Reference no: EM132174967
Assignment - Industry Knowledge and the Lending Process
Section 1: Case study 1 - Philip and Jennifer Brown
Assignment tasks -
Task 1 - Gathering and documenting client information
Complete the Client Information Collection Tool (located at the end of the assignment in Appendix 1) using the information provided in Case Study 1.
Note: Any assumptions you make should be listed and should not be in conflict with the case study information already provided.
Task 2 - Assessing the clients' situation
1. Based on the information provided in the case study and using the tools available to you (e.g. loan calculators, including those available on lenders' websites or Genworth.com.au), provide your assessment of the clients' loan application. This assessment of the clients' needs is a critical prelude to you completing Part 4 of the Oral Assessment requirement for this course.
Consider and comment on issues such as:
- maximum borrowing capacity of client
- capacity to meet deposit and total cash contribution for the loan required
- repayment requirements based on the loan required
- do they require Lenders Mortgage Insurance (LMI), and if so, how much will it cost and what are the options to pay fee
- what loan amount would you recommend
- likelihood that the clients will be able to meet all their financial obligations
- any other issues that may impact, now or in the future, on the clients' ability to meet their obligations, including any possible risks.
Provide data to support your comments and conclusions. (750 words).
2. (a) Most lenders stress test loan repayments by adding an additional 2-3% on to the loan repayments to make sure a borrower can afford the repayments. If interest rates moved 3% higher, what would Philip and Jennifer's loan repayments be and do you think they would be able to cope with the extra repayments?
(b) What could you recommend that may remove this consideration as a risk factor?
Task 3 - Reasonable enquiries
In the course of gathering information about the couple, you are required under the National Consumer Credit Protection Act 2009 to make all 'reasonable' enquiries to determine a borrower's objectives, requirements and financial situation.
Identify at least six (6) 'reasonable' enquiries that you would make with the clients in the case study and explain why these enquiries are important in terms of NCCP compliance. (200 words)
Task 4 - First Home Owners Grant
Describe the first home owner grant or home buyer assistance scheme benefits and stamp duty concessions that are available in your State or Territory, who would be eligible and what would be their benefit? Are Philip and Jennifer eligible for any assistance?
Note: Please identify which State or Territory you are from in your answer. (150 words).
Task 5 - Philip and Jennifer's professional network
1. Name three (3) parties, who are not directly involved in the loan processing, Philip and Jennifer may wish you, as their broker, to keep informed of the progress of their finance application? (25 words).
2. Briefly explain why is it important for the broker to remain informed of developments in the lending process despite not being actively involved at every stage? (100 words).
Task 6 - Interest rates
Clinton and Jennifer have reconsidered the loan proposed and have called in to discuss whether they should consider fixing the interest rate on their proposed loan - they have conflicting opinions and are seeking your guidance.
1. Firstly, they need to understand the role of the RBA with respect to interest rates and why it is necessary to have these controls. Conduct some research and answer the following;
(a) What is the role of the RBA with respect to the movements of interest rates?
(b) Why is it important to have these controls and how do they impact mortgage loans in Australia?
(c) Are banks obliged to follow the RBA cash rate? Explain the reason for your answer.
(200 words)
2. Philip and Jennifer have called to discuss whether they should fix the interest rate on their loan after having received several conflicting viewpoints from family and friends.
Explain to Philip and Jennifer some of the advantages and disadvantages of fixing a loan. (150 words).
3. What other option/s can you suggest if they remain uncertain about whether to fix the rate on their loan? (100 words).
Section 2: Case study 2 - Richard and Pauline Jackson
Assignment tasks -
Task 7 - Establishing level of financial knowledge
What communication skills might you use to confirm Richard and Pauline's understanding and knowledge about credit and finance, as well as their current position, including establishing their requirements and objectives with the refinance? (150 words).
Task 8 - Responsible lending obligations
The National Consumer Credit Protection Act 2009 imposes 'responsible lending' obligations on brokers that must be satisfied by all people arranging loan applications. The primary objective under responsible lending guidelines is that the credit facility offered to the borrower is 'not unsuitable' for the borrower, meets their requirements and objectives and will not create substantial hardship.
1. In your own words how would you define 'substantial hardship' (detailed information on this subject is found at RG 209 issued by ASIC)? (150 words).
2. What are the benefits of debt consolidation for Richard and Pauline? (100 words).
3. Richard and Pauline have decided to consolidate their debts into their home loan with two splits, one for the existing home loan and a second split for the all other debts. They will not be including the landscaping supplies account as they pay this in full each month and will clear the outstanding $500 from business account.
In the template below provide a new liabilities summary once Richard and Pauline have completed the debt consolidation including their new monthly repayments.
Note: They have chosen to refinance with 'One State Bank' who are offering a 4.5% interest rate on a variable, principal and interest loan over 30 years.
4. What savings will Richard and Pauline obtain in monthly repayments? (Include calculation of how you determined the savings.)
Task 9 - Self Employed special considerations
1. As Richard and Pauline are self-employed, what documents will you need to obtain and assess their income? (150 words).
2. If a Low Doc application is an option for the customer, name three (3) extra documents you will need to obtain and assess. Explain how each these documents will establish their income? (150 words).
3. Explain how applying for a 'Low Doc Loan' could lead the mortgage broker to be accused under NCCP of recommending an 'unsuitable' product. (250 words).
Task 10 - Advising on strategies
Following the presentation of your proposal, Richard and Pauline say that they would like your advice regarding loan and debt management strategies that could help them to repay their home loan as quickly as possible.
- List at least three strategies or methods that will help them achieve their aim.
- Provide the advantages and disadvantages of each.
Note to students: You may refer to the MoneySmart website for information on this subject and your answer may also include, but not be restricted to, available mobile phone apps used for debt management. (300 words)
Task 11 - Impact of credit history
Richard tells you that his former wife failed to properly meet their unsecured personal loan debt obligations before they separated. Although he eventually repaid the debt he is afraid that this incident may count against him when he applies for a loan. There are a few things Richard can do as he is concerned about his credit rating. What information would you provide in the following situations?
1. Provide Richard with the details of two (2) major credit reporting agencies and explain what information may be recorded on his credit file. (Information can be sourced from the websites of credit reporting agencies. (200 words).
2. Richard has decided he would like to obtain a copy of his credit report from either Equifax or Dun & Bradstreet. Explain what options are available for the chosen provider, how long it takes to obtain a copy, and the associated costs. (100 words).
3. If there are errors on file, what are the options for Richard to follow in order to have these errors rectified? Hint: Refer to the Equifax website. (150 words).
4. What is the Lender legally obliged to advise the client if they decline an application due to the content of the credit agency file? (100 words).
5. What alternate options can you suggest to Richard and Pauline in the event that the loan was rejected by the lender you initially proposed due to a credit report (150 words).
Task 12 - External dispute resolution
During the loan process, Richard is starting to become upset with the time it's taking to get him an approval. Although you've explained that this is because of delays with the lenders processing system due to staff being away, you're concerned the matter may escalate beyond your control.
1. As a broker it is important to understand the role of the Credit Ombudsman. Explain the function and role of the Credit and Investment Ombudsman (CIO) in the EDR process and the options available to the claimant once a determination is made. (200 words).
Attachment:- Assignment File.rar