1  Overview

1.1 Purpose

1.1.1 This chapter sets out the main features of the Open Market HomeBuy programme, the procedures which must be followed, and the conditions under which Equity Loan Providers and HomeBuy Agents are required to market and administer the programme.

1.1.2 Equity Loan Providers will also be required to market the products, are able to receive applications direct from potential purchasers, assess those applications and claim grant to enable the provision of an equity loan.

HomeBuy Agents will be expected to provide product information, take applications and undertake headline eligibility checks before referring these details to an Equity Loan Provider - see 1.6 for further information

This is the basis upon which the Homes and Communities Agency will assess applications for SHG

1.2.2 The aims of the programme are:

• to assist tenants of housing associations, local authorities, and those nominated from waiting lists (who would otherwise have priority for social rented housing), to buy a home of their own
• to help meet the demand for social housing in areas of housing shortage by creating vacancies in social housing stock, reducing waiting lists and re-housing those in priority need in vacated units
• to help with recruitment and retention of key workers and ensure that good public services can be provided and maintained locally and
• to help some other priority first time buyers/purchasers as defined by Regional Assemblies.

1.2.3 The programme is not intended for those who would in any case be buying a home and wish to buy a higher quality home or one in a more expensive location. For Guidance on ths follow the asterisk  

 

1.2.4  There is no statutory right to Open Market HomeBuy and not everyone who is eligible can be accepted.  Acceptance will depend on funds being available in a particular area .Should there be a need to prioritise between applicants existing social tenants will be given priority.

1.2.5  It is a condition of Social Housing Grant (SHG) payment under s18 (3) of the Housing Act 1996 that RSLs operating OMHB as Equity Loan Providers comply with these procedures. The Homes and Communities Agency has no discretion to pay SHG in cases that do not comply with these procedures.
 
1.2.6  All Equity Loan Provider claims for payment of SHG must be submitted via the internet using the Agency’s Investment Management System (IMS).
  
1.2.7  The scheme submission must comply with the Funding Conditions (Please see Funding conditions in General - Finance - Section 2 as accepted by the Equity Loan Provider's Committee and confirmed on line by the Equity Loan Provider's Security Administrator, plus any further conditions issued by the Homes and Communities Agency in year.  The Equity Loan Provider will not be able to make a submission of any kind into IMS until this confirmation has been made.  The Equity Loan Provider must retain a minute of the Committee decision on file for Compliance Audit purposes. 

1.2.8 Equity Loan Providers are also Registered Social Landlords and their permissible purposes, specified in section 2(4) of the Housing Act 1996, have been expanded to enable them to provide loans in support of OMHB . Please see the Social Landlords (Additional Purposes or Objects) Order (S.I. no. 985) 1999. 

1.2.9 Equity Loan Providers must obtain a Consumer Credit Licence and a Direction from the Director General of Fair Trading under s60(3) of the Consumer Credit Act 1974 in order to be able to provide the product.

Detailed guidance on obtaining a licence is set out in OMHB section4. 

For information regarding publicity material requirements please see paragraph 4.1.2 of section 4 
1.3 Main Features of the Programme

1.3.1 Open Market HomeBuy is a means of helping a qualifying person (see OMHB section 3) to buy a home outright on the open market anywhere in England.  The purchaser buys the property outright with funds from the following sources:

1. savings (if any)
2. conventional mortgage
3. an equity loan from an Equity Loan Provider - see below.

Equity loans are jointly funded by both the Equity Loan Provider and the Corporation on behalf of  the government. 

There are two products both available throughout England, MyChoiceHomeBuy provided by a consortium of RSLs, the other Ownhome, by Places for People.

For details of the consortium follow the asterisk  

 

The MyChoiceHomeBuy equity loan will:

• fund a minimum of 15% and up to a maximum of 50% of the property price or valuation, whichever is the lower,
• allow a deposit, but this is not essential 
• enable applicants to obtain their conventional mortgage from a range of qualifying lending institutions

The Ownhome equity loan will

• fund a minimum of 20% and up to a maximum of 40% of the property price
• allow a deposit, but this is not essential 
• require applicants to obtain their conventional mortgage from their partnership funder,  Co-operative Bank in the first instance. Applicants would then be able to remortgage with another Qualifying Lending Institution in accordance with the terms of the initial mortgage agreement.

 1.3.2 The OMHB programme for 2008/2011 is undertaken by only the MyChoiceHomeBuy Equity Loan Providers and Places for People.

1.3.3 The applicant is responsible for their own costs associated with the purchase, for example conventional mortgage fees, valuation fees, legal fees, removal costs.

1.3.4 The equity loan will be based on the full market valuation of the property and calculated according to the percentage of the loan required . Please see OMHB - 4.6.4 and 4.6.5.

1.3.5 Interest on MyChoiceHomeBuy equity loan:   This will be subject to an annual fee, payable to the Equity Loan Provider on a monthly basis. Initially this will not exceed 1.75% of the amount of the equity loan in year one, rising annually at RPI plus 1%.

1.3.6 Interest on Ownhome equity loan:  no interest is charged up to year 5. For years 6 to 10 the Places for People element of the equity loan will be subject to a charge of 1.75% per annum, and from year 11 it will be 3.75% payable to the Equity Loan Provider. The interest charge is not subject to annual indexation.

1.3.7 Repayment of equity loans:

Home owners may redeem their equity loan on a voluntary basis in part or in full. However  there is a requirement for the equity loan to be repaid in full when the property is sold. The amount to be repaid will be based on the market value of the home at the date of repayment or sale. The home owner will have to share any increase in the property’s value with the Equity Loan Provider. See OMHB section 5 for full details and examples.

1.3.8 The home owner must repay the equity loan

• on selling the home
• after 25 years or the end of the conventional loan period, which ever is the shorter;
• expiry of a default notice;
• if the homeowner becomes insolvent; and
• when the homewowner(s) no longer lives in the property (in joint applications, this would be when the last of the original applicants was no longer resident).

1.3.9 The equity loan will be secured as a second charge on the property  immediately after the conventional mortgage (the conventional mortgage lender is referred to as the senior funder).

1.3.10 The recovery of equity loans paid by Equity Loan Providers are in accordance with the Equity Loan Provider Contract. For details of Grant Recovery see RCGF chapter section 3.

1.4 Targeting and Providing Information

1.4.1 Equity Loan Providers, in consultation with HomeBuy Agents and local authorities, are responsible for targeting and providing information about the programme to eligible client groups.

1.4.2 The Agency has produced a publicity booklet , “Open Market HomeBuy: Getting a foot on the property ladder” which  can be downloaded from its website : www.housingcorp.gov.uk.

1.4.3 Equity Loan Providers will produce their own publicity material for the programme which must contain the information required by the Consumer Credit Act 1974.

1.4.4 Equity Loan Providers will also provide their publicity material to HomeBuy Agents for them to provide information about the products on their behalf.
 
1.5 Conventional Mortgage Providers

1.5.1 Under current arrangements a mortgage can only be secured as a first charge if it is provided by a “Qualifying Lending Institution”.

1.6  Role of the HomeBuy Agent 

1.6.1 The role of the HomeBuy Agent is to:

• provide information about the programme on behalf of the Agency. This will include providing information to applicants on the OMHB product criteria and the equity loans available..  For more details on the product criteria follow the asterisk  
• receive OMHB  applications
• undertake applicant eligibility assessments
• undertake headline applicant financial eligibility assessments - such as meeting household income criteria
• copy wages slips etc where provided to forward to Equity Loan Providers
• inform applicants that they have the option of seeking guidance from an independent Financial Advisor
• forward headline eligibility details to the relevant MyChoiceHomeBuy and Ownhome Equity Loan Provider, or to the applicant's chosen Equity Loan Provider where known.

1.6.2 It will then be for the applicant to decide which Equity Loan Provider they wish to approach to further their application. Applicants may wish to approach both Equity Loan Providers before making a final decision

1.6.3 Role of the Equity Loan Provider

On receipt of an application direct from an applicant the Equity Loan Provider will be required to confirm that the applicant meets the OMHB eligibility criteria and will be buying an eligible property and inform the applicant that they have the option of seeking advice from an Independent Financial Adviser. 

1.6.4 Where the application has been forwarded by a HomeBuy Agent the applicant eligibility criteria will already have been assessed as being met.

1.6.5 The Equity Loan Provider will be responsible for undertaking the  applicants' detailed financial assessment.

1.6.6 Having approved an application, the Equity Loan Provider must instruct the purchaser to look for a property that meets the eligibility requirements (see OMHB section 3) and once they have received a mortgage offer from a Qualifying Mortgage Lender then to proceed to exchange of contracts.  Please see section OMHB section 4 for further details.

1.6.7 The Equity Loan Provider will provide the applicants’ legal representative with a sum not exceeding the agreed maximum % of the purchase price on the date agreed for the purchase completion.

1.6.8 The equity loan provided by the Equity Loan Provider has to be secured as a charge on the property and will rank immediately behind that of the conventional mortgage lender's loan. Further advances provided by the mortgage lender will need to be approved by the Equity Loan Provider and provided the loan is for improvements to the property, such a further advance would rank ahead of the Equity Loan Provider's loan  - for further details see OMHB section 5.