Section 1 — Case study 1 — Andrew and Stephanie Wilson Background Andrew

| November 9, 2018

Assignment
MB-11SN9-2.1 Finance and
Mortgage Broking
Section 1 — Case study 1 — Andrew
and Stephanie Wilson
Background
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 one 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

Address:

Unit 1, 92 Seaside Lane, Coastville, 2996

Purchase price:

$410,000

Description:

2 bedroom strata title unit

Agent details:

Steven Allstone

Phone:

02 8282 1113

Mobile:

0412 880 088

The couple

Current address:

Unit 12, 22 Wentworth Lane, Highville, 2999

Andrew and Stephanie have lived there since March
2001

Home phone:

02 9001 2121

Funds position

Purchase price:

$410,000

Estimated costs:

$20,000

Total required:

$430,000

Loan:

$370,000

Own contribution:

$60,000

Assets

Capital Bank savings account (joint)

$72,000

Capital Bank cheque account (joint)

$1,600

Holden Commodore SS 2002 (Andrew)

$25,000

Suzuki Baleno 2001 (Stephanie)

$9,000

Superannuation — Capital Bank (Andrew)

$28,000

Superannuation — Capital Bank (Stephanie)

$62,000

Household effects (insured value)

$40,000

Liabilities

Capital Bank personal loan (Andrew)

$3,600
(repayments $180
p.m.)

Capital Bank Visa card (Andrew)

$200
(limit $2,000)

Capital Bank Visa card (Stephanie)

$600
(limit $3,000)

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.
Income/employment
Andrew (date of birth 21/2/84)

Position:

Team leader (full time)

Employer:

ACME Limited

101 City Rd, Westside, 2998

Phone:

02 9800 1111

Income (gross):

$45,000 p.a., net monthly income: $2,900

Employer contact:

Alison Johnson, HR Manager

Length of service:

Since October 2001

Driver’s licence:

8855KL

Email:

andreww@acme.com.au

Stephanie (date of birth 8/10/85)

Position:

Accountant (full time)

Employer:

Phones R Us

804 High Street, City East, 2997

Phone:

02 9910 2033

Income (gross):

$85,000 p.a., net monthly income: $4,900

Employer contact:

Stan Adams, HR Manager

Length of service:

Since March 2002

Driver’s licence:

17016C

Email:

swilson@phonesrus.com.au

Interest income
Approximately $40 per month from $12,000,
remaining in savings account after home loan deposit. Interest 4% p.a.
Solicitor’s details
Jones and Co
22 High Street, City East, 2997
Phone: 02 8281 1382
Fax: 02 8290 1800
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.
Assignment tasks(student to complete)
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 three (3) of these disclosures. (200
words)
Student Response:

Assessor feedback:

Task 2 — Gathering and documenting client information
Complete the Client Information Collection Tool using
the information provided in the case study, (Appendix 1).
Note: any assumptions
you make should be listed, and not be in conflict with the case study
information already provided.
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, including
those 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
• do
they require Lenders Mortgage Insurance (LMI), and if so, how much will it cost
• 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)
Student Response:

Answer here

Assessor feedback:

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 factors that must be taken
into consideration when assessing whether a credit facility is ‘not unsuitable’
for a borrower. (100 words)
Student Response:

Answer here

Assessor feedback:

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)
Student Response:

Answer here

Assessor feedback:

Task 6 — Prepare your recommendation
a. Based
on the information presented in the case study, prepare a written professional proposal
to your 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 on either your knowledge
of the products currently offered by your own organisation, or the products
offered by a lender you have researched.
In your proposal, you
should 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). Consider disclosures that are required by both legislation and by
lenders codes of practice.
Note: List any assumptions you have made about the clients and their
situation in order to complete this part of the assignment.
Student Response: part a

Answer here

b. i)
Describe the workings of any home buyer assistance schemes and stamp duty
concessions that may be available in your State or Territory. Would your client
be eligible for any of these? (150 words)
Student Response: part b
i)

Answer here

ii) Provide a summary of
all additional costs and fees that the couple should be made aware of. (150
words)
Note: When considering
your response to these questions, bear in mind the couple’s inexperience with
the borrowing and property purchasing process.
Student Response: part b
ii)

Answer here

Assessor feedback:

Task
7 — Advising on strategies
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.
• List
strategies or methods that will help them achieve their aim.
Provide the advantages and disadvantages of each.
(250 words)
Student Response:

Answer here

Assessor feedback:

Task 8 — Settlement
Outline in detail the steps a Lender should take in order to
document, settle and administer this application, post-approval. (300 words)
Student Response:

Answer here

Assessor feedback:

Section 2 — Case study 2 —Natalie
Background
Natalie is a single parent. She is returning to
the workforce after a period looking after her young child. Because of the
location of her new employment, she needs to buy a car for transport.
In the past, Natalie’s former partner managed all
the household finances, now she has to make the decision about how to finance
the purchase of the car. She has insufficient funds to buy it outright.
Natalie comes to you for advice on credit and the
best way to finance the purchase of the car. It is likely to cost about
$15,000. She would prefer to obtain finance for the whole amount. Assume that
her income will be sufficient to cover the repayments.
After reading the case study above, answer the
questions below.
Project tasks (student to complete)
Task 9 — Establishing level of financial knowledge
What communication skills might you use
to establish and confirm Natalie’s level of knowledge about credit and finance
and to establish her needs? (150 words)
Student Response:

Answer here

Assessor feedback:

Task 10 — Offering financial options
a). Suggest two suitable types of credit options for Natalie.
b). Explain why you have chosen these credit
options, and provide a comparison of the two.
c). Recommend one of the options, with your reasons for the
recommendation. (200 words)
Student Response: part a)

Answer here

Student Response: part b)

Answer here

Student Response: part c)

Answer here

Assessor feedback:

Task 11 — Explaining financial options
a). Provide a simple explanation of the difference
between a secured loan and unsecured loan to Natalie for the purpose of her
loan.
b). Explain the implications of taking out a secured loan.
(150 words)
Student Response: part a)

Answer here

Student Response: part b)

Answer here

Assessor feedback:

Task 12 — Explaining finance costs
a). Provide
Natalie with a summary of potential fees and charges, (both inside and outside
of the comparison rate), that might be applicable to the credit option you have
suggested.
b). Explain
how she can compare the real cost of loans offered by different credit
providers.
c). Explain
why your suggestion is likely to provide an indication of the real cost. (150
words)
Student Response: part a)

Answer here

Student Response: part b)

Answer here

Student Response: part c)

Answer here

Assessor feedback:

Task 13 — Impact of credit history
Natalie tells you that her former partner failed
to properly meet their unsecured personal loan debt obligations before they
separated. Although Natalie eventually repaid the debt she is afraid that this
incident may count against her when she applies for a loan.
What would you advise Natalie about:
a). The
records kept by credit reporting agencies (please include at least two major
credit agencies)?
b). the
procedure and cost involved in obtaining a copy of her credit file?
c). The
accuracy of records?
d). The
impact of credit history including the legal obligations of Lenders? and
e). Her
rights?
(200 words total).
Student Response: part a)

Answer here

Student Response: part b)

Answer here

Student Response: part c)

Answer here

Student Response: part d)

Answer here

Student Response: part e)

Answer here

Assessor feedback:

Appendix1 —
Client information collection tool
Appointment date:
Appointment time:

Applicant 1

Applicant 2

Surname

Other names

Contact details

Address

Phone (W) Phone (H)

Mobile

Email

Employment

How long?

Previous employer

How long?

PAYG

Self-employed

Gross income ( p.a.)

Number of dependants

Motor vehicles

Loan purpose

Purchase price/Valuation

Deposit

Loan amount

Borrowing capacity

Assets and liabilities

Assets

Liabilities

Details

Market value

Details

Monthly payments

Amount owing

Property at:

Mortgage with:

Property at:

Mortgage with:

Property at:

Mortgage with:

Cash at bank

Car leasing

Other cash

Personal loans
1.
2.

Deposit paid on property

Overdraft

Motor vehicles:
1.
2.

Other loans:
1.
2.

Personal effects

Credit card limit: $2000

Business value

Credit card limit: $3000

Shares and investments

Other:

Superannuation

Other:

Other assets (give details)

Other:

Total assets

Total liabilities

Surplus/deficiency: $___________________________________
Needs analysis

1

Name of your current
lender?

2

What type of loan do you
have?

3

Why did you choose this
particular loan and lender?

3

What is the interest rate?

4

What are your payments?

Amount

5

Frequency

6

Do you know the fees and
charges?

7

What is your proposed
purpose for the loan proceeds?

8

Branch access available

9

Internet banking available

10

Phone banking available

11

Lenders not to be
considered

12

Type of loan sought

13

Interest rate

14

Payment frequency

15

Redraw

16

Offset

17

Salary crediting

18

Low fees and charges

Notes

Anticipated fees and charges

Anticipated purchase price

$

Deposit

$

Loan amount

$

LVR

%

Purchase costs

Stamp duty on transfer

$

Solicitor/conveyancer

$

Rates and land taxes

$

Pest inspection

$

Borrowing costs

Application/establishment fee

$

Valuation fee

$

Security admin fee

$

Mortgage stamp duty

$

LMI

$

Registration of mortgage

$

Release of mortgage

$

Search fees

$

Other

$

Total

$

Loan interview diary
Name(s) of client(s) present at interview

Date of interview:
Location of interview

Indicate all clients who were interviewed in person

Do all of the clients appear
to clearly understand English?
If not, have the services of
an interpreter been recommended?

Do all of the clients
clearly benefit from taking out this loan?
If not, what inquiries have been made to ascertain the level
of benefit to each party of the loan?

Are any clients acting as
though they are under duress or other disability?
Are any clients acting as
though they are unsure of anything
about the loan?
Are any of the clients
acting as though they are unable to comprehend
their obligations?
Are there any guarantors?
If yes is answered to any of
the above questions, have the clients
been advised to seek the services of a lawyer or financial adviser?
Provide details of other pertinent information obtained
during the loan interview which may be of interest or any unusual circumstances
you may wish to record

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