Reference no: EM132963403

Section 1: Case study 1 - Philip and Jennifer Brown

Background
Philip and Jennifer Brown are a young couple about to buy their first home. They have been married for five years and during that time have rented an apartment while saving for their own home.

Following a personal referral from Glenn Brown, Philip's brother you have already had a first meeting with Philip and Jennifer to discuss their objectives and needs. They admitted they have little time to do much research of lenders, have limited knowledge of the loan products available and have approached you to guide them through the process as they are confused.

During (and subsequent) to your first meeting, Philip and Jennifer have provided the basic information documents - pay slips, tax returns, bank statements, property details for review/verification. You have now undertaken your preliminary assessment and need to discuss and present to them the proposal covering the options and your recommendations. It is important to get the proposal moving quickly, as the agent has indicated other parties are interested in the property.

They have been looking at properties for the past three months and have found a 10 year old established apartment that has really caught their eye, although they have some concern over the kitchen which requires some minor renovations.

They have not paid a deposit at this stage, but the Real Estate Agent has provided some guidance on additional fees and charges.

Following is a summary of the details of the property they wish to purchase, the couple's financial and employment details, and the loan features they require.

Assignment tasks (student to complete)

Task 1 - Key terms, gathering and documenting client information
1. Complete the ‘Key terms' (located at the end of the written assignment in Appendix 1).
2. Using the information provided in Case study 1, complete the ‘Client information collection tool' (located at the end of the written assignment in Appendix 2).
3. You will need to complete the Genworth LMI Calculator and Genworth Serviceability Calculator to assess the security, debt service and borrowing capacity for Jennifer and Philip Brown. To do this, follow these steps:
(a) Use the details in Case study 1.
(b) Read the Genworth Calculator Supplementary Material Guide available in the KapLearn CIVMBv5 subject room.
(c) Process the loan application using the Genworth Serviceability Calculator accessible here: <https://www.genworth.com.au/lenders/lmi-tools/serviceability-calculator>.
(d) Once you have processed it, download a copy of the PDF and save it to your desktop.

Task 2 - Assessing the clients' situation
1. Based on the information provided in the case study and any other online tools used, you now need to assess the clients' loan application paying particular attention that you have met legislative requirements, followed industry codes of practice and met lender credit policy.

Answer questions (a)-(j) for Task 2: Question 1 below.
Provide data to support your comments and conclusions. (450 words)
Note: The assessment of the clients' needs is a critical prelude to you completing Part 4 of the Oral assignment requirement for this course.

(a) Does the application appear to meet legislative requirements? (e.g. NCCP)
(b) According to the Genworth calculator, what is the maximum borrowing capacity of client?
(c) Does the client have the capacity to meet deposit and total cash contribution for the loan required?
(d) What are the required repayments based on the loan required?
(e) What will the security be and is it an appropriate type of security?
(f) (i) Will Jennifer and Philip be required to pay Lenders Mortgage Insurance (LMI) and why?
(ii) If so, what would the premium be?
(iii) Name at least two (2) options borrowers have to pay the LMI fee.
(g) What loan amount would you recommend, and why?
(h) What is the likelihood that the clients will be able to meet all of their financial obligations?
(i) Do Jennifer and Philip qualify for concessions on any of the fees and charges? Why or why not?
(j) What other issues may impact, now or in the future, on the clients' ability to meet their obligations, including any possible risks?

2. 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? (50 words)
3. Identify appropriate product options you can present to the clients that may remove this interest rate risk? (50 words)

Task 3 - Borrowing options
Although Philip and Jennifer are looking to borrow at approximately 90% LVR, what other options could you present that would avoid the cost of LMI? Provide a minimum of two (2) options. (50 words)

Task 4 - 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. (150 words)

Task 5 - First Home Owners Grant and home buyer assistance schemes

(a) Describe the First Home Owner's Grant or home buyer assistance scheme benefits and stamp duty concessions that are available in your State or Territory.
Note: Please identify which State or Territory you are from in your answer. (100 words)
(b) Who would be eligible and what would be their benefit?
(c) Are Philip and Jennifer eligible for any assistance? Explain why.

Task 6 - Professional network and loan settlement process

1. Name three (3) parties, who are not directly involved in the processing of a loan and what their role is. Explain how you would communicate with them in an efficient and effective manner so that they understand pre-settlement conditions and their involvement required. (75 words)
2. Explain how you would develop and maintain relevant networks with professionals such as those you detailed above or other professionals to ensure you are up to date with the products or services they provide. (50 words)
3. You want to ensure that Philip and Jennifer have all the key insurance protections in place in case something unfortunate was to happen to one of them.
(a) What process would you follow during your discussion with the clients to ensure you have a good assessment of their needs? (50 words)
(b) Explain who you should refer Philip and Jennifer to obtain advice on these types of products? (10 words)
4. Briefly explain why it is important for the broker to remain informed of developments in the lending process despite not being actively involved at every stage. (150 words)
5. The application form and related documents have now been signed and forwarded to the Lender for approval. Philip and Jennifer have agreed that you will keep their Solicitor informed of progress if/when the loan is approved.
Refer to the ‘Example of an Organisation's Policies and Procedures' within the toolbox document and explain what the service standards and timelines are for the following steps: (50 words)
(a) Advising the client's solicitor/conveyancer that the loan is approved.
(b) Advise the client's solicitor/conveyancer that the loan documents have been executed by the client and returned to the lender.
(c) Advise the client and the client's solicitor/conveyancer that the settlement date has been confirmed.
6. Clients have now called to execute loan offer and mortgage documents and are nervous that their Solicitor is very busy and difficult to contact. They want to know who will be responsible for what tasks from this point in the lead up to settlement and immediately following settlement.
Explain to Philip and Jennifer who is responsible for completion of what tasks once the loan documents have been returned to the lender and in the lead up to settlement and once settlement occurs. Focus on the lending organisation and the client's solicitor/conveyancer roles in this part of the lending process. (150 words)

Task 7 - Interest rates
1. Conduct your own research and answer the following: (150 words)
(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.

2. Philip and Jennifer from Case study 1, have called to discuss whether they should fix the interest rate on their loan after having received several conflicting viewpoints from family and friends. (150 words)
(a) Explain the process you would use to research and identify the various product options available to meet the needs of Philip and Jennifer.
(b) Explain to Philip and Jennifer two (2) advantages and two (2) disadvantages of fixing a loan over different fixed rate terms.
3. What other option/s can you suggest if they remain uncertain about whether to fix the interest rate on their loan? (100 words)

Section 2: Case study 2 - Richard and Pauline Jackson

Background
Richard and Pauline Jackson have a small mowing and gardening business in which they have been working for the last eight years. As it is only the two of them in the business they operate as a partnership.
They have approached you to help restructure their finance, as they are finding the management of their debts a struggle following the loss of one of their major commercial property contracts.
After further questioning, you realise that the situation is more serious than they originally explained; they had missed payments on their mortgage, only pay the minimum on their credit card of 3% each month and the work ute they have on lease is expiring. They have a $15,000 residual payment due and do not have the funds available.
They lost the major contract 12 months ago and fell behind on the mortgage payments soon after. They spoke to their lender (First and Last Bank) and a ‘hardship application' was approved. The missed payments were corrected by extending the term of their loan. Nothing adverse was recorded on their credit file but they are still struggling with all the monthly commitments.

Task 8 - Establishing level of financial knowledge
1. What communication skills would you use to establish rapport and build a relationship with clients. (100 words)
2. Refer to the ‘Example of an organisation's policies and procedures' document found in the toolbox and outline what service standards you should meet to provide a high level of service to clients. Include timelines for returning client enquiries etc. in your response. (100 words)
3. (a) List two (2) questions that you would use to effectively communicate with the clients to confirm Richard and Pauline's understanding and knowledge about credit and finance. (20 words)
(b) List a further two (2) questions that you would ask to identify or confirm their current financial position, including establishing their requirements and objectives with the refinance? (20 words)
(c) Advise where you would record the client's responses. (20 words)

Task 9 - 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. Refer to ‘What is substantial hardship?' available in the toolbox. In your own words how would you define ‘substantial hardship' (detailed information on this subject is found at RG 209 issued by ASIC)? (100 words)
2. What are the benefits of debt consolidation for Richard and Pauline? (50 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 all other debts.
In the template below provide a new liabilities summary once Richard and Pauline have completed the debt consolidation including their new monthly repayments.
4. What savings will Richard and Pauline obtain in monthly repayments?

Task 10 - Self-employed special considerations
1. As Richard and Pauline are self-employed, what documents will you need to obtain to verify and assess their income? You must list a minimum of three (3) documents. (50 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 of these documents will establish their income. (100 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. (150 words)

Task 11 - Advising on strategies
Following the presentation of your proposal, Richard and Pauline say that they would like your advice on strategies that could help them to repay their home loan as quickly as possible.
• List at least three (3) strategies or methods that will help them achieve their aim.
• Explain how each strategy will result in a home loan being repaid more quickly.
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. (150 words)

Task 12 - 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 and the Office of the Australian Information Commissioner. (100 words)

2. Richard has decided he would like to obtain a copy of his credit report from either Equifax or illion Data Registries (formerly Dun & Bradstreet). Explain what options are available for the chosen provider, how long it takes to obtain a copy, and the associated costs. (50 words)

3. If there are errors on file, what are the options for Richard to follow in order to have these errors rectified? To assist you with answering this question, refer to the Equifax website. (50 words)

4. What obligation does the Privacy Act impose on the Lender to supply the client, in terms of providing certain information, if they decline an application due to the content of the credit agency file? (50 words)

5. Provide three (3) possible alternate options that you could suggest to Richard and Pauline in the event that the loan application was rejected by the lender you initially proposed it to, due to their credit report? (50 words)

Task 13 - Dispute resolution
1. Due to delays in loan processing, Richard has lodged a complaint with you about the time it's taking to get an approval on the loan. Although you've explained that this is because of delays with the lenders processing system due to staff shortages, you're concerned the matter may escalate beyond your control.
(a) You are now required to record Richard's feedback by completing the Customer Complaint Report below.
(b) Provide a response to Richard explaining the process going forward and what actions you will take regarding his complaint in the box below.
(c) Refer to the ‘Example of an Organisation's Policies and Procedures within the toolbox document.
Produce a short report for your manager that identifies and recommends ways that you may be able to improve these Policies and Procedures, to keep clients like Richard up to date on the progress of the loan application in the box below:
2. As a broker it is important to understand the role of the Financial Ombudsman. Explain the function and role of the Australian Financial Complaints Authority (AFCA) in the External Dispute Resolution (EDR) process and the options available to the claimant once a determination is made. (200 words)
3. What could be the maximum financial compensation limit amount payable to a consumer borrower through AFCA for a claim for direct financial loss? (10 words)

Task 14 - Effective access to files
The loan application is finally approved. Loan offers have been produced by the lender, as have numerous documents that the client needs to access and review. The lender has requested these documents be forwarded as soon as they are available. Richard and Pauline are away at the moment and their email provider has a size limit on the data that can be sent via email. Name a service provider that could assist in solving this problem and explain how the service could assist with solving this problem. (30 words)

Section 3: Case study 3 - Mary Jane Smith

Task 15 - Prepare and check a loan application
Mary Jane Smith: Client Background
Mary Jane Smith is a young professional, excelling in her career within the IT industry. She has saved hard and is ready to purchase a property of her own.
Her objective is to pay the loan down quickly and then use the equity in the property to purchase another. She would like to build a small property portfolio over the next eight to 12 years.
You have met with her a few times and exchanged several emails and telephone calls. She has complimented you on a few occasions for the service and guidance you have provided so far.
Mary has been cautious in finding and then negotiating the purchase of this property. It is now time to get an application to a lender. You have gathered appropriate documents and completed all necessary checks. Everything is looking positive to proceed.
1. Using the details in the Example Fact Find for Mary Jane Smith in the Toolbox, prepare a loan application by completing Appendix 3 in this written assignment.

2. Using the following list, select which basic items below will need to be gathered from Mary as the supporting documentation necessary for her loan application:

3. Before submitting Mary's loan application, you must check her details thoroughly to ensure accuracy. Using the following two items available in the toolbox, check that the personal details and current employment details section of Mary's Fact Find document and loan application are accurate and identify three (3) errors. Write your answer in the box below.
• example driver's license
• example pay slip.

4. Refer to the ‘Example of an Organisation's Policies and Procedures' document in the toolbox and provide at least two (2) examples in each question of how Mary's loan application complies with each of the below:
(a) The organisational credit policy.

(b) Legislative requirements (particularly NCCP).
(c) Industry Code of Practice.

Section 4: Working in financial services

Task 16 - Financial services legislation and industry codes of practice
1. Conduct some research and identify two (2) websites that you could use to keep up to date with legislative changes and two (2) websites for changes in codes of practice in the mortgage broking Industry. (40 words)
2. Describe the key features of:
(a) The National Consumer Credit Protection Act 2009. (150 words)
(b) The Privacy Act.
(c) Code of Practice.
3. How would you communicate any changes in legislation or codes of practice to colleagues? (50 words)

4. An Australian Credit Licencee must maintain statutory records; such as financial records, membership certificates, insurance policies, training and risk assessment registers.
Explain how these could be managed to ensure they are secure and available for easy retrieval when updating is required. (50 words)

Task 17 - Produce a document
You have recently joined YS Finance, a small broking business. Your employer has asked you to design a personalised ‘CPD Register' where you will record any training and personal development that you undertake in your role as a mortgage broker.
Using the organisational requirements from the ‘YS Finance Personalised CPD Register checklist' in the toolbox, you will need to create a CPD Register in a new word document.
Your CPD Register should include a table with the following column headings:
• date
• activity
• duration
• content
• method
• location
• CPD points allocated.
Once you have created your CPD Register, you will need to do the following:
1. Save a copy of the CPD Register to your desktop.
2. Print the document.
3. Take a clear photo of the document and a screen snipping of the document from your screen.
To do this you will need to use the Snipping Tool on your device and a camera.
4. Insert a copy of the photo and the screen snipping into the box below.
Remember to do the following:
• Proofread your CPD Register prior to printing, to ensure there are no spelling errors.
• Adhere to all of the organisational requirements outlined in the ‘YS Finance Personalised CPD Register checklist'.

Task 18 - Applying principles of professional practice to work in the financial services industry
As a mortgage broker, you are required to complete 20 points per annum of Continuous Professional Development (CPD). This task requires you to identify and evaluate appropriate professional development (PD) opportunities available to you in the industry. In this task, you will need to visit the Education and Events page on the Mortgage and Finance Association of Australia (MFAA) website:

Identify two (2) professional development events that you would like to attend after your studies and complete the table below.

Task 19 - Develop and maintain in-depth knowledge of products and services used by an organisation
1. There are three (3) main types of products used in finance and mortgage broking: variable rate home loans, fixed interest rate home loans and a line of credit.
Using the table below, define each product, its strengths, its weaknesses and how it is promoted. You should list at least two (2) strengths and two (2) weaknesses for each product.
Write this in your own words.

2. This exercise requires you to compare refinancing options for a home loan to report on the benefits and disadvantages of selecting a particular refinancing option.

3. You now need to examine the current rate, comparison rate and monthly repayment applicable to refinancing a home loan by comparing home loans.
Enter the following details to compare:
Loan amount: $350,000
Loan purpose: Refinance
Type: Variable rate loan
State: NSW
Using the Sort feature on the website, fill in the table below for the product with:

4. Answer the following questions about home loan products.
(a) As a mortgage broker, how would you keep informed about updates to the various home loan product options in your organisation or elsewhere?
(b) Describe one (1) emerging trend in variable rate home loans.

Attachment:- Case study - Philip and Jennifer Brown.rar