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)

Remember that you must identify at least three (3) disclosures here, and you should include a description of each.

The disclosures you discuss should be those that a finance broker makes to prospective borrowers about the range and limitations of their services.

Refer to Topic 1-2 and Topic 3-1 of your subject notes for information on disclosures.

Task 2 — Gathering and documenting client information

Complete the Client Information Collection Tool using the information provided in the case study, (Appendix 1, page 27 of your assignment template).

Note: Any assumptions you make should be listed, and not be in conflict with the case study information already provided.

You should complete the Client Information Collection Tool based on the information you have been provided with in the case study, in line with the client’s current situation.

Any information you haven’t been provided with you should make assumptions for as long as they’re not in conflict with the case study.

Ensure you complete all parts of the information collection tool, including: the Needs Analysis, Notes, the Anticipated Fees and Charges, Loan Interview Diary, values for the vehicle’s, and their borrowing capacity.

The Notes page is especially important to capture all other relevant information about client’s goals, objectives, or other matters they have discussed at interview as recorded in the case background information and not recorded anywhere else in the Fact Finder.

It is important that loan amount, LVR and fees and charges are calculated correctly as your work here is used in Tasks 3 and 6.

Task 3 — Assessing the clients’ situation

1. 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

Provide data to support your comments and conclusions. (750 words)

2. Stress testing the loan repayments

Most lenders add 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 Malcolm and Susan’s loan repayments be, do you think they would be able to cope with the extra repayments, and what could you recommend that may remove this consideration as a risk factor?

1. Ensure that as a minimum you identify and assess the key elements — these are listed for you in the question:
   • Borrowing ability — make sure you show your calculations
   • Deposit requirements — remember to separate deposit from allowance for fees and charges
   • Repayment ability — make sure you show your calculations
   • Likelihood of the clients’ meeting their repayment commitments — this will be based on your assessment
   • Is Mortgage Insurance required and how much will it cost — you might also consider the options of how cost can be paid
   • Any other issues that may impact now or in the future, in relation to ability to meet obligation or possible risks

Any assumptions that you make should be clear in your answer.

2. Use an appropriate online loan servicing calculator to complete your stress test Subject note reference is Topic 3-1.

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)

This task requires you to demonstrate your understanding of your obligations under the National Consumer Credit Protection (NCCP) Act 2009.

It is essential when answering this questions that you identify and described the key elements that must be taken into consideration when assessing whether a credit is ‘not unsuitable’ for a borrower.

Please refer to Topic 1-2 and Topic 1-3 for further information on determining if a loan is ‘not unsuitable’.

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)

Remember this is your opportunity to demonstrate your knowledge to the assessor.

Do not simply list them, you must explain the purpose of each enquiry in your own words. Refer to Topic 1-2 of your subject notes for further information.

Task 6 — Prepare your recommendation

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 questions of this task are ‘critical’ and you must demonstrate the required knowledge in each to be deemed competent.

• Based on the information presented in the case study, prepare a written professional proposal to your (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 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

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. Note that the credit guide in your resources is not a ‘written proposal’.

Note: When considering your response to these questions, bear in mind the couple’s inexperience with the borrowing and property purchasing process.

Part (a)

This task requires you to prepare a written proposal addressed to your clients, and as such you should ensure that it is presented in a professional manner.

Consider if you were the client – would you be happy if you were presented with your written proposal?

The style and language used in the proposal should also be appropriate to the case study client’s level of understanding.

As a minimum, your proposal must address each of the items set out in the question:

• a summary of your understanding of the clients’ needs
• a summary of the client’s current financial position
• the product options you have considered to meet the clients’ needs
• the option you recommended and the reasons for the Explain how the recommended product meets the clients’ needs

• the amount of fees and charges as you have calculated and their options to pay any additional cost, if in excess of their estimated amount
• a brief outline of Lenders Mortgage Insurance, the cost and options to pay, remembering they are not experienced in these matters
• disclosures applicable to the situation (a summary of likely applicable disclosures is adequate)

Make sure you include any assumptions you’ve made about the case study in order to arrive at your recommendations.

Part (b) (i). You now need to provide details of any home buyer assistance schemes or stamp duty concession as they apply in your home State/Territory. Please refer to Topic 3-2 of your subject notes for further information.

Part (b) (ii) You may add other costs here that you think will be of assistance to clients to prepare them for purchases and move.

Task 7 — Advising on strategies

Following the presentation of your proposal, Malcolm and Susan 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 Provide the advantages and disadvantages of each. (250 words)

Use this task as an opportunity to demonstrate your knowledge of strategies to the assessor.

For any strategies that you do discuss, make sure that you include both the advantages and the disadvantages.

You need to explain to your client how each strategy works and how it may, or may not, be effective for them.

It is important to explain the pros and cons of each strategy so that you can assess if your clients are comfortable to proceed with it.

You should also aim to include examples of each strategy or method that you discuss.

And remember to include the disadvantages of each strategy – if you forget to include the disadvantages you may be asked to resubmit your assignment.

Refer to Topic 1-3.

Task 8

Malcolm and Susan have called to discuss whether they should consider fixing the interest rate on their loan

— they say their parents have said ‘you never beat the bank when you fix’, and yet their friends are telling them about a loan where they can ‘have a bit of both’.

1. Explain the role of the RBA with respect to interest rates and why it is necessary to have these
2. Suggest how Malcolm and Susan could potentially solve their

For part 1, the assessor is looking to see that you can explain the role of the RBA in setting and monitoring interest rates and the impact this can have. Refer to topic 1-1.

In part 2, you are required to consider the appropriate product option that might provide a solution to both points of view. Refer to Topic 1-3.

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)

or this task, the assessor is looking to see that you understand the complete process of settling a loan application from start to finish, including the correspondence that would issue to the clients informing them that settlement has occurred.

Ensure you include details of every stage required in this process, in order to properly document the loan. Refer to Topic 3-4 of your subject notes for further information that may assist you with this Task.