1 THE ROLE OF THE HOMEBUY AGENT AFTER PURCHASE HAS BEEN COMPLETED

1.1 Following the purchase of the property the HomeBuy Agent will be required to give its consent (not to be unreasonably withheld) to a number of events under the terms of the mortgage loan deed that secures the equity mortgage loan. The terms and conditions of the HomeBuy Agent’s mortgage loan are set out in EOMHB-7. The following events require the HomeBuy Agent’s consent

• re-mortgaging;
• where the owner wishes to secure additional borrowing;
• undertaking works.

For each of the above events the HomeBuy Agent must ensure that its equity loan remains secure against the property. However, the opportunity to undertake all or any of these activities will depend on the terms and conditions of the mortgage loans provided by the participating lenders. 

 
Re-mortgaging

1.2 In today’s competitive mortgage loan market the HomeBuy Agent may receive a request for consent to remortgage to another lender. If the customer has repaid the lender’s equity loan, such a request may be approved provided the remortgage loan is obtained from a “qualifying lending institution” (i.e a body regulated by the Financial Services Authority to provide mortgage loans)If the customer has not repaid the lender’s equity loan, the alternative mortgage loan lender must be one of the participating lenders   and the total amount borrowed excluding the HomeBuy loan, must not exceed the limits as set out in section 1.4. The new lender will need a new deed of postponement from the HomeBuy Agent. Borrowers should be made aware that they are likely to incur significant early repayment charges if they redeem their mortgage loan in the first five years. 

Additional Borrowing

1.3 There is limited opportunity for purchasers to increase their borrowings above their contribution to the initial purchase price. Those wishing to do so should be advised to contact their lender to discuss the options.

1.4 Total borrowings must not normally exceed a loan to value ratio of 87.5% nor be provided by a non-qualifying lending institution. If either event occurs, the loan cannot be registered as a priority charge over the HomeBuy Agent’s equity loan. However, if essential repairs are required to the property, the HomeBuy Agent has discretion to agree further secured borrowing (from a participating lender) above this limit where it is satisfied that the repairs are urgently required to protect all parties’ interest in the property.

Undertaking Works

1.5 The agreement of the HomeBuy Agent and lender must be obtained before the commencement of any works. This is to ensure that the works are completed to a satisfactory standard and where additional monies are required sufficient is available to complete the project. The owner of the property is responsible for obtaining all necessary statutory consents

2 LOAN REDEMPTION ON RESALE OF PROPERTY - ACTION BY HOMEBUY AGENT

2.1  When someone wishes to sell their property on the open market, or redeem    their HomeBuy equity loan, they need to notify their lender and the HomeBuy Agent. The Lender will arrange for the property to be valued by an independent RICS qualified valuer, assuming a sale on the open market with vacant possession.  For Key Worker clawback (see KWL annex) or in cases where only the HomeBuy Agents loan remains to be repaid , the HomeBuy Agent will arrange the valuation.

2.2 Where appropriate the Homeowner will need to provide the valuer with  details of any  additions or improvements to the property that they have been  given written permission to undertake. In such cases the valuer will write to  the lender stating the value of the property disregarding the home  improvements

2.3 The disposal price will be the current market value. However where there are previously agreed additions/improvements, the valuation will be based on the current market value of the property assuming those works had not been undertaken.
 
2.4 There are likely to be circumstances where the cost of undertaking improvements may not be reflected in the valuation. HomeBuy Agents should point this out to owners when they seek consent to undertake works.

2.5 In cases where the owner and lender cannot agree the valuation/sale price, the lender will arrange a further independent valuation nominated in accordance with the mortgage loan deed, see EOMHB-7 which provides details of the mortgage loan deed and in the solicitor’s guidance notes an explanation of the terms used in the mortgage loan deed. The lower of the two valuations will be used to calculate the shared appreciation.

2.6 All valuation fees are payable by the owner.

3 Sub-letting

3.1 It is expected that the HomeBuy property will be occupied as the only or main  residence (see 9.11 in the legal charge ). HomeBuy Agents may consider, on a  case-by-case basis, requests to sub-let in certain controlled circumstances.  

3.2 HomeBuy Agents should consider the following criteria when dealing with requests:

• the reasons for sub-letting are genuine and unavoidable, and are not for   speculation or gain;
• the terms of the sub-let are for a fixed period after which occupation   must revert back to the HomeBuy owner;
• the permission of the mortgage loan lender will also normally be required.

4  CLAWBACK FOR KEY PUBLIC SECTOR WORKERS

4.1 On sale or transfer of property, or within 2 years of a key worker leaving a qualifying form of employment the HomeBuy Agent’s equity loan must be repaid to the HomeBuy Agent. Changes in the sector specific eligibility criteria will not, on their own, trigger clawback.  Beneficiaries' eligibility status will be judged against the criteria prevailing at the time they were granted assistance under the scheme, unless they change employment in which case their eligibility will be re-assessed against the current version of the sector specific eligibility criteria. The amount repayable in respect of an equity loan will be that proportion of the value of the property that the loan advanced bore to the original purchase price.  So if the loan represented 12.5% of the purchase price then the loan repayment sum will be 12.5% of the market value of the home at the date of repayment. In these circumstances the valuation will be arranged by the HomeBuy Agent. All valuation fees will be payable by the owner.

4.2 HomeBuy Agents are required to establish robust mechanisms whereby they   are able to regularly review and confirm the qualifying employment status of  key public sector workers and are able to implement speedy grant recovery procedures should clawback apply.

4.2.1 On an annual basis, at the end of the financial year, for each key worker household, the HBA/RSL should:

• check with the key worker's employer that the key worker remains in eligible employment;
• initiate clawback (or monitoring of the time period prior to clawback applying) where the key worker is found no longer to be eligible;
• confirm to the Corporation's regional investment team that this check has been carried out, and the numbers of households found no longer to be eligible.

Confirmation should be sent to the Corporation within the first quarter following, i.e. by the end of June

4.2.2

Clawback applies to all those being helped through KWL Open Market HomeBuy as this assistance is only available to those in eligible employment.  

It also applies to those obtaining assistance under Open Market HomeBuy who are in key worker categories defined by their RHB,   unless they are existing social tenants (the RHB definition in the region   where the property is being purchased should be used).  Currently this applies in:

a) the East of England where the RHB has recommended the following public sector workers: medical secretaries, medical receptionists, teaching assistants, learning assistants, care workers employed by Local Authorities.

b) the South West where the RHB has targeted “key public sector workers providing essential services” for help.

Where people are helped within a wider Regional Housing Board definition, for instance, due to their local connection or their contribution to the local economy, and not by virtue of their employer, they will not be subject to clawback if their circumstances change. Therefore where public sector workers are not specifically targeted for assistance, then clawback will not apply.

RSLs will be required to use some discretion to decide which individuals have been helped above someone else solely by virtue of   their employment.  The key test will be whether their employment status has afforded them priority status over any other applicants on the   waiting list resulting in them accessing assistance over any other applicants on the waiting list.  Any key workers that are also social   tenants will not be subject to clawback because they are a priority for HomeBuy assistance regardless of their employment.

If an RSL believes there is an exceptional reason why a clawback lease should not be used please refer this to your local Housing Corporation Investment Team

Exclusions

4.3 The clawback rules would not apply where a key worker left their employment because:

• they retired, provided that a minimum of five years continuous service has been undertaken since the qualifying key worker was granted assistance under the scheme
• they were made redundant
• they left with the employer's permission, for health reasons validated by a health professional (i.e. early retirement on health grounds, dismissal on health grounds)
• they died in service (when it would become a matter for probate)

In such cases, sale of the property or transfer of ownership only would triggerrepayment.

4.4 Repayment would also not be required if they took a career break of up to 12  months with their employer's permission. This period could be extended to a  maximum of three years, at the employer's discretion in exceptional  circumstances, with an assumption that this would be for family reasons.  Further extensions beyond the three years will trigger the clawback  requirements. There may be other special circumstances where it would be  appropriate to defer repayment until a later date on sale of the property or  transfer of ownership.  All exceptional cases should be presented to the  Housing Corporation who will decide whether this approach is merited. 
 

Divorce

4.5 Where a court is considering the terms of the property settlement they will  serve the HomeBuy Agent (as one of the lenders) with an application form  indicating the intention to proceed for ancillary relief, i.e. a property transfer  order.  The HomeBuy Agent should ask to see the financial statement, setting  out the applicant's financial situation and agree with the Housing  Corporation whether it is appropriate to defer or waive the clawback, should  the court decide that immediate sale of the property would not be advisable.  As a general rule clawback should be applied as usual if there are: a) no  children; or b) there are children, but both parties can be adequately housed  from the proceeds of the sale. Waiver or deferral clawback would normally  only be considered if there are children under the age of 18 or in full time  education, where rehousing would be difficult, or other extenuating  circumstances apply.

Change of employment

4.6  Repayment of the loan will not be required as long as the new post qualifies   as eligible employment under the scheme as set out in Annex B(ii) in the KWL   chapter

Recovering the loan

4.7 The clawback provisions take effect from the date that the beneficiary leaves eligible employment.  Thus, the loan must be repaid two years from the date the key worker leaves eligible employment, not two years from the date that notification is received.  If the beneficiary returns to eligible employment within the two-year period the clawback provisions no longer apply.  It will be for the selected mortgage loan lender to decide whether or not the beneficiary will also be required to repay the lender’s equity loan at the same time.

4.8 The HomeBuy Agent should write to the beneficiary and set out the next steps as soon as notification from the employer/employee is received. This letter should make it clear to the beneficiary that, in cases of hardship, they can make a case for deferral or waiver of clawback.  The Housing Corporation will adjudicate on all such cases. 

4.9 The HomeBuy Agent will be expected to use all reasonable endeavours to recover debts.  As they have a charge on the property the HomeBuy Agent can initiate legal action to ensure repayment. The lender must be informed of the intention to initiate legal action, as the property may need to be sold to recover the debt.     
 

5 PORTABILITY RIGHTS

5.1 If a key worker received an equity loan prior to 2nd October (so not through the  new expanded scheme) they are entitled to move that loan to a new property as  long as they are still in housing need.  There will not be any facility to top up  the loan if they need more help.

5.2  If a key worker receives an equity loan via the expanded open market scheme  and wants to move property they will need to reapply to the scheme and be reassessed like a new applicant. Like- for-like transactions will be permitted in certain circumstances (see EOMHB-3 para 1.3). Successful applicants should speak to their current lender about the cost implications of moving, before deciding to proceed. Where a customer moves house within the Open Market HomeBuy scheme, but remains with the same lender, their selected lender may look to refund any early repayment charges paid.
 
5.3 If  the decision to move is taken, the customer must either have completed the sale of their existing property, or be in the process of completing the sale of their existing property at the same time as buying for the second time through HomeBuy. This is to avoid a situation in which a customer ends up holding two HomeBuy equity loans simultaneously.

6 MORTGAGE LOAN DEFAULT

6.1 In the event of a property becoming repossessed by the lender (which has a first charge on the property), it will have first call on the sales receipt to repay any outstanding mortgage loan debt, and the lender’s equity loan.  If any balance is insufficient to repay the HomeBuy Agent’s equity loan any grant to be recovered will be written off in these circumstances.

7 SCHEME INFORMATION

7.1 HomeBuy Agents must record information on each application for monitoring purposes. For each completed sale the information should be provided alongside the grant claim for the completion. The information below is required to enable the Corporation, for each allocation and generally, to report on progress of the Open Market HomeBuy programme and monitor the types of assistance required and amounts of subsidy provided. The information required on each sale and collected through IMS will include:

• name of applicant(s)
• the eligibility criteria
• name and type of applicant e.g key worker where key workers are purchasing (data on both when two key workers purchasing together), social tenant, other priority purchaser.
• ethnic origin
• gender
• declared disability (if any)
• length of time in their occupation
• the employer  (including key worker employer e,g  Health Trust, Police authority, LEA)
• place of work (e.g. for KW’s name of school/hospital)
• sponsor local authority if appropriate(the local authority area where the purchaser is employed)
• location local authority - LA area of purchase
• the property address
• value of property
• property type
• number of adults/children in household
• number of qualifying points (London Teachers only)
• number of bedrooms
• name of lender
• mortgage loan/equity loan required
• HomeBuy Agent’s equity loan ( value and percentage)
• total household income
• number of adult household members who have an income
• administrative charge
• date of completion
   

HomeBuy agents may also be required to provide further management  information direct to DCLG and the Housing Corporation.

Click here for section 7 of the EOMHB chapter