Assignment - Certificate IV in Finance and Mortgage Broking

Section 1: Case study 1 - Clinton and Jennifer Andrews Assignment tasks -

Task 1 - Initial disclosures

Following a personal introduction and before you begin gathering information about the clients' existing financial situation or needs, there are certain disclosures you are required to make as a finance broker.These disclosures include the way you are remunerated and the range and limitation of your services.

1. There are four (4) documents listed in ASIC Information sheet INFO 146 'Responsible lending disclosure obligations - Overview for credit licensees and representatives'that must be provided to customers. Refer to this Information sheet and the information contained in your topic notes to answer part (a) and (b) below.

(a) Identify which of these four (4)documents you must provide your client before you commence providing credit assistance and explain the main disclosures relevant tothat document. (40 words)

(b) Identify which of these four documents you will provide the client should you intend to charge a broker fee and explain what is required for it to be valid. (40 words)

Task 2 - 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 3 - Assessing the clients' situation

1. Using the Excel or Online version of the Genworth Serviceability Calculator, calculate the Genworth NDI for the borrowers. This will require you to enter all the data, including their future rental income.

Once you have completed the calculations, copy the data into the Serviceability Calculator (located at the end of this assignment in Appendix 2).

Do not upload the Excel spreadsheet as a separate file.

2. 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), provide an assessment of the clients' borrowing ability. Consider and comment on the following issues:

(a) the maximum loan using the Genworth calculator

(b) deposit requirements for the loan required

(c) combined net monthly income, less cost of living expense as specified by the borrower

(d) do they require Lenders Mortgage Insurance (LMI) and if so, how much will it cost?

Refer to Genworth LMI estimator for this figure

(e) 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.

(No word count requirement for questions (a) to (d)).

Question (e) (100 words)

Task 4 - Using equity

1. Although Clinton and Jenniferhave chosen to borrow 90% LVR on the investment property plus the LMI costs, what other option could you present that would avoid the cost of LMI?(100 words)

2. Explain how it could be possible for Clinton and Jennifer to borrow 100% of the purchase price ($450,000) and obtain a tax benefit for the interest charged. (100 words)

Task 5 - 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 6 - Recommendations

Note: Incorrect or uninformed advice can lead to significant financial detriment for your client and lead to possible complaints against you for misleading or deceptive and misleading conduct.Therefore, all three (3) questions of this task are 'critical' and you must demonstrate the required knowledge in each to be deemed competent.

1. Based on the information presented in the case study, prepare a written proposal (letter or email) outlining your proposal to clients. (750 words)

The style and language used in the proposal should be appropriate to the case study client's level of understanding. It should be clear and concise and written in language that is easy to understand, while still remaining professional in its presentation.

You may base your response to this part of the assignment either on your knowledge of the products currently offered by your own organisation or on the products offered by a lender you have researched.

In your proposal, you should include:

• a summary of your understanding of the clients' needs (this could be an outline summary of their proposed loan structure)
• a summary of their current financial position (use information from the 'funds to complete' template completed in Appendix 1)
• the product options you have considered that meet their needs (research two lenders and detail their loan features; you can use the internet or if working in industry, internal software)
• the option you recommend and the reasons for the recommendation - explain how the recommended product meets the clients' needs (refer to the case study and explain why you are recommending this lender)
• disclosures applicable to the situation (a summary of likely applicable disclosures is adequate). Include disclosures in the Credit Guide and any conflicts of interest.

Note: List any assumptions you have made about the clients and their situation in order to complete this part of the assignment. There are no rules regarding the format. Please use the format that best suits you. Should you require it, an example of a written proposal format has been provided in topic 3.3. Note that the credit guide in your resources is not a 'written proposal'.

2. (a) Describe the 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?

Note: Please identify what State or Territory you are from in your answer.(150 words).

2. (b) Provide a summary of all additional costs and fees, that the couple should be made aware of. (100 words)

Note: When considering your response, you can refer to your completed Appendix 1 which lists fees expected and charges. Apart from known costs, you can estimate other costs (i.e. pest inspection, rate etc.).

Task 7 - Clinton and Jennifer's professional network

1. Name three (3) parties Clinton and Jennifer may wish you, as their broker, to keep informed of the progress of their finance application who are not directly involved in the loan processing? (100 words)

2. It is important that as a broker you understand the loan application process and how to effectively manage the progress of a loan application. Outline to Clinton and Jennifer the process that will occur from your first meeting through to post settlement. Please present nine (9) steps in the process. (350 words)

3. 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 8- 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 understandthe 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. Explain to Clinton and Jennifer some of the advantages and disadvantages of fixing a loan. (150 words)

3. Suggest how Clinton and Jennifercould potentially manage the risks associated withfixing a loan in the event they need to break the fixed loan contract. (100 words)

Task 9 - Settlement

Outline in detail the steps a Lender should take post-approval in order to document, settle the loan and administer the loan post-settlement. (300 words)

Section 2: Case study 2 - Tony and Lorraine Denton Assignment tasks

Task 10 - Establishing level of financial knowledge

What communication skills might you use to confirm Tony and Lorraine'sunderstanding and knowledge about credit and finance, as well as their current position, including establishingtheir requirements and objectives with the refinance?

Provide examples of how you would use these skills to establish Tony and Lorraine's level of financial knowledge.

(150 words)

Task 11 - 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. 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 Tony and Lorraine? (100 words)

3. Tony and Lorraine have decided to consolidate their debts into one 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 cleaning supplies bill as they pay this in full each month.

In the template below provide a new liabilities summary once Tony and Lorraine have completed the debt consolidation including their new monthly repayments.

Note: They have chosen 'New Bank Loan' who are offering a 4.5% interest rate on a variable, principal and interest loan over 30 years.

4. What savings will Tony and Lorraine obtain in monthly repayments?

(Include calculation how you determined the savings.)

Task 12 - Self Employed special considerations

1. As Tony and Lorraine 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 of recommending an 'unsuitable' product. (250 words)

Task 13 - Advising on strategies

Following the presentation of your proposal, Tony and Lorraine say that they would like your advice regarding loan and debt management strategy tools that are available to help them to pay down their home loan as quickly as possible.

List strategies or methods that will help them achieve their aim.

Note to students: You may refer to the MoneySmart website for information on this subject and your answer may also include available mobile phone apps used for debt management.

Provide the advantages and disadvantages of each. (300 words)

Task 14 - Impact of credit history

Tony 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 Tony can do as he is concerned about his credit rating. What information would you provide in the following two situations?

1. Provide Tony with the details of three (3) major credit reporting agencies and explain what information may be recorded on his credit file. (200 words)

2. Tony has decided he would like to obtain a copy of his credit report from either Veda or Dun & Bradstreet. Explain what options are available for each provider, how long it takes to obtain a copy, and the associated costs. (100 words)

3. If there are errors on file, what is the procedure for Tony to follow in order to have these errors rectified? Hint: Refer to the Veda website. (150 words)

4. What are the Lender's legal obligations if they decline an application due to the content of the credit agency file? (100 words)

5. What options are available to Tony and Lorraine in the event that the loan was rejected by the lender you initially proposed due to a credit report (150 words)

Task 15 - External dispute resolution

During the loan process, Tony 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. (200 words)

2. What could be the maximum financial compensation limit imposed by the CIO?

(You can obtain this information on the CIO website.) (10 words)

Task 16 - 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. Tony and Lorraineare 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? (100 words).

Attachment:- Assignment File.rar