Mortgage Regulation Quiz

1. What is the primary purpose of a mortgage?

A. To use an asset as security for a loan
B. To provide unsecured personal loans
C. To meet bridging loan eligibility
D. To transfer property ownership to the lender for a period of time

2. What does a "legal charge" grant a lender?

A. Full ownership of the property
B. Rights over the property as security for the loan
C. Tax exemptions on the loan
D. Authority to sell the property without borrower consent

3. Why does a first-charge mortgage have priority over a second-charge mortgage?

A. It has a lower interest rate
B. It is unregulated by the FCA
C. It is registered first at the Land Registry
D. It is only for commercial properties

4. Which UK body is the primary regulator for the sale and administration of residential mortgages?

A. Prudential Regulation Authority (PRA)
B. Bank of England
C. Financial Conduct Authority (FCA)
D. Financial Ombudsman Service (FOS)

5. What is the key document containing FCA mortgage regulations?

A. Mortgages and Home Finance: Conduct of Business (MCOB)
B. Consumer Credit Act 1974
C. Financial Services and Markets Act 2000
D. EU Mortgage Credit Directive (MCD)

6. When did the EU Mortgage Credit Directive (MCD) take effect in the UK?

A. 31 October 2004
B. 21 March 2016
C. 1 April 2014
D. 31 December 2020

7. What was a major change introduced by the MCD?

A. Abolishment of all UK mortgage regulation in favour of EU
B. Removal of affordability checks
C. Creation of "consumer buy-to-let" (CBTL) mortgages
D. Legal requirement for Suitability Report

8. What defines a "regulated mortgage contract"?

A. Any loan secured on a UK property
B. Only loans for commercial properties
C. Loans issued before 2004
D. A loan secured on UK land where ≥40% is used as a dwelling

9. Which mortgages are classified as "MCD regulated"?

A. Mortgages issued on or after 21 March 2016
B. Mortgages issued after 1st of April 2014
C. Only buy-to-let mortgages
D. Only corporate mortgages

10. What is a "back book loan" in mortgage regulation?

A. A loan issued after 2016
B. A second-charge mortgage issued before 21 March 2016 but now regulated
C. A loan with no legal charge
D. A mortgage for high-net-worth individuals

11. What is the status of EU-derived mortgage laws post-Brexit?

A. Fully abolished
B. Only applicable to EU-based lenders
C. Retained as "assimilated laws" unless repealed
D. Replaced by the PRA’s rules

12. Which type of mortgage is explicitly excluded from FCA regulation?

A. Residential mortgages
B. Lifetime mortgages
C. Islamic home purchase plans
D. Corporate mortgages

13. What is a lifetime mortgage primarily used for?

A. Releasing equity from a property for older homeowners
B. A government saving scheme for home purchase
C. Financing a business venture
D. To get a mortgage for life

14. When is repayment typically required for a lifetime mortgage?

A. Monthly over a 25-year term
B. When the borrower dies, moves, or sells the property
C. Only if the borrower defaults
D. After 10 years

15. What is "interest roll-up" in a lifetime mortgage?

A. Interest is paid monthly, and capital is repaid at term end
B. Interest rates decrease over time
C. Interest is added to the loan and repaid when the mortgage ends
D. No interest is charged until the end of the term

16. Which of the following is not regulated under MCOB?

A. First-charge residential mortgages
B. Second-charge mortgages (post-2016)
C. Home reversion plans
D. Commercial buy-to-let mortgages

17. What distinguishes a "consumer buy-to-let" (CBTL) mortgage?

A. It is not for business purposes
B. It is for professional landlords only
C. It is secured on commercial property
D. It has no affordability checks

18. How did the UK implement the MCD after Brexit?

A. All MCD rules were abolished
B. Most MCD rules were retained under UK law
C. Only first-charge mortgages remain regulated
D. The PRA stopped regulating mortgages

19. What is the key feature of a home reversion plan?

A. The lender takes full ownership immediately
B. No legal charge is involved
C. The borrower sells a share of their property but retains occupancy
D. It is only for commercial properties

20. Which Act allowed the UK to retain EU-derived financial laws post-Brexit?

A. Financial Services Act 2021
B. European Communities Act 2016
C. Financial Services and Markets Act 2019
D. EU Withdrawal Act 2018

21. What is the main purpose of the Financial Services and Markets Act 2023?

A. To replace EU laws with UK-specific financial rules
B. To abolish all mortgage regulation
C. To deregulate buy-to-let mortgages
D. To remove FCA oversight

22. Which type of mortgage would not fall under MCOB?

A. A residential mortgage secured on a UK home
B. A loan secured on a property where <40% is residential
C. A lifetime mortgage
D. A regulated second-charge mortgage

23. What happens if a borrower defaults on a first-charge mortgage?

A. The second-charge lender receives nothing
B. The borrower avoids repossession
C. The first-charge lender has priority in repayment
D. The loan becomes unsecured

24. What is the FCA’s role in mortgage regulation?

A. Setting interest rates for all mortgages
B. Approving all mortgage applications
C. Guaranteeing loans for first-time buyers
D. Overseeing conduct rules for mortgage sales and advice

25. Which of the following is true about second-charge mortgages?

A. They are riskier for lenders due to lower repayment priority
B. They have priority over first-charge mortgages in repayments if they have a larger balance
C. They are always unregulated
D. They cannot be secured on residential property

Regulation and The Buying Process Quiz

1. Under MCOB 4.4A, what must firms disclose at the pre‑application stage?

A) The borrower’s credit score and affordability rating
B) Product range, fees, and any limitations on the regulated mortgage contracts offered
C) The lender’s internal underwriting criteria
D) Competitors’ interest rates for comparison

2. During the application stage, which activity is specifically required under MCOB rules?

A) Issuing the formal mortgage offer
B) Providing the initial disclosure document
C) Gathering financial information and conducting affordability assessments
D) Registering the property title

3. When a formal mortgage offer is made, what must it include under MCOB?

A) Clear details of interest terms, costs, and repayment conditions
B) A breakdown of the lender’s product offerings
C) A valuation report of the property
D) The borrower’s borrowing capacity

4. At the start of the mortgage contract, MCOB 7.4 requires what type of communication?

A) A brief verbal summary of repayment terms
B) A marketing brochure outlining optional services
C) A copy of the property’s title register
D) A single, detailed written communication covering payments, methods, linked products, and obligations

5. Which MCOB section governs execution‑only transactions?

A) MCOB 5.4
B) MCOB 4.8A
C) MCOB 5.6
D) MCOB 3.2

6. Which scenario qualifies for execution‑only business under MCOB 4.8A?

A) A first‑time buyer seeking advice on fixed‑rate products
B) A customer with poor credit requesting product recommendations
C) A high‑net‑worth customer who rejects advice and proceeds independently
D) Any customer applying online

7. What distinguishes a real‑time financial promotion?

A) It occurs during interactive dialogue, requiring immediate clarity
B) It is delivered via printed brochures or static web pages
C) It allows unlimited time for the consumer to reflect
D) It is exempt from FCA rules

8. Which is an example of a non‑real‑time financial promotion?

A) A live webinar with Q&A
B) A telephone call discussing mortgage options
C) A face‑to‑face meeting with a broker
D) A printed brochure mailed to the customer

9. From the borrower’s perspective, what is the main purpose of the initial disclosure stage?

A) To finalise the mortgage contract
B) To provide transparent product information early, enabling informed comparisons
C) To give an overview of fees and costs of all services required
D) To register the mortgage with the Land Registry

10. Which document replaced the KFI under the Mortgage Credit Directive for cross‑border standardisation?

A) Mortgage Summary Sheet (MSS)
B) Annual Mortgage Statement (AMS)
C) European Standardised Information Sheet (ESIS)
D) Consumer Credit Key Facts (CCKF)

11. What additional feature does the ESIS include compared to the KFI?

A) A second APRC to show the impact of rate changes
B) A property valuation certificate
C) A lender’s internal risk rating
D) A summary of the borrower’s credit history

12. Under MCOB 7.4, which of the following must be disclosed before the borrower’s first payment?

A) The lender’s repossession procedure
B) The borrower’s future property tax liabilities
C) Exact payment amounts, collection method, linked products, and repayment type
D) The solicitor’s professional indemnity cover

13. In a real‑time financial promotion, what is a key regulatory requirement?

A) The caller may continue unless the customer explicitly objects
B) The firm must ensure the customer wishes to continue before proceeding
C) The firm may withhold its identity until the customer agrees to proceed
D) The firm can make calls at any time

14. Which of the following is not a permitted reason to use execution‑only sales?

A) The customer is a high‑net‑worth individual
B) The customer is a professional client
C) The customer has expressly rejected advice
D) The customer is seeking tailored recommendations

15. Why does the initial disclosure stage help borrowers make better decisions?

A) It provides transparent, early information on key product features for comparison
B) It guarantees the borrower will be approved for the mortgage
C) It allows the borrower to bypass affordability checks
D) It qualifies fixed rate eligibility