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.

The property

The couple

Funds position

Use fees and charges applicable to your state. If a servicing calculator you are using requires a postcode, select one that would represent a reasonable suburb/location in your city or state.

Assets

Liabilities

Payments have always been met on time and any prior loans repaid in terms of contracts. The minimum monthly commitment on each of the credit cards should be calculated at 3% of the credit limit.

Living expenses

Annual expenditure for living expenses — $33,000.

Employment and income

Philip (date of birth 21/2/87)

Jennifer (date of birth 8/10/88)

Solicitor’s details

Jones and Co

22 High Street, City East (Your state)

Phone: 82811382

Email: jonesandco.net.au

The solicitor has quoted a fee of $1,500 for the conveyance.

The loan requirements

• 30 year term
• premium option home loan features
• variable interest rate (for this case use 4.5% p.a.)
• LMI to be capitalised
• proposed settlement date — six weeks from exchange of contracts
• ability to make additional payments from time to time without penalty
• fortnightly repayment option
• redraw facility
• funds access via card.

Task 1 — Key terms, gathering and documenting client information

(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.

Comment on issues such as:

• does it appear to meet legislative requirements (e.g. NCCP)
• maximum borrowing capacity of client
• capacity to meet deposit and total cash contribution for the loan required
• repayment requirements based on the loan required
• what the security will be and if it is appropriate
• do Jennifer and Phillip require Lenders Mortgage Insurance (LMI), and if so, how much will it cost and what are the options to pay the fee
• what loan amount would you recommend, and why
• likelihood that the clients will be able to meet all their financial obligations
• do Jennifer and Philip qualify for concessions on any of the fees and charges
• 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.

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) Identify appropriate product options you can present to the clients that may remove this interest rate risk? 

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?

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. 

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

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, 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. 

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. 
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. 
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. What process would you follow during your discussion with the clients to ensure you have a good assessment of their needs? 
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.
5. 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’ document in toolbox and explain what the service standards and timelines are up to and including the issue of offer letter and mortgage documents.

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. 

Task 7 — Interest rates

1. Conduct your own 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.

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.

(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 rate on their loan? 

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.

After reading the case study above and reviewing their funding position below, answer the questions that follow:

Assets

Liabilities

Assignment tasks (student to complete)

Task 8 — Establishing level of financial knowledge

2. What communication skills would you use to establish rapport and build a relationship with clients. 
3. 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. 

3. 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.

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?

Advise where you would record the client’s responses.

Assessor feedback for Task 8 — Establishing level of financial knowledge

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)?

2. What are the benefits of debt consolidation for Richard and Pauline? 

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.

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.

Student response to Task 9: Question 3

4. What savings will Richard and Pauline obtain in monthly repayments?
   (Remember to show the calculation of how you determined the savings). 

Assessor feedback for Task 9 — Responsible lending obligations

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?

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.

3. Explain how applying for a Low-doc loan could lead the mortgage broker to be accused under NCCP of recommending an ‘unsuitable’ product. 

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. 

Assessor feedback for Task 11 — Advising on strategies

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.

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. 

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 Equifaxwebsite. 

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

5. What alternate options can you suggestto Richard and Pauline in the event that the loan was rejected by the lender you initially proposed due to a credit report?

Assessor feedback for Task 12 — Impact of credit history

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.

Student response to Task 13: Question 1a

(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 Organisations Policies and Procedures’ document in the toolbox. Produce a short report which 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. 

3. What could be the maximum financial compensation limit amount payable to a consumer borrower through AFCA for a claim for direct financial loss?

Assessor feedback for Task 13 — Dispute resolution

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. 

Assessor feedback for Task 14 — Effective access to files

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 3in 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 Organisations 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.repare and check a loan application

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 Industry codes of practice. 

2. Describe the key features of:

(a) The National Consumer Credit Protection Act 2009. (

(b) The Privacy Act.

(c) Code of Practice.

3. How would you communicate any changes in legislation or codes of practice to colleagues? 

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. 

Assessor feedback for Task 16 — Financial services legislation and industry codes of practice

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’.

Assessor feedback for Task 17 — Produce a document

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: <https://www.mfaa.com.au/education-events/courses>.

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

Note: You can list events that are available online.

Student response to Task 18

Assessor feedback for Task 18 — Applying principles of professional practice to work in the financial services industry

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.

Student response to Task 19: Question 1

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.

To complete this task, you will need to visit .

What service does Canstar provide?

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:

Student response to Task 19: Question 3(a)–(c)

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.

Note: This may require some internet research.

Assessor feedback for Task 19 — Develop and maintain in-depth knowledge of products and services used by an organisation

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?