Conservative Party Conference

October 2011

Prepared for

EMMA CARIAGA

LAND SECURITIES

Helping kick-start the housing market

www.easy-step.co.uk

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“Capital adequacy and responsible lending issues

have created a market where borrowers realistically

require a deposit as high as 25%. The result is a

struggling housing market. The Belgravia top up lending

proposition is unique in securing a framework for

lenders to share risk and to meet capital adequacy

and responsible lending requirements. It provides

borrowers with access to true, responsible 90% lending.

The scheme is privately funded with over £250m

available – double the government allocation. Whilst

supporting home builders in their sales needs, it also

allows them to recapitalise in months rather than

years.”

John Lloyd BA (Hons), MBA

John Lloyd 07595953277

Robert Rogers 07914818651

www.easy-step.co.uk

Background:

Capital adequacy and responsible lending issues have created a market

where borrowers realistically require a deposit as high as 25%. There are a

large number of 90% loans available and there are great aspirations for 95%,

but the reality is that the banks cannot afford the capital reserves to

substantiate such lending and the FSA demand substantial validation for high

risk lending. The result – a struggling housing market.

Current solution:

The current solution is the government-backed shared equity scheme. This

facilitates a sale by offering an equity loan to bridge the finance gap. There

are two issues: the amount of funding required from both builder and

government at this time on the one side, and the open-ended financial

commitment on the borrower, on the other hand. The borrower has no idea

what level of finance they may have to raise in years to come, or indeed,

what their financial position will be at that time.

Proposed solution:

Top up lending in a new transparent scheme.

10% personal deposit.

This promotes responsible lending. The default rate at 95%

compared to 90% is considerable. This requirement provides

confidence to lenders.

75% first charge loan.

This facilitates good quality low LTV lending. It meets capital

adequacy requirements.

Lender Transparency Document.

A new document & procedure introduced to summarise the

total lending required. This document details both lenders, the

borrowing requirement, the product, the rate charged and the

monthly repayment. This supports the requirement on the lenders

(whilst underwriting at 75% and 15% respectively) to apply an

overall affordability measure at 90%. The document allows both

lenders to communicate under the Data Protection Act.

15% top up loan.

This is offered by the builder on commercial terms. RICS has

confirmed that this transaction does NOT constitute an incentive

www.easy-step.co.uk

and, as such, should NOT be recorded on the CML declaration

of incentives form. The builder holds the loan for a minimum of 3

months. This provides a payment profile before sale. The builder

sells the loan on commercial terms in month 4, assuming the first

3 monthly repayments have been received. The loan note is sold

at a discount of 33.3%, offering an excellent return for the

investor and an immediate recapitalisation for the builder. The

33.3% discount is similar in cost to the builder to 5% of the

purchase price.

Costs: The top up loan is a fixed loan of 15%. The amount repaid is fixed at

20%. The repayments are fixed. The duration of the loan is fixed (10

years). There is an administration fee for the top up loan (maximum

£275+vat). There will be a range of first charge products offering fee-

free or lower rates.

Example: £100,000 purchase price, 15% loan = £15,000, amount repaid

20% = £20,000 over 120 months £166.66 per month.

Mortgage Sale Agreement:

The lenders and builder will sign up to the MSA in advance. Firmly

entrenched in this agreement are the arrears management protocol

and loan terms, conditions, rate and duration. This protects the

consumer and the reputational risk of the lender and builder. The

builder has asked for an option to buy back a property in the event of

a potential repossession. This may be exercised where the default is

immediate and occurs on a house at the commencement of a

development.

Panel management:

The scheme requires the use of panel lenders, solicitors and IFAs.

Belgravia will manage appointments to the panels. The scheme must

be controlled and transparent. The solicitors and IFAs will be trained in

the product and must agree not to profiteer from their panel

appointment.

Branding:

The scheme can be branded to meet an individual builder

requirement. Barratt have selected a brand of Easy Step. The product

will be supported by a brochure and information website. The website

offers details about every component in the scheme, as well as

supporting the home builder and home hunter with a range of free

house buying tools.

Easy Step for Barratt Purchasers

Only 10% deposit

Take 75% mortgage

Plus 15% top up loan

Providing an Easy Step

on to the property ladder

Struggling to secure a mortgage or save a large

deposit? Barratt Easy Step is here to help.

You only need 10% deposit

Barratt lends you 15% over 10 years

This means you only need a 75% mortgage

75% mortgages are easier to secure than a

conventional 90% loan from the same lender

Terms and conditions apply. Scheme cannot be used in conjunction with any other Barratt offer. Ask your sales adviser for full details. BDW Trading Limited (company number 03018173) whose registered office address is Barratt House, Cartwright Way, Forest Business Park, Bardon Hil l, Coalville, Leicestershire LE67 1UF (“BDW”) BDW is a subsidiary of Barratt Developments PLC. BDW provide a loan for 15% of the purchase price of the property which is secured as second charge on your property.

Easy Step for Barratt Purchasers

If you only have a small deposit of 10%

Barratt Easy Step is designed to help

Easy Step is a top up loan of 15% of the property

value repaid over 10 years with fixed monthly

instalments. Easy!

How Does Easy Step Work?

Your lender will require you to have a 10% deposit. Your

mortgage will be for 75% of the property value. Barratt

Easy Step offers you a top up loan of 15%.

The Easy Step loan is for a fixed amount (15%) for 10

years with fixed repayments and a fixed interest rate. At

the end of 10 years you will have paid off your 15% loan

(plus interest).

Example:

Purchase Price £100,000

Deposit required 10% £ 10,000

Mortgage 75% £ 75,000

Easy Step loan 15% £ 15,000

The Easy Step loan is repayable in equal

instalments of £166.66 including interest over a term of 10 years and interest is

payable at

APR 6.7% How Do I Apply?

Easy Step is available on houses priced

at £100,000 and above on selected

developments.

If you would like more details, your Barratt

Sales Adviser will refer you to an

Independent Financial Adviser who is familiar

with the scheme.

Your lender will use a conveyancer who is

familiar with this scheme. You will be invited

to use the same firm as this will offer you

attractive rates and a swift transaction.

Applications will be subject to status. Barratt

terms & conditions will apply, including

exchange of contracts within 28 days and

legal completion by a specified date. Written

details are available on request. Barratt

Homes does not give financial advice.

Mortgage lenders’ criteria may vary.

Barratt Easy Step Loans

Barratt Homes is not a financial institution and will,

therefore, look to such institutions to take over our loans

as soon as it can. This allows us to keep offering the

product and helping purchasers to secure an “easy step”

on to the property ladder. Assuming banks/lenders take

over our loans, nothing changes so far as the borrower is

concerned. The rate, the terms, the monthly

repayments, the direct debit/standing order always

remain the same.

Does This Mean I Have Two Loans?

Yes. Firstly, you will have a mortgage for 75% of the

property value. This may be fixed or discount — your

Independent Mortgage Adviser will help you choose.

Secondly, you will have a fixed rate top up loan of 15% of

the property value. Add the two payments together to

compare the cost to a conventional 90% loan.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

OR ANY OTHER LOAN SECURED ON IT

Do I Qualify?

You must have a deposit of 10%.

You must be accepted for a 75% mortgage granted

under this scheme from a participating lender.

This lender will ensure that you can afford to pay a

total loan of 90%.

You must pass a credit assessment undertaken by

the second loan provider.

Lender Transparency Document Belgravia (New Build Solutions)

Applicants Name/s: …………………………………… and ………………………………………. Current Address: …………………………………… ………………………………………. Purchasing: …………………………………… Builder ……………………………………….

DATA PROTECTION You are applying for two separate mortgages from the lenders detailed below, to help purchase the above property. In order to process your application, the two mortgage lenders and their underwriters need to have access to the information you have supplied to them. Without it, they will not be able to reach a decision as to whether or not to grant you a mortgage. They will not send you information about their other products, or those of other companies without you giving your prior written consent. By signing this form, you are giving your permission for the two lenders and their agents and underwriters to have access to all the information you provide, along with the results of any credit reference checks that may be carried out. This means that both lenders can disclose to each other information regarding the conduct of the mortgage account at any time. Both lenders will disclose to you, on written request, what information they have on their systems relating to you, how they use it, and they will give you the opportunity to review and correct any information they may hold. Please note that at some time in the future the house builder who has granted the top up loan/2

nd mortgage facility

may sell this loan/mortgage; this would have no impact on your monthly payments, the rate of interest charged, or the terms and conditions of the loan.

SOLICITORS As this scheme involves two mortgage lenders and two loans, we have created a panel of solicitors offering you specialist knowledge and speed at a reduced cost. By signing this document you agree to a solicitor from this panel contacting you regarding the scheme.

FINANCIAL ADVISERS Firm name:……………………………….……. Adviser ………………………………………...

First Charge Lender Top Up (IPS) Lender Total

Name

Barratt Homes

Product Instalment Payment Scheme

Duration

10 years

Initial rate 3.3% flat/fixed APR 6.7(max)

Loan £ £ £

Monthly Payment £ £ £

Purchase Price £

Deposit £

Total Loan £

THIS DOCUMENT IS FOR LENDERS TO DETERMINE AFFORDABILITY FOR THE TOTAL LENDING REQUIRED

I / We have read this document and understand and accept the terms of this document. I / We understand that two loans as detailed above are being arranged to help me / us purchase the property which means that I / we will have two monthly payments. If I am / we are unsure about any aspect of this document I / we agree to speak to our Financial Adviser before signing SIGNED ……………………………… ……………………………………… …………….

(First Applicant) (Second Applicant) (Date)

YOUR HOME MAY BE REPOSSESSED IF YOU FAIL TO KEEP UP REPAYMENTS ON A MORTGAGE OR LOAN SECURED ON IT

V4 01/09/11 open ended version