The following is a brief checklist to follow when processing cases;

 

1.             Single lender / policy case

 

Things to consider:

 

i.)   Is DTA and/or Critical Illness cover applicable (If company selling policy sold DTA need to use this rather than calculator built into system)

ii.)   Determine correct lender methodology (Some lenders have Annual and/or Daily rest and some differ dependant on who sold the mortgage)

iii.)   Determine correct interest rate table (depending on ii.) above or the size of the mortgage)

iv.)  Ensure where possible, the term of the live mortgage is used (It may be that the term should be reduced as mortgage was sold into retirement)

 

 

2.             Deferred Case

 

a.     Payment amount adjustment (Amount of initial loan - basis for payment calculation)

b.    Payment rate % adjustment, Payment rate diff % or Payment amount % (Dependent on method used by lender)

 

Things to consider:

 

i.)     Did the lender offer deferred interest on both Interest Only and Repayment mortgages

ii.)    Was there an incentive offered depending on the repayment method

iii.)   Check payment against statements (offer letter)

 

3.             Reduced MIRAS allowance

 

a.     MIRAS Amount adjustment (Set to amount of MIRAS relief)

 

4.             Increased MIRAS allowance

 

a.     MIRAS Amount adjustment (Set to amount of MIRAS relief)

 

5.             Second Endowment Policy to cover loan increase

 

a.     Add Lender to existing Calc using CFWD (First policy continuing)

b.    Add Calc (Second policy)

c.     Enter the amount the loan has increased by (Not the total of the loan, just the increase)

d.    Actual adjustments; Monthly premium - Calc n (Endowment policy - 2 for second, 3 for third etc.)

e.     Actual adjustments; Surrender value - Calc n (2 for second, 3 for third etc.)

f.     Notional adjustments; Monthly premium - Calc n (DTA policy if applicable - 2 for second, 3 for third etc.)

 

Things to consider:

 

i.)     MIRAS allowance used on main part of mortgage (Select No MIRAS for 2nd Calc)

ii.)    Part MIRAS used on main part of mortgage, add in MIRAS Amount adjustment for remaining Calc.

iii.)   Was the loan increase applicable for MIRAS (if not - select No MIRAS for 2nd Calc)

 

6.             Top-up endowment policy to cover loan increase

 

a.     Add Lender (Same Calc as top-up policy)

b.    INCREASE loan by increased amount (Just the increase amount)

c.     Actual adjustments; Monthly premium - same Calc number (Additional Endowment premium)

d.    Actual adjustments; Surrender value - included in main endowment surrender value

e.     Notional adjustments; Monthly premium - same Calc number (Additional DTA premium if applicable)

 

Things to consider:

 

i.)     Was the loan increase applicable for MIRAS

 

7.             Customer moved but no increase in loan

 

a.     Add Lender

b.    Use CFWD (Takes correct value forward)

 

8.             Customer moved and decreased their loan

 

a.     Add Lender

b.    Use DECREASE and enter amount loan decreased by

 

9.             Adjustment set to be used

 

a.     Common - only adjustments common to both Actual (endowment) and Notional (repayment) sides of mortgage

b.    Actual - only those adjustments relevant to the Actual side (NOT common to both sides)

c.     Notional - only those adjustments relevant to the Notional side (NOT common to both sides)

 

Things to consider:

 

i.)     Anything in the Common set of adjustments should NOT be in the Actual or Notional set of adjustments

ii.)    When Redress Manager® processes cases it uses the Common and Actual sets of adjustments for the Actual calculation and similarly it uses the Common and Notional sets of adjustments for the Comparison calculation.

 

10.          Part of mortgage converted to repayment

 

a.     Use Set Loan A Balance adjustment setting this to the interest only amount

b.    Use Change Calc Type adjustment with Loan B for loan part to change to repayment

c.     Use MIRAS Amount adjustment set to ALL, or Loan A/B depending on where applicable  (If Loan B remember to set MIRAS amount for Loan A to 0)

 

Things to consider:

 

i.)     Adjustments not to be included in Common set of adjustments as only changing the Actual side (Interest only mortgage)

ii.)    Must change Loan B to repayment as this part will decrease

iii.)   If both parts of loan to be treated as individual items, use Set Variable Loan A adjustment

iv.)  Consider MIRAS allocation

 

11.          New type of accounts

 

For offset accounts like IF, Virgin One and others, Redress Manager® can handle the varying balances using the Payment balance, Interest balance and Working balance adjustments. However without all the account information it would be very difficult to recreate an account of this type. If you have any cases like this we recommend that you call the helpdesk for further information.

 

12.          Different interest rates - fixed portion of loan on lower rate (Staff preferential rate)

 

a.     Set Loan A Balance adjustment specifying fixed part of loan as balance

b.    Fixed, Discount, Capped or Collar rate adjustment applied to Loan A

c.     Fixed, Discount, Capped or Collar rate adjustment applied to Loan B, if applicable

d.    MIRAS Amount adjustment for ALL, Loan A or Loan B (If Loan B only, remember to set MIRAS amount for Loan A to 0)

 

13.          Different interest rates - independent parts of loan

 

a.     Set Variable Loan A adjustment specifying balance of Loan A

b.    Fixed, Discount, Capped or Collar rate adjustment applied to Loan A

c.     Fixed, Discount, Capped or Collar rate adjustment applied to Loan B, if applicable

d.    MIRAS Amount adjustment for ALL, Loan A or Loan B (If Loan B only, remember to set MIRAS amount for Loan A to 0)

 

 

14.          Irregular payments

 

a.     Use Mortgage Payment adjustment to match payments

b.    Use system adjustment generator option to create appropriate under / over payments

c.     Use system generated adjustment set as Common set of adjustments

 

Things to consider:

 

i.)     Ensure it is only the mortgage payment (i.e. excluding insurance payments)

ii.)    Will need statements to replicate

iii.)   Never use an adjustment set containing Mortgage Payment adjustments for an endowment comparison (you always want the difference between what should have been paid and what was paid).

 

15.          Tracker mortgage

 

a.     Bank Base Rate / Bank of Scotland interest rate table as appropriate (or alternative)

b.    Increase % adjustment for rate over base rate

 

16.          Understanding the detailed output

 

We quite often get asked how the monthly payment is calculated and why is it different to the interest shown. Key points on this are as follows:

 

a.     Most lenders calculate interest on a daily basis (e.g. days in month - 28, 29, 30 or 31)

b.    Most lenders calculate monthly payments on a monthly basis (e.g. 30.4166 days or 30.5 days)

c.     The payment shown in a period may include the mortgage payment and endowment / DTA premium

d.    The first payment often includes uncollected interest from the first month (i.e. if you took out your mortgage in January and made your first payment in February the first payment would include the interest from the first month)

e.     For repayment mortgages the payment also includes a capital payment (minimal at start of the mortgage)

 

Further analysis:

 

i.)     If you want to see the monthly payment without the DTA / endowment premium, set the Actual and / or Notional adjustment set to ‘No Adjustment’. The detailed output will now show just the mortgage payments (remember to re-select the adjustment sets afterwards).

ii.)    If you want to see just the endowment / DTA premiums, change the first payment date to after the end date of the mortgage. The detailed output will now show just the monthly premiums (remember to change it back).

 

17.          Good working practices

 

a.     Always use the Verify option (every calc, every change). Print and retain with case documentation.

b.    Check output against original case information (all adjustments shown at bottom of output).

c.     With interest rate and other adjustments it is beneficial to have a quick scan over the detailed output to ensure the adjustment has been applied on the dates you expected (see Appendix C).

d.    Use the Redress Status function to record your redress amount. This is very useful for general reporting and later for checking cases are in an acceptable range.

e.     Ensure that you have selected the correct lenders’ methodology and interest rate table (see Appendix B).

f.     Use the analysis mode to aid checkers and ensure that they have the full adjustment list.

g.    Ensure that everyone using Redress Manager® reads all release notes, especially the FULL release notes.

h.     If you are unsure about a case call the helpdesk for assistance, we are here to help. Please note that we may ask you to contact either FOS or the FSA based on the nature of your query (i.e. interpretation of CP75 / RU89 guidance).

 

18.          RU89 exceptions

 

a.     Prior premiums - new tab for Premiums + Interest calculation

b.    Interest after RU89 calculation - tabs for Redress + Interest and Redress + Premiums + Interest

Related Topics

Appendices