Lloyd's of London is planning a special mortgage facility for hard-hit names designed to help them stay living in their homes while being able to meet their final payment into the insurance market's recovery plan.
The facility is designed to overcome the difficulties most names would face because of their age and their need to raise a substantial amount against their homes.
All names have funds deposited at Lloyd's to cover their underwriting. In a significant number of cases these funds in effect amount to a pledge secured by a names' home. On Friday, Lloyd's is sending out individual interim statements to all 34,000 names, giving them a first estimate of what they must pay to re-insure all their liabilities into Equitas, the new company into which Lloyd's is hiving off all the pre-1993, loss-making policies.
Some sort of Equitas premium, up to a maximum of pounds 100,000 in a few thousand cases, will need to be paid by a majority of names, over and above their funds deposited at Lloyd's which will also be taken into account.
Although Lloyd's says it does not know how many names have pledged their homes as security, the number is believed to be significant. The idea of some form of mortgage deal to allow people to carry on living in their homes while taking part in a final settlement of their Lloyd's affairs was first proposed by names representatives. It has been devised by specialist consultants and Lazards, the merchant bank, in conjunction with a small number of big mortgage lenders.
The scheme will reflect the fact that the average age of Lloyd's members is 58, and that they will not easily get 95 per cent mortgates elsewhere. But it will need a reasonably strong take-up to make the scheme feasible - in the order of pounds 300m to pounds 400m overall.
The planned facility will re-finance an existing mortgage and advance further amounts to meet finanity bills. The maximum amount available will be limited to the lower of: the Equitas premium plus any existing mortgage; 100 per cent of house value; or 3.75 times the applicant's annual income. The presence of a guarantor could enable larger sums to be raised.
Loans, which could be at a fixed rate, will generally mature in 25 year's time, irrespective of the age of borrower, with repayment arranged from life and pension policies or a special schedule.
Under the plan, names would not be required to take out insurance cover beyond any existing policies they may hold. Names will be able to express their interest in the scheme in a questionnaire to be included with the interim Equitas premium statements.Reuse content