how much • Someone who is a recognised Valuer

An Accountable Process

• The new approach, after decades of unaccountable, poorly monitored lending….

• Everyone must be credible• Everyone must be professional • Everyone must be accurate• Everyone must operate in real time and in

factual terms • Everyone must be adequately indemnified

Considerations for a Valuer

• The objective…..– Is it mortgagable? – Does it meet our criteria as a ‘normal’ dwelling? – Is it feasible?

… Is it worth it?

• The subjective…. – How does it compare with the house next door? – Are they comparing apples with oranges? Messi with Ronaldo?

… Is it worth it?

• The sublime….. – Is there a weird plant from Japan in the garden? – Is it going to upset underwriting?

… Is it worth it?

Questions that arise…

• Is it transacting at the right price? • Is it oversold / undersold? • Can the Valuer back it up with relevant comparable

evidence? • Does the reinstatement value match the purchase price? • New homes

– Are there any incentives? – How many are sold?– How many future phases are planned? – Is there any overhang from previous phases?

• Self-build – do the figures stack up?– Rights of Way – is it ‘clean’? – If it had to be sold, would a complete stranger want to live

there?

The Valuer’s Process

• Instruction goes to Valuer… tick tock…

• 3 day limit… schedule, inspect, assess, report

• Couldn’t get access?

• Couldn’t find comparables?

• File the report late? My bad!!!

• Late again? Bye bye!

Duty of Care…

• To whom is the Valuer responsible?

• (discuss scenarios here)

• The Valuer effectively stands in the shoes of the Bank = sees and notes what they need to know

The Valuer’s Risk

• Valuer’s Risk– Removal from a panel – Litigation for negligent property valuations – Brownrigg v Leacy [2014]

https://www.irishtimes.com/business/agribusiness-and-food/wexford-farmer-sues-auctioneers-over-land-valuations-1.1472812

• In order to bring a successful claim against a Valuer for overvaluing property securing a loan, it is necessary to establish negligence, causation and loss:– that the Valuer owed the claimant a duty of care– that the Valuer fell below the standards to be expected of a

reasonably competent Valuer and that his/her valuation fell outside an acceptable ‘margin for error’

– that the lender (or issuer) relied on the valuation and would have acted differently if the valuation had been accurate

– That, as a consequence, the lender suffered a loss which falls within the scope of the Valuer’s duty of care

https://www.irishtimes.com/business/agribusiness-and-food/wexford-farmer-sues-auctioneers-over-land-valuations-1.1472812

The Valuer & The Broker

• How credible your Valuer is, reflects on how credible the Broker is…

• Don’t leave the bank wondering about the credibility of your proposition

• A Valuation Report must report FACT

Conclusion

Fiction has no place in Security Valuations…

in everyone’s interest

Credibility counts…

Selling Immoveable Property

A Presentation by

Joanne Lavelle

BSc MIPAV AssocSCSI REV Mediator

Michael Lavelle Estate Agents

What we will cover…

• The Mortgage Valuation as part of a bigger picture

The Property

The Market

Selling a Property

• Legal Context

– Property Services (Regulation) Act 2011

– Land & Conveyancing Law Reform Act 2009

• A much changed, closely regulated legal environment

– Estate Agents are regulated (PSRA)

– Solicitors are self-regulated (Law Society)

– Engineers are more accountable

Week 1 Week 2 Week 3 – 6 Week 7-15 Week 16

Pick your agent:Sales ValuationProfessionalismSlick operation Local knowledge Good terms

Preparations:DeclutterBERCompliance Cert Advise Solicitor Reg Septic tank

On market: ViewingsSecond viewsNegotiationsAGREE DEAL

Contracts: Mortgage stage ValuationSurvey

MOVE HOUSE!!

Comment: The Mortgage valuation comes late in the process!

How many values does a house have?

• Asking Price / AMV

• Agreed sale price

• Valuer’s opinion of value

• Reinstatement value

• If works – value on completion

• If self-build – value on completion

• The ‘Property Opinionati’

• The Revenue-friendly figure – check it upfront, not later!!

What affects Value?

• Things you can see– Location & Neighbourhood – Accommodation – Condition

• Things you cannot see – Title – Building & Planning Regs – Structural issues – Energy efficiency

Factors of the property market

• External Factors

– Supply v Demand of stock

– Government policy

– Availability of credit

– Time of Year

– Planning policy

Factors of the property market

• Internal Factors

– Is the house unusual? Any USP’s?

– How is the Location?

– Is the AMV accurate?

– Is the house compliant?

• Planning issues

• Works eg attic conversion

– Any structural issues?

• Cracks, damp, rot, wiring, plumbing

• Services, Boundaries

The Valuer’s Process

1. Instruct the Valuer

2. The Valuer inspects the property, assessing key lender criteria

3. Reach Opinion of Value (does it match the PP or AV?)

4. Find comparables

5. Report compiled and issued

The Valuer’s Sources

• Property Price Register

• Daft.ie

• Local agents

• Myplan.ie

• Landdirect.ie

• Local Authority website

Conclusions

• The Valuation is always left til last – too much depends on it!

• Any number of factors can become apparent at Valuation stage

• Observant Valuer…a good thing or a bad thing? Banks rely on our eyes

BROKERS IRELAND

MARKET UPDATE

RACHEL MCGOVERN

DIRECTOR, FINANCIAL SERVICES

MARKET UPDATE

30th of May the Banking & Payments Federation Ireland (BPFI) has published the latest figures from the BPFI Mortgage Approvals Report for April 2018.*

• The following are the key elements:

• 3,751 mortgages were approved in April 2018

• 1,776) were for first-time buyers

• 1,087 were for mover purchasers mortgages approvals up 14.2% year-on-year

• Mortgages approved in April 2018 were valued at €842

• The value of mortgage approvals rose by 19.8% year-on-year

• Re-mortgage/switching approvals rose by 103.5% on a year-on-year basis

• The average home purchase approval in April 2018 was €237,732, up by 5.9% year-on-year.

OVERVIEW OF TRENDS

VIEW OF TRENDS

Source: BPFI May Housing Market Monitor

Property transactions


Mortgages- Drawdowns and Approvals


MEDIAN DEPOSITS


Median Incomes


Median Price to Income Ratios


Cash Sales Ratios

Source: BPFI May Housing Market Monitor/CSO

• Continuing increased activity in approvals and drawdowns

• Structural Changes- Mortgages

- Non purchase activity has declined

- Due to lack of supply, share of new homes declined

Conclusions

BROKERS IRELAND

FINANCIAL & ECONOMIC FACTORS

RACHEL MCGOVERN

DIRECTOR, FINANCIAL SERVICES

FINANCIAL AND ECONOMIC FACTORS

4 Major Factors That Shape Market Trends

• Government

• International Transactions

• Speculation and Expectation

• Supply and Demand


Government

The government have already interfered in the mortgage space bythe introduction of the macro prudential rules in February 2015.

These rules limit the loan to value and multiply of income that canbe used in determining how much a borrower can obtain from alender.

In Ireland both the Fiscal and economic policy is in some partdetermined by the EU.

Fiscal policies have a significant impact on economic growth,macroeconomic stability and inflation. Key aspects in this respectare the level and composition of government expenditure andrevenue, budget deficits and government debt. Fiscal discipline isa pivotal element of macroeconomic stability.


Government cont..

The economic policy of governments covers the systems forsetting levels of taxation, government budgets, the money supplyand interest rates as well as the labour market, nationalownership, and many other areas of government interventionsinto the economy.

Interest rates in Ireland are however determined not bygovernment but by the ECB.


International Transactions

The flow of funds between countries effects the strength of a country'seconomy and its currency. The more money that is leaving a country, theweaker the country's economy and currency. Countries that predominantlyexport, whether physical goods or services, are continually bringing moneyinto their countries. This money can then be reinvested and can stimulatethe financial markets within those countries.


Speculation and Expectation

Speculation and expectation are integral parts of the financial system. Consumers, investors and politicians all hold different views about where they think the economy will go in the future and that effects how they act today. Expectation of future action is dependent on current acts and shapes both current and future trends. Sentiment indicators are commonly used to gauge how certain groups are feeling about the current economy. Analysis of these indicators as well as other forms of fundamental and technical analysis can create a bias or expectation of future price rates and trend direction.


Supply and Demand

Supply and demand for products, services, currencies and other investmentscreates a push-pull dynamic in prices. Prices and rates change as supply ordemand changes. If something is in demand and supply begins to shrink, priceswill rise. If supply increases beyond current demand, prices will fall. If supply isrelatively stable, prices can fluctuate higher and lower as demand increases or

decreases.


Supply and Demand Cont..

In the housing market, the law of supply and demand is prominent.Generally, each housing transaction involves a buyer and a seller.The buyer places an offer for a property and the seller may acceptor reject the offer. The law of supply and demand dictates theequilibrium price of a property.

When there is a high demand for properties in a particular city orstate and a lack of supply of quality properties, the prices of housestend to rise. When there is no demand for housing due to a weakeconomy and an oversupply of properties is available, the prices ofhouses tend to fall.


Supply and Demand Cont..

At the moment the lack of supply in some ofthe urban areas in Ireland is causing houseprices to increase to unaffordable levels for a lotof potential borrowers.

LACK OF SUPPLY

Source: Eurostat / BPFI May Housing Market Monitor

LACK OF SUPPLY


NEW DWELLINGS COMPLETED

Source: Department of Housing

NEW DWELLING COMMENCEMED

Source: Department of Housing

Properties listed for sale

Source: Daft.ie

PROPERTIES LISTED FOR RENT

Source: Daft.ie

TRANSACTION PRICES

Source: CSO

LISTED SALE PRICE

Source: Daft.ie

LISTED RENTAL PRICE

Source: Daft.ie

HOUSE PRICES

Source: The Daft.ie House Price Report – 2018 Q1

PRICE INDEX


TRANSACTION PRICE


DUBLIN


LEINSTER


MUNSTER


CONNACHT / ULSTER



• Supply & Demand

• Government intervention

LUNCH

BACK AT 13.00

THANK YOU!

ETHICSDr. John Cullen

thinking versus doing……

Contemporary business ethics

■ Negative

■ Positive

■ Prescriptive

■ What are our lives for?

■ Everything in nature has purpose (telos) that is specific to itself in the grand scheme of things.

■ The purpose of our short human lives is our essence, so we must find out what our telos is.

■ The things that make a contribution to ‘the good’ in nature are what make them ‘excellent’ at fulfilling their purpose.

■ These qualities = virtues

■ Arete = Excellence [Greek], but often translated as virtue

■ What makes us individually excellent?

human virtues

■ Humans differ from the rest of nature because

we are self conscious ‘rational animals’

■ What we want from life is happiness

■ But happiness means different things to

different people…..

Aristotle said that we generally believe that 3 things can make us happy…..

■ Pleasure

– Aristotle rejects this because animals also share this.

– It isn’t uniquely human

■ Honour or status

– Aristotle also rejects this because animals also have a ‘pecking order’

– Sometimes people seek these without having earned them

■ Virtue

– True happiness is not pleasure or prestige

– It is the process of finding our purpose and flourishing as a result of doing it.

Artistotle’s ‘Nicomachean Ethics’ (Book 1)

‘We are now in a position to define the happy man as “one

who is active in accordance with complete virtue, and who is

adequately furnished some external goods, and that not for

some unspecified period but through a complete life”. And

probably we should add “destined both to live this way and to

die accordingly”; because the future is obscure to us, and

happiness we maintain to be an end in every way utterly find

and complete. If this is so, then we shall describe those of the

living who possess and will continue to possess the state

qualification as supremely happy – but with a human

happiness” (p.. 85).

Virtue ethics

‘The virtues are the only things worth pursuing for their own sake, for they constitute the

deepest happiness and true honour. True happiness is not the same thing as having

pleasurable states of mind, but is instead the process of flourishing, of one’s nature

flowering. It is the joy of being what you’re meant to be, of doing what you’re meant to

do, and doing it well – of being a goo specimen of your species. It is fulfilling your

‘destiny’. The virtuous life is our telos. Aristotle’s word for the true happiness of a

fulfilled and flourishing life is eudaimonia.’ (Stewart, 2009: 61).

SO, it is in our interest to be moral because each one of us is supposed to have a deeply

satisfying, fulfilling, purposeful and happy life.

Being moral means acquiring virtues.

How do we acquire the virtues that will help us flourish?

■ No quick fixes!

■ The doctrine of the mean

– Virtues lies between vices of deficiency and vices of excess

■ Good role models and mentors

■ The four Ancient Greek cardinal virtues

– Courage

– Temperance

– Justice

– Wisdom

■ We develop character through practice and making our virtues habitual

■ These habits will help us make the right call each time we are unexpectedly tested

Trolleyology!

Other ‘classic’ approaches to bringing about happiness…

Utilitarianism

■ The greatest good (or happiness) of

the greatest number should be our

aim.

Consequentialism

■ The results of an action count in

deciding whether it is ethical or not

■ The Categorical Imperative

– Used for determining whether actions are

right or wrong

– Can a maxim be universalised for

everyone?

– If the maxim can be universalised without

self-contradiction, then it passes the

categorical imperative test. If it doesn’t,

then it is wrong, and nobody should do it,

even when the consequences look

appealing.

– ACT ON THOSE MAXIMS WHICH YOU CAN

WILL TO BE UNIVERSAL LAWS

– ALWAYS TREAT OTHER PERSONS AS ENDS

IN THEMSELVES AND NEVER AS MEANS

Virtue ethics grows in interest from the 1950s…..

Alasdair MacIntyre (1979)

‘Everyone needs to find some productive work to do in the world, if their lives

are to have point and meaning.

Productive work has point and purpose, both because of the way in which it involves us in common enterprises

with others and because of the ways in which it is worth doing in and for

itself.’

BUT ARE THESE IDEAS PRACTICAL?

Will these theories work in real life?

■ What happens to our ethical, moral or religious

beliefs when we see someone close to us suffer?

■ Evil appears to always trump goodness?

■ Power corrupts absolutely?

■ Is virtue really rewarded?

■ How can we think about the good life when we are

busy dealing with all this guilt and anxiety?

OTHER PROBLEMS WITH ETHICS?

‘First, psychoanalysis is in a position to take up

the promise of ancient Greek ethics: namely the

development of a robust moral psychology. Plato

and Aristotle are explicit that the virtuous person

must have an integrated, harmoniously

functioning psyche. But they cannot say in any

detail what such harmony consists in. They use

suggestive phrases – for example, that the

rational and non-rational parts of soul much act

“in concord” or “speak with the same voice” –

but at the time they wrote, such places could

only serve as placeholders. If moral psychology

is to avoid the charge of cheerleading for an

illusory image of virtue, it mush provide a

convincing account of what the required psychic

unity amounts to. Psychoanalysis is especially

well-placed respond to this challenge – and thus

take up the legacy of ancient Greek ethical

thought’.

Freud’s fundamental rule of psychoanalysis.

An analysand is asked to say

whatever it is that comes

into his or her mind, without

censorship or inhibition.

Carol Gilligan

What can we learn from contemporary ethical controversies?

It doesn’t matter what you do, or how you do it, it is your personal reason why you do it that matters.■ S.C. – identify your principles and live by them

■ Aristotle – find your purpose

■ Peterson – accept personal responsibility for your own life

– Don’t blame others or participate in systems that blame others.

– If you fail to live up to your personal ethical responsibilities, you will blame

other groups

– Your ethical drive focuses on destroying ‘evil’ rather than fostering what you

believe to be good.

responding to the fact of morality: denial

■ Faced with death, we construct

‘immortality projects’ (means of

reminding ourselves that our

existence is significant)

■ These projects are based on our

ideas of just systems of living and

governing

■ Conflicts emerge between

immortality projects

■ Frustration with not being fulfilled

can lead to illness

the fact of mortality

■ Julia Kristeva

‘contemporary secular discourse and

philosophy cannot successfully

accommodate the inevitability of death,

which has meant that secularism is in

crisis and religious/spiritual traditions

are not’

responding to the fact of morality: engaging

‘To philosophize is to learn how to die’.

“Remembering that you are going to die

is the best way I know to avoid the trap of

thinking you have something to lose. You

are already naked. There is no reason

not to follow your heart”

Jobs, S. (2005) Stanford Commencement Address

[Speech]. 12 June. Available from:

http://news.stanford.edu/news/2005/june15/jobs-

061505.html [Accessed 08 December 2014].

Feeling that what we do is meaningful is critical to our wellbeing.

■ PTSD = anxiety disorder in response

to witnessing or exposure to a

traumatic experience

■ Moral Injury =depression as a result

of knowing that they have violated

their own values.

A persistent sense of meaninglessness

arises.

What to do with this sense of meaninglessness?

Camus ‘We must imagine Sissyphus happy’

Kierkegaard: Faith is the opposite of despair

‘ And however difficult life may seem, there is always something you can do and succeed at. It matters that you don’t just give up.”

Stephen Hawking

Brokers Ireland Mortgage Services

(h)Appropriate knowledge of the consumer’s creditworthiness

assessment process or where applicable, competence in assessing consumers’ creditworthiness;

Kimberley Hyland - Mortgage Manager

Assessing Creditworthiness

When assessing a case you need basic information from Client

Name

Age (term)

Income (taxable)

Area in Ireland they wish to purchase (LTV and product restrictions)

Brief summary of what they wish to do

• CBI Rules

• ICB & The Central Credit Register

• Help to Buy

• Affordability

• Repayment Capacity

• Balance Of Funds

CBI Rules

• On the 27th of January 2015 - Central Bank of Ireland announced

new restrictions on mortgage lenders in relation to the loan to

values and loan to income ratios

• The new rules for Loan to Value (LTV) for principal dwelling

houses (PDH) differentiate between First Time Buyers (FTBs), Non-

First Time Buyers (NFTBs) and Buy To Lets (BTLs).

NFTB CBI rules

PDH mortgages for NFTBs are subject to a limit of 80% LTV

Example

Property price €350,000

20% deposit = €70,000

*unless the lender approves this application as part of its 20% of

lending allowed to exceed the new limits.

It’s important to note that borrowers in negative equity who wish to

obtain a mortgage for a new property are not within the scope of

these new LTV limits.

FTB CBI rules

• The ceiling on the loan to value (LTV) ratio for all first time buyers is set at 90 per cent. This is a shift from the previous requirement, which put the ceiling at 90 per cent for loans up to €220,000 but at 80 per cent for the balance of loans above €220,000.

• This means that first time buyers will be able to borrow up to 90 per cent of a value of a home, with a requirement for a 10 per cent minimum deposit.

• The structure of the proportionate LTV allowances is amended. Five per cent of the value of new lending to first time buyers will be allowed above the 90 per cent LTV limit

Buy to Lets

BTLs mortgages are now subject to a limit of 70% LTV.

This limit can only be exceeded by a maximum of 10% of the euro

value of all housing loans for non PDH purposes annually.

Example - BTL:

Property price €350,000

30% deposit of €105,000 is required,

*unless the lender approves this application as part of the 10%

exception allowed to exceed the new limits.

Loan to Income (LTI)

In relation to the Loan to Income (LTI) measures for PDH mortgages,

these are subject to:

• A limit set at a multiple of 3.5 times loan to gross income.

• This limit must not exceed more than 20% of the euro value of all

housing loans for PDH purposes annually split at 20% FTB and 10%

NFTB

Example

Gross Income of joint borrowers of €40,000 and €30,000

Maximum loan now allowable is €245,000, unless the lender

approves this application as part of its 20% allowed exceeding the

new limits

Exemptions

Applicants can apply for an exemption for LTV or LTI. (not both)

Generally a property should be identified

Must have repayment capacity

Must not be at max on the other exemption. i.e. if looking for LTI

exemption the can not be at maximum loan to value on the

application.

Must have clean ICB

Must be well within nets

ICB & The Central Credit Register

What is an ICB

The Irish Credit Bureau (ICB) is the biggest credit-referencing agency in Ireland. The bureau is an electronic library or database that contains information on the performance of credit agreements between financial institutions (for example, banks and building societies) and borrowers (the citizen). A credit agreement can include a mortgage, car and personal loans and leasing and hire purchase agreements. Credit card details are included in the ICB library.

Credit cards and credit historyIn the past, information was mainly supplied by the lenders only where credit cards were revoked or cancelled. Now lenders have the option of supplying full information about opening and closing balances to the ICB. Your card repayment performance will be measured by the ICB on a monthly basis but due to the nature of credit cards, you also get an additional 30 days before negative information about your record is recorded.


Length of time records are kept for

Members of the Irish Credit Bureau send information about to the loans they have given to their customers to the Bureau. Therefore, information about a loan will be kept on the ICB database for the full term of the loan whether this is a 3-year personal loan or a 30-year mortgage. The ICB Member records the customer's performance on the repayments and this information is then sent to ICB where it is also recorded.

When the loan is completed or when it reaches a frozen state (that is when it is Written Off) the 5-year retention term clock starts ticking. In other words, regardless of what the customer’s performance on the loan was like, once the loan is terminated in its current state - it will then stay on the ICB Database for 5 years from that date


What is The Central Bank Register

• The Government gave a commitment to the IMF to develop a legal framework

that would facilitate the collection and centralisation of information on credit,

which has resulted in the creation of the Central Credit Register (the Register).

• The Register is a secure database established and controlled by the Central Bank

of Ireland, under the Credit Reporting Act 2013. It is used to collect and store

personal and credit information on loans of €500 or more from lenders.

• From 30 June 2017 and every month after that, the lenders will

submit information to the Register to enable the updating of the

comprehensive credit report. The credit report will help lenders

when it comes to making decisions about their loans and loan

applications.

• The Register will promote greater financial stability by supporting

a full and accurate assessment of loans and loan applications.

What is Included on the Central Credit Register• Credit Cards• Mortgages• Overdrafts• Personal LoansWhat is NOT Included on the Central Credit Register• Hire Purchase/PCP*• Utility Bills• Income and salary information• Deposit accounts• Tax Liabilities• The court services• The Insolvency Service of Ireland

*these are intended to be included in the future.

Cont…• Loans will be included if the loan is for €500 or more, and the

borrower lives in the State at the time of applying for the loan, or • where the loan agreement or loan application is governed by Irish

law. Over 500 Lenders are included on the Register including, • Asset finance house• Banks• Credit Unions• Firms that have acquired loan books from Irish Financial Institutions• Licenced moneylenders• Local authorities• NAMA

When will the Register start?

• From 30 June 2017, and every month after that lenders will submit the personal and credit information to the Register. This will apply to any existing loans they have of €500 or more at 30 June 2017, and any new loans of €500 or more that you take out after that.

• From 30 March 2018, information on loans from licensed moneylenders and local authorities will be included in the Register.

• How far back does the information go? • Personal and credit information for loans existing at 30 June 2017

will be added to the Register from 30 June 2017. No details about transactions on your loans before 30 June 2017 will be submitted to the Register.

What information will be included in the credit report?

Personal information includes• Name, current and previous addresses, DOB. PPSN number, gender,

Eircode and telephone number.

Credit information given includes• Loan type, Lender name, Loan amount, Loan balance, outstanding

balance, no. of overdue payments, date of next payment and the amount of next payment.

• The Central Bank will publish on the website www.centralcreditregister.ie the exact date of when this service will become available.

Help to Buy Scheme

Rules• First Time Buyers must not have individually or jointly with any other

person previously built or owned a property• All tax affairs must be up to date and any outstanding will be

deducted from the eligible amount• Property purchased must be occupied by the applicants for 5 years

post completion• To qualify they must have closed between 19/7/2016 – 31/12/2016Or• Building new property or purchasing from a registered contractor

from 01/01/2017

Rules cont…

• Maximum amount claimable per property is €20000 and purchase price is equal or less than €500,000.00

• If a joint application they can each claim but subject to the above• The qualifying amount is based on tax paid over the last 4 years and

any outstanding tax liability.• Grants will be paid directly to the property contractor once all final

contracts have been signed• FTBs apply through ROS or PAYE • The applicants can print off confirmation of amount they are eligible

for and the reference to provide the lender with balance of funds proof.

Assessing Affordability

All applications must show affordability. We must evidence the affordability up front through income documents and bank statements. To do a full initial assessment you require;

• Income figure

• Repayment capacity

• Balance of Funds

It is important to look closely at each, and ensure that payslips match bank accounts and they can afford the savings. We will be looking at each area above in more detail next.

Before we look at calculations it important to understand where a lender looks for affordability. The areas are:

• MSR mortgage service ratio

• NDI net disposable income

• Repayment capacity

It is not sufficient for an applicant to meet some of these areas. They must meet all the above.

MSR

MSR is the monthly stressed mortgage repayment expressed as a percentage of the sole or joint applicants net monthly income.

Lenders may vary slightly but we would look at approximate MSR being

€0 - €34999 up to 35% of income can be used for mortgage payment

€35k - €59999 up to 40% of income can be used for mortgage payment

€60k - €74999 up to 42.5% of income can be used for mortgage payment

€75k - €124999 up to 47.5% of income can be used for mortgage payment

€125+ 50% of income can be used for mortgage payment

Net Disposable Income

NDI is the sustainable residual net monthly income after making the stressed repayment and any other regular monthly outgoings.

Again this figure can vary per lender but we have provided you with the general figures below:

Single €1400

Couple €1900

Child €375

Net Disposable Income

Example

Mr and Mrs Smyth applying for a mortgage have 2 children.

Couple €1900

Child x2 €700

They would need €2600 left out of there net income after making all monthly payments including the new mortgage payment. (discuss living expenses sheet)

Net Income can be worked out on PwC Tax calculator

Repayment Capacity/Banking Profile

Repayment capacity must be evidenced in all cases. Repayment capacity shows the lender that the client can repay the stressed monthly mortgage payments.Proven repayment capacity can be • Current rent/mortgage payments • Current savings *• Current loan repayments (only if cleared prior to drawdown)• Increase in current account balance (over last 6 months)• Pension contributions (non-mandatory that will no longer be made)Rent and savings must be evidenced in the bank statements and where rent is paid to a direct family member this may be discounted by the lenders*Savings made from a current account that is continuously operating an overdraft will be excluded

Balance of Funds/Savings Background

Lenders ideally like to see borrowers have an established regular savings

pattern. Where applicants do not have savings and are reliant on a gift, the

lender may reduce the amount they can borrow. Savings do not have to be in

the form of a general savings account , and may come from various sources;

• Regular mandated savings (shown over 6 months)

• An increase in the balance of the a current account (must be shown over 6

months)*

• Investments in stocks – provided they are regular and are increasing

• Savings bonds

The monthly savings figure can be used for repayment capacity

Balance of Funds

Sale of Shares or Property & Inheritance

Sale of shares will require evidence, generally this can be in the form of a statement

from the company. Where the balance comes from the sale of a house, they will look

for the confirmation by way of a solicitors letter.

Balance of funds obtained by way of inheritance must be shown as lodgement in

account and a solicitors letter confirming the source and that the inheritance tax has

be cleared.

Gifts

For cases where the applicant is being gifted the balance of funds you must supply

the following

• Gift letter*

• Statements (from both parties)**

Balance of Funds

GiftsA gift may also be given by way of discounted purchase price.

• the gift letter must state the gift amount, that the gift is non-returnable

and that the person waives all interest in the property. It should clearly

confirm the relationship to the borrower/s.

• statements from the gifter are required to confirm that they are gifting

monies from an un-borrowed source.

Some lenders will require deed of confirmations and a solicitor to confirm the

3rd party has received independent legal advice in relation to the gift

amount. This is generally for the larger gifts.

Credit Criteria and Assessment Rules

• LTVs• Ages and Terms• Income• Banking Profile

LTVs*80% refinance for BTL but 70% new lending

** Overall LTV upon completion.

Product Haven KBC permanent tsb Pepper Money

FTB 90% 90% 90% 90%

Home Mover 80% 80% 80% 80%

Switcher 90% 90% 90% 80%

Buy to Lets 70% 70% 80%*

Holiday Homes 70% 70% 70%

Self-Build** 90% 75%

Age and TermsTerm PAYE Self-employed

*Max term less than 30 years to aged 68, Max term greater than 30 years to aged 65.

Product Haven KBC* permanent tsb Pepper Money

FTB 35 65 70 35 68 68 35 70 70 30 67 67

Home Mover 35 65 70 35 68 68 35 70 70 30 67 67

Switcher 35 65 70 30 68 68 35 70 70 30 67 67

Buy To Let X X X 25 68 68 25 70 70 25 75 75

Holiday Home 25 65 65 25 68 68 25 70 70 X X X

Self Build 35 65 70 X X X 35 70 70 X X X

Assessing Income and Employment

Income & Employment

1 year continuous employment minimum required. Will look at

teachers/medical staff on contracts provided they have been renewed

and letter confirming renewal is highly likely.

Will take between 25% - 50% of Over Time and Bonus provided

evidenced in last 3 years P60s and satisfactory employer confirmation.

Income

PAYE• Payslips, x 3months*• P60 (if using bonus or OT please supply last 3 years)• Salary cert (must be with in last 2 months)SELF-EMPLOYED2 or 3 years depending on lender annual accounts2 or 3 years depending on lender chapter 4 form 1112 months business bank accounts

Only original required from the list is the salary cert*if paid weekly you must still submit a full 3 months payslips

Assessing Income docs,

PayeAlways look at the taxable year to date figure, and divide by the insurable week and multiply by 52. This figure should closely match the salary cert. Ensure you check for employee pension deductions as this can have a negative impact on the success of the application if not factored in. Check previous years insurable weeks on p60 to ensure that they have been employed as per salary cert.

Self-employedLook at the Form 11 figure for total taxable income. This should match closely with the net profit plus depreciation on the accounts. The lenders will average the last 2-3 years for income figure. Take note if profits increased or decreased more that 20% then they will take the average of 3 years. Always look at the accounts year on year to ensure no huge differences particularly in the directors remuneration or wages and the cash held in bank.

Bank StatementsInvestigate the bank statements

• Referral fees / Unpaid DD’s etc. • Is the salary mandated? • Are there further loan payments?• Is there children’s allowance?• Are clients in their overdraft?• Are rent payments evident? • No mini statements or screen shots of internet transactions• Credit card, loan, savings and current accounts all needed• Dated no longer that 4-6 weeks ago

These are the key elements needed to assess consumers’ creditworthiness. While lenders may have slight variances, these are the sections that should require main focus.

Brokers Ireland Mortgage Services

(a)Appropriate knowledge of credit products falling within Regulation 5

and the ancillary services typically offered with them;

Kimberley Hyland - Mortgage Manager

PRODUCT

RATE

LENDER OFFERS

ADDITIONAL REQUIREMENTS

First Time Buyer

NFTB

Buy to Let

Holiday Home

Switcher

Re-mortgage

Equity Release

Self-Build

FX-Mortgage

Pension Mortgage

Negative Equity

Fixed RateVariable

Rate

Residential Lender Rates

Investor Lender Rates

New Business

Rates

Discounted Rate

Interest Only

Tracker Rate

Discounted Rates

Cashback

Home Insurance discounts

Cash Switchers

Savings on monthly

Repayments

Moratorium Offer

Split Rate Products/Flexi

Tracker Portability

No fee

Valuation

Life Cover/Mortgage

Protection

Buildings Insurance

Legal Fees

Stamp Duty

Thank You

Q & A

Documents

Security Valuation - Brokers Ireland · What is a Security Valuation •The process of determining how much a security is worth. Security valuation is highly subjective, but it is