Andrew and Stephanie Wilson 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.

They have been looking at properties for the last month and have found one that has really caught their eye, although the kitchen and bathroom could do with a little work.

They had planned on shopping around the various lenders themselves to find the most appropriate loan for their needs, but as they both work, they have little time to do the research necessary. And, as they both admit, they have limited knowledge of the loan products available and might have difficulty in evaluating the options.

They have not paid a deposit at this stage.

On a suggestion from Stephanie's father (one of your former clients) they have contacted you about the loan.

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.

The property

The couple

Funds position

Assets

Liabilities

All debts have been repaid according to arrangements. In relation to the credit card debt, the minimum monthly commitment should be calculated at 3% of the credit limit.

Employment and income

Andrew (date of birth 21/2/84)

Stephanie (date of birth 8/10/85)

Interest income

Approximately $40 per month from $12,000, remaining in savings account after home loan deposit. Interest 4% p.a.

The loan requirements

• 25-year term
• Premium Option home loan
• standard variable interest rate @ 7.57%
• proposed settlement date - 6 weeks time
• ability to make additional payments from time to time without penalty
• fortnightly repayment option
• redraw facility
• funds access via card
• offset facility.

Project tasks

Case study 1 - Andrew and Stephanie Wilson

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 regarding the way you are remunerated and the range and limitation of your services.

Identify and describe at least three (3) of these disclosures.

Task 2 Gathering and documenting client information

Using the information provided in the case study, complete the Client Data Fact Finder.

Task 3 Assessing the clients' situation

Based on the information provided in the case study and using the tools available to you (e.g. loan calculators, loan calculators available on lenders' websites) provide an assessment of the clients' borrowing ability and ability to service the loan they require.

Consider and comment on, issues such as:

• borrowing ability in relation to the loan required
• deposit requirements for the loan required
• repayment ability based on the loan required
• likelihood that the clients will be able to meet 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.

Task 4  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 is 'not unsuitable' for the borrower.

Identify and describe the key elements that must be taken into consideration when assessing whether a credit facility is 'not unsuitable' for a borrower.

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 six (6) 'reasonable' enquiries that you would make.

Task 6 Prepare your recommendation

a.  Based on the information presented in the case study, prepare a written proposal for your clients. In your proposal include:

     • a summary of your understanding of the clients' needs

     • a summary of their current financial position

     • the product options you have considered to meet their needs

    • the option you recommend and the reasons for the recommendation. Explain how the recommended product meets the clients' needs

     • disclosures applicable to the situation (a summary of likely applicable disclosures is adequate).

     Also consider the style of your written proposal and the language you use.

     Note:

     1.  You may base your response to this part of the assignment on:

          •    your knowledge of the products offered by your own organisation, or

          •    the products offered by a lender you have researched.

     2.  List any assumptions you have made about the clients and their situation in order to complete this part of the assignment.

b.  List other issues relevant to the case study clients' situation that should be brought to their attention and discussed.

     Note: When considering your response to this question, bear in mind the clients' inexperience with the borrowing and property purchasing process.

Task 7

Following the presentation of your proposal, Andrew and Stephanie say that they would like your advice regarding strategies that will help them to pay down their home loan as quickly as possible.

Outline strategies or methods that will help them achieve their aim. Include examples and the characteristics of the strategies or methods you would discuss, including advantages and disadvantages of each.

Task 8

In general terms, and without needing to specifically reference the case study, what steps and checks will need to be taken to settle the application and debt arrangement?