Financial Assessment and Loan Serviceability

This document presents a detailed financial assessment for a loan application. It includes calculations for variable income from different sources like rentals, non-taxable income, and total net income for all applicants. The document also outlines the applicant's commitments such as existing mortgages, credit card limits, and other expenses. Serviceability calculations are performed using NDI ratios, assessment rates, and monthly repayments to determine the maximum loan amount both at standard and actual interest rates.

Assignment
Certificate IV in Finance and Mortgage Broking
(CIVMB_AS_v3A3)
Student identification(student to complete)
Please complete the fields shaded grey.
Student number 10550523
Assignment result (assessor to complete)
Result — first submission (Details for each activity are shown in the table below)
Not Yet Competent
Parts that must be resubmitted:
Tasks 1.1a, 1.1b, 2, 3.1, 3.2a, 6.1, 8.1, 14.5, 15.1, 16
Result — resubmission (if applicable)
CIVMB_AS_v3A3

Result summary(assessor to complete)
First submission Resubmission (if required)
Section 1: Case study 1 —
Clinton and Jennifer Andrews
Task 1— Initial disclosures Not yet demonstrated Not yet demonstrated
Task 2 — Gathering and documenting client information Not yet demonstrated Not yet demonstrated
Task 3 — Assessing the clients’ situation Not yet demonstrated Not yet demonstrated
Task 4 — Using equity Demonstrated Not yet demonstrated
Task 5 — Reasonable enquiries Demonstrated Not yet demonstrated
Task 6 — Recommendations Not yet demonstrated Not yet demonstrated
Task 7 — Clinton and Jennifer’s professional network Demonstrated Not yet demonstrated
Task 8 — Interest rates Not yet demonstrated Not yet demonstrated
Task 9— Settlement Demonstrated Not yet demonstrated
Section 2: Case study 2 —
Tony and Lorraine Denton
Task 10 — Establishing level of financial knowledge Demonstrated Not yet demonstrated
Task 11 — Responsible lending obligations Demonstrated Not yet demonstrated
Task 12 — Self Employed special considerations Demonstrated Not yet demonstrated
Task 13 — Advising on strategies Demonstrated Not yet demonstrated
Task 14 — Impact of credit history Not yet demonstrated Not yet demonstrated
Task 15 — External dispute resolution Not yet demonstrated Not yet demonstrated
Task 16 — Effective access to files Not yet demonstrated Not yet demonstrated
Feedback (assessor to complete)
A reasonable first attempt at this assignment. There are a few questions that require further work.
Please be guided by the feedback provided for each of the Tasks1.1a, 1.1b, 2, 3.1, 3.2a, 6.1, 8.1,
14.5, 15.1, 16 and refer to the self-study material for reference.(Please keep your original answers
and complete your re-submission answers in a different colour.)
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Before you begin
Read everything in this document before you start your assignment forCertificate IV in Finance and
Mortgage Broking (CIVMB_AS_v3A3).
About this document
This document includes the following parts:
• Part 1: Instructions for completing and submitting this assignment
• Section 1: Case study 1 — Clinton and JenniferAndrews
– Task 1 — Initial disclosures
– Task 2 — Gathering and documenting client information
– Task 3 — Assessing the clients’ situation
– Task 4 — Using equity
– Task 5 — Reasonable enquiries
– Task 6 — Recommendations
– Task 7 — Clinton and Jennifer’s professional network
– Task 8 — Interest rates
– Task 9 — Settlement
• Section 2: Case study 2 — Tony and Lorraine Denton
– Task 10 — Establishing level of financial knowledge
– Task 11 — Responsible lending obligations
– Task 12 — Self Employed special considerations
– Task 13 — Advising on strategies
– Task 14 — Impact of credit history
– Task 15 — External dispute resolution
– Task 16 — Effective access to files
• Appendix 1:Client information collection tool/Fact Finder.
• Appendix 2:Serviceability calculator.
How to use the study plan
We recommend that you use the study plan for this subject; it will help you manage your time
effectively and complete the assignment within your enrolment period. Your study plan is in the
KapLearn Certificate IV in Finance and Mortgage Broking (CIVMBv3) subject room.
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Part 1: Instructions for completing and submitting
this assignment
Completing the assignment
Saving your work
Download this document to your desktop, type your answers in the spaces provided and save your work
regularly.
• Use the template provided, as other formats will not be accepted for these assignments.
• Name your file as follows: Studentnumber_SubjectCode_Submissionnumber
(e.g. 12345678_CIVMBv3A3_Submission1).
• Include your student ID on the first page of the assignment.
Before you submit your work, please do a spell check and proofread your work to ensure that everything is
clear and unambiguous.
The assignment
This assignment is split into 16 Tasks, over 3 Sections. To finish this assignment, you must complete
all 16 tasks.
The information and data needed to complete Sections 1 and 2 is presented in case studies at the
beginning of those sections.
Word count
The word count shown with each question is indicative only. You will not be penalised for exceeding the
suggested word count. Please do not include additional information which is outside the scope of the
question.
Additional research
When completing the Client Information Collection Tool in Appendix 1, assumptions are permitted,
although they must not be in conflict with the information provided in the Case Study.
You may also be required to source additional information from other organisations in the finance industry
to find the right products or services to meet your client’s requirements or to calculate any service fees that
may be applicable.
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Submitting the assignment
You must submit the completed assignment in acompatibleMicrosoft Word document.
You need to save and submit this entire document.
Do not delete/remove any sections of the document template.
Do not save your completed assignment as a PDF.
The assignment must be completed before submitting it to Kaplan Professional Education.
Incomplete assignments will be returned to you unmarked.
The maximum file size is 5MB. Once you submit your assignment for marking you will be unable to make
any further changes to it.
You are able to submit your assignment earlier than the deadline if you are confident you have completed
all parts and have prepared a quality submission.
The assignment marking process
You have 26 weeks from the date of your enrolment in this subject to submit your completed assignment.
Should your assignment be deemed ‘not yet competent’ you will be given an additional four (4) weeks to
resubmit your assignment.
Your assessor will mark your assignment and return it to you in the Certificate IV in Finance and
Mortgage Broking (CIVMBv3)subject room in KapLearnunder the ‘Assessment’ tab.
Make a reasonable attempt
You must demonstrate that you have made a reasonable attempt to answer all of the questions in
your assignment. Failure to do so will mean that your assignment will not be accepted for marking;
therefore you will not receive the benefit of feedback on your submission.
If you do not meet these requirements, you will be notified. You will then have until your submission
deadline to submit your completed assignment.
How your assignment is graded
Assignment tasks are used to determine your ‘competence’ in demonstrating the required knowledge
and/or skills for each subject. As a result, you will be graded as either competent or not yet competent.
Your assessor will follow the below process when marking your assignment:
• Assessing your responses to each question (and sub-parts if applicable)then determining whether you
have demonstrated competence in each question.
• Determining if, on a holistic basis, your responses to the questions have demonstrated overall
competence.
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‘Not yet competent’ and resubmissions
Should sections of your assignment be marked as ‘not yet competent’ you will be given an additional
opportunity to amend your responses so that you can demonstrate your competency to the required level.
You must address the assessor’s feedback in your amended responses. You only need to amend those
sections where the assessor has determined you are ‘not yet competent’.
When making changes to your original submission, use a different text colour for your
resubmission.This way, your assessor will be in a better position to gauge the quality and nature of your
changes. Ensure you leave your first assessor’s comments in your assignment, so your second assessor can
see the instructions that were originally provided for you. Do not change any comments made by a
Kaplan assessor.
We are here to help
If you have any questions about this assignment you can post your query at the ‘Ask your Tutor’ forum in
your subject room.
Before you submit your assignment
If you have any queries about the assignment questions, please use the ‘Ask your Tutor’ forum in your
subject room. You can expect an answer from your Tutor within 24 hours of posting your question.
Remember, your online tutor cannot preview or check your assignment answers, or provide specific answer
guidance. Please ensure that your questions are about clarification of the intent of an assignment question.
After your assignment has been assessed
If you have questions about your assessor’s feedback, please
email:<[e-mail]>and include a copy of your assessed assignment. Never post your
assignment answers or assessor comments in the ‘Ask Your Tutor’ forum.
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Section 1: Case study 1 — Clinton and Jennifer Andrews
Background
Clinton and Jennifer Andrews live in Sydney with their two school-age children. Theybought their home
15 years ago. With the rise in its value over time they have generated substantial equity and have decided
to purchase an investment property. Recently they went to a real estate seminar where the presenter
explained that it is possible with correct leverage to purchase more than one investment
property.Consequently, they have decided to borrow 90% LVR on the investment property plus the LMI.
The deposit, stamp duties and other costs will come from their ‘offset account’ attached to their home
loan.They have requested not to use their current lender.
After conducting research over the last six months they have decided to purchase a new four-bedroom
home in outer Brisbane for $450,000 with a rental income of $450.00 per week.
The real estate agent has recommended they contact you to arrange their finance.Their accountant has
been providing some advice in relation to negative gearing benefits.
The following tables are a summary of the details obtained from the couple during the fact find interview.
The details provided include a description of the property they wish to purchase, their financial and
employment details and the loan features that they require.
The investment property
Address: 29PacificDrive, Ipswich, Queensland 4305
Purchase price: $450,000
Description: 4-bedroombrick veneer home
Rent: $450.00 per week
Agent details: Rain and Hall
Phone: [phone]
Mobile: [phone]
The borrower’s home address
Current address: 17 Moss Ave, East Hills, NSW 2213
Description: 5-bedroom full brick home
Value: $850,000
Mortgage: $190,000
Monthly repayment: $1,020.00 per month
Home phone: [phone]
Clients’ view of funding requirements
Purchase price: $450,000
Estimated costs: $20,000
Total required: $470,000
Loan: $405,000 + LMI
Own contribution: $65,000
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Assets
Big Bank offset savings account (joint) $180,000
Little Bank fixed term account (joint) $10,000
FordFalconG6, 8 years old (Clinton) $15,000
Holden Barina, 10 years old (Jennifer) $5,000
Superannuation — MPAInsurance (Clinton) $82,000
Superannuation — CLMInsurance (Jennifer) $54,000
Household effects (insured value) $80,000
Liabilities
Big Bank standard home loan (Joint)
(P&I repayment, variable, no fees)
5.0% $190,000(repayments $1,020 p.m.)
Big Bank Visa card (Clinton) 18.5% $800(limit $5,000) (clears monthly)
Little Bank Visa card (Jennifer) 12.9% $1,200(limit $3,000) (pays $500 per month)
All debts have been repaid according to arrangements. In relation to the credit card debt, the minimum
monthly commitment for servicing purposes should be calculated at 3% of the credit limit.
Income/employment
Clinton (date of birth 24/5/84)
Position: Project Manager (full time)
Employer: ACM Construction
10 Wide Rd, Ryde, NSW
Phone: [phone]
Income (gross): $85,000 p.a., gross monthly income of $7,083, net monthly income of $5,476
Employer contact: KellyWilliams, HR Manager
Length of service: 16 years
Driver’s licence: 8869KL
Email: [e-mail]
Jennifer (date of birth 8/10/87)
Position: Accounts Assistant (full time)
Employer: Pretty Clothing Pty Ltd
80 High Street, Penrith, NSW
Phone: [phone]
Income (gross): $74,000 p.a., gross monthly income of $6,166, net monthly income of $4,837
Employer contact: JoanCollins, HR Manager
Length of service: 7 years
Driver’s licence: 2897HT
Email: [e-mail]
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Interest income
Approximately $30 per month from the $10,000 term deposit,interestof 3.5% p.a.
Expenditure
Monthly expenditure for living expenses— $3,200.
Solicitor’s details
Jackson &Williams
28West Street, Yagoona, NSW
Phone: [phone]
Fax: [phone]
Note:The solicitor has quoted $1,500 to cover estimates costs.
Proposed loan details
• application fee— $600.00 (includes valuation)
• 30-year term
• principal and interest
• residentialinvestment loan
• standard variable interest rate of 5.68% (comparison 5.82%), special offer rate of 4.78%
(5.16% comparison) (Note: Clinton& Jennifer will qualify for this special loan offer.)
• proposed settlement date — 6 weeks’ time
• ability to make additional payments from time to time without penalty
• fortnightly repayment option
• redraw facility
• internet banking.
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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.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)
Student response to Task 1: Question 1(a)
The disclosure that needs to be given to the client before commencing credit assistance is the “Resposnible
Lending Disclosure Obligations-Overview for the credit licensees and representatives”. The main disclore
related to it is that they are responsibilitiesare to provide certain documents to clients to supply them with
the data that they require to have knowledge about the credit operations that will be provided.
These documents needs to be given in order to make sure that the consumers have entrance to the data
that will assist them in constructing decisions about handling with undertaking the credit, gain knowledge
about their rights if they do tackle with the transaction and gain knowledge about the agreements that are
being given to them.
Assessor feedback: Resubmission required?
Competency not yet Demonstrated
Task 1(a)- you are asked to identify which of these documents, that
you must provide your client once you have decided to provide credit
assistance but before you have gathered information about the
client’s existing financial situation or needs and then explain the main
features. (Hint – there is only one)
Please refer to Topic 3.1, section 13 in your course material, section
113 and 114 of the Australian Consumer Credit Legislation and
resubmit.
NOTE: If you do not get this right you risk civil and criminal actions
from ASIC.
Yes
(b) Identify which of these four documentsyou will provide the client should you intend to charge a
broker fee and explain what is required for it to be valid. (40 words)
Student response to Task 1: Question 1(b)
The documents provided to the client for the levying of the fees for the purpose of brokerage are given
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below:
 Quote
 Credit Guide
 Written assessment
 Proposal document
Assessor feedback: Resubmission required?
Competency not yet Demonstrated
You have not identified the document. The question clearly states
which document you will provide the client should you intend to
charge a broker fee and explain what is required for it to be valid -
please be more clear and concise with your re-submission
Please refer to Topic 3.1
Yes
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.
Assessor feedback: Resubmission required?
Competency not yet demonstrated
Please amend all highlighted areas in Appendix 1. Please strictly
read and use case study 1 facts - Clinton and Jennifer Andrews.See
comments at Appendix 1.
Yes
Task 3 — Assessing the clients’ situation
1. Using theExcel 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.
<http://www.genworth.com.au/online-tools-forms-and-reports/lmi-tools/serviceability-calculator>.
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.
Assessor feedback: Resubmission required?
Competency not yet demonstrated
Please see highlighted incorrectly entered or missing information. This
is a very important task a broker will need to get correct.
NDI Incorrect. The GE website/worksheet has a How to guide - please
Yes
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strictly follow it to ensure you input correct amount to arrive at the
actual NDI. This excel spreadsheet needs to be correct as it helps to
complete part of Task 3.2a.
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)
Student response to Task 3: Question 2(a)
In this aspect, it can be viewed that there are two maximum degree of amount that Clinton and Jennifer
can undertake as loan. The primary and the lower sum consists of $885,954, which is in regards to
thecalucltationopf growth serviceability and the second one is the bigger amount which is the real sum that
amounts to $1,160.333. This is due to the fact that the special interest that the couple are entitled to.
Student response to Task 3: Question 2(b)
The amount of deposit has been 10% of the actual value of the property and the amount sums upto
$45,000.
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Student response to Task 3: Question 2(c)
The collective net income of the couple is $140,368.71 and the monthly combined income is $11697.39.The
living cost for the couple is $38,400 having a monthly value of $3200. Thus, the combined monthly value
less by the cost of living is $8497.39
Student response to Task 3: Question 2(d)
The couple would be in need of LMI. It has been mainly due to the fact that they have been only
contributing about 10% of the total loan amount. The LMI value comes to $8,627.
Student response to Task 3: Question 2(e)
After the observation of the facts and figures that have been submitted by the couple Clinton and Jennifer,
it can be dfined that they would not have much effect in accordance to the ability to meet their
accountabilities as they have both fullt time and permanent jobs for the long run that would be adequate
to cover any kind of risk which would permit them with a steady cash inflow. In accordance to the current
situation, the real NDI ratio has been viewed to be steady and helathy and comes up to 2.08:1 in
accordance to the Genworth’s ratio of 1.76:1. The completion of the settlement reveals that there has been
a surplus fund of $8,627 and this additional fund can be used for the purpose of meeteing any unexpected
costs. In the worst circumstances, they have the capability and the option to exploit the equity as well. The
remaining risk that may be faced by the client is the interst rate. If there is a transformation in the real time
situation and the couple are no longer entitled for any kind of special rate, then their NDI will have an effect
bit it has been viewed that NDI has been so steady and vigorous that they would be able to look after their
financial compulsions.
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Assessor feedback: Resubmission required?
Competency not yet Demonstrated
Q2a) Once you correct your serviceability sheet the max loan amount
will change. Please amend and re-submit.
Yes
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Task 4 — Using equity
1. Although Clinton and Jenniferhavechosen 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)
Student response to Task 4: Question 1
Lender’s Mortgage Insurance (LMI) is an one-off payment method which is to safeguard the lenders in
situations when the borrower is unable to undertake repayments and when the loan to valuation ratio
(LVR) is more than 80%. This can even be capiatlised in the repayment of the loan. A rise in depsosit would
explain a lower loan value and thereby would reduce the LVR. Therefore, in this circumstances, the copuple
are to reduce the LVR in order to prevent the LMI. They can make use of their savings and the equity of the
off-set accounting to deposit that is more than 20%. As the LVR of the couple is lower than 80%, it can be
said that they can dodge the cost of LMI which has a vlue of $8,627.
Assessor feedback: Resubmission required?
Competency Demonstrated No
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)
Student response to Task 4: Question 2
Clinton and Jennider have an off-set account of $1,80,000 and furthermore they have an equity of $610,000
over the house in which they live. It has to be recorded that the couple still have a mortgage value of
$1,90,000 on this house.
Hence, universally it has been viewed that they can make use of their savings in order to pay for the loan
that they have taken for the residential property and exploit their equity in order to gain 100% of the loan
for the investment property. These costs of interest would be tax deductible as the loan was undertaken in
order to buy the inmvestment property.
Assessor feedback: Resubmission required?
Competency Demonstrated No
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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 to Task 5
 The credit value that is required, the period of time for the repayment and the purpose whether
the required product has an appropriate features and flexibility that can be undertaken in order to
dsetermine the goals of the client.
 It is essential to look at the main source of income that includes their salaries and the interest
income by investigating their pay slips and the tax returns in order to confirm that the client have
the capabnility for the repayment of the loan.
 Clinton and Jennifer have provided their details and the employment status and their past history
in accordance to their residence. They would even be asked for their bank statement and
investigate their credit history. This has been to determine the likelihood that they would be able
to meet their obligations for the purpose of repayment during the loan duration.
 The valuations will be required for the property that Clinton and Jennofer would like to buy as this
would be exploited by the banks in order to assess their extent of risk in permitting the loan to the
couple.
 The risk appreciation by the borrower is associated with the features of a distinct credit product
that needs to be noticed. It is even essentiual to confirm with the client the deposit amount in
order to calculate the LVR as it would have an effect on their LMI.
 The reasonable estimated changes in their financial and domestic circumstances that may have an
effect on their expenses, income and repayments.
Assessor feedback: Resubmission required?
Competency Demonstrated No
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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’.
Student response to Task 6: Question 1
Client Praposal:
Credit proposal
Applicant's details
Applicant 1 Applicant 2
First name/s Clinton Jennifer
Surname Andrews Andrews
Date of birth 24.05.1984 08.10.1987
Number of dependant 2 2
Relationship with the applicant Parents Parents
Mobile/Phone [phone] 6051 2121
Email [e-mail] [e-mail]
Current address 17 Moss Ave, East
Hills, NSW 2213
17 Moss Ave, East
Hills, NSW 2213
Employment status Full time Full time
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Occupation Project manager Accounts Assistant
Basic salary $ 85,000 Per month $ 74,000 Per month
Max price of the property $450,000.00
How much to be borrowed $405,000.00
First home buyer No
Loan trem Up to 30 years
Loan to value ratio (LVR) 90%
Premium payable LMI $8,627.00
Capitalised premium, if any $43.00
In order to take the amount as loan, the couple has to take a loan that comes to $405,000 and the premium
of LMI will come to $8,627 with the capitalised premium value of $43 if there are any.
Requirement of the client
The couple are both employees and have been salaried and have two children who are cuirrently school
going children. The couple have gained the knowledge that their income that is available is suffient for
them to buy another investment. Therefore, the primary need at the present scenario has been to gain
financial consultation in accordance to the buying of the new investments with appropriate leverage with
the help of the residential investment loan, due to which the repayment option would be fortnightly and
will have internet banking with the withdrawal facility. However, as their accountant have provided them
with come recommendations in accordance to the benefits of negative gearing. It has been because that
Clinton and Jennifer has the want of taking specific suggestuions from the financial service providers in
order to buy the investment without having an effect on their present standard of living.
Current financial position
By observing the information that has been given to the couple, it has been discovered that they require a
total total amount of $470,000 in order to purchase the new house and from the overall amount, a sum of
$65,000 would be paid to the client. However, the desired loan amount comes to $413,000. Therefore, the
demanded own funds will come to $56,373 and the extra fund that will be the remainder with the client
would be $8,627 in order to cover the costs that have been unprecedented.
Product Options
IMB Budget Home Loan- This provides competitive rate, effortlessness and other features like the
unrestricted repayments that are withdrawal free, flexible for repayment and the discount in the loan life-
cycle. If the budget home loan is not able to satisfy the needed criterion of the client, IMB offers other
options that are varbale in nature of the home loan like the introductory variable home loan, necessary
home loans and the fixed loan options that are available to them. However, in order to be eligible for the
special rate, the borrower requires to be the owner of the occupier and open a transaction account for
IMB.
NAB choice package fixed rate home loan- This loan provides discount on a general fixed interest rate and
certain other fees when it is linked with the Tailored Fixed rate Home Loan. It even provides home loan to
the customers with 350,000 NAB reward points out of which they make application for the banking bundle
and NAB eligible home loan before 30th November 2017.However, the home loan requires to be withdrawn
before 30th December 2017 and this would not be the NAB refinance or any refinance from U Bank or
Advantage. The minimum amount that is eligible for the home loan is $250,000.
Factor for Recommendation
It is observed that the IMB budget home loan is recommended as it is simple and the interest rate is
competitive. Furthermore , it provides numerous options for the home loans like the preliminary variable
home loan, standard variable home loan, essential home loan, and discount-split home loans. Thus, the
Page 18 of 60

Clinton and Jennifer can choose the option with respect to their need and preference. In addition, the
couple is in need of the internet banking and the facility of re-withdrawal and these conveniences are
discovered in the IMB Budget Home Loan.
However, the NAB choice package fixed rate home loan is recommended as it provides discount on the
standard fixed interest rate and certain other fees when it is combined with the Tailored fixed rate home
loan. They will be receiving 350,000 NAB reward points as it is very precise from the fact finder that they
are in need to apply for the loan immediately that is before 30th November and it is projected that the loan
will be taken before 30thDecenber 2017. Furthermore, the minimum eligible loan value is $250,000 and the
demand for the couple has been found to be $413,000.
Disclosures
By observing the demands and the financial scenario of the couple, it is suggested that prior to undertaking
application of the loan from the sources that have been explained, the client should gain knowledge about
their presence and needs in a precise manner. They would even look into the schedule of the repayment of
the loan and the interest rate. Furthermore, they should examine the other sources before making any final
decision with respect to the loan.
The “Regulation 28L”provides the process for giving credit disclosure statements.
These reports can be provided to a client personally or, if the consumer harmonies and so can be
forwarded electronically or made available for reclamation in a format that is electronic in nature.
The credit guide disclosure generally includes contact details,name and Australian credit licence number or
credit representative number, and data about the method for determiningdisagreements with a client,
including the agreement details to access:
the internal dispute resolution (IDR) procedure, and
theEDR scheme of which one is a member.
Conflict of interest
It is seen that one of the key interest conflict is that if the client take the loan from NAB Choice Package
Fixed rate of home loan, the lender of credit assistance would gain a commission at 1% of the overall loan
value. The other interest conflict is that the accountant and the tax consultant of the client is a relative to
the solicitor. Thus, there are probabilities that the solicitor would npot assess the documents of the couple
in details.
Page 19 of 60

Assessor feedback: Resubmission required?
Competency not yet Demonstrated
• disclosures applicable to the situation (a summary of likely applicable
disclosures is adequate). Include disclosures in the Credit Guide and any
conflicts of interest.
(In your proposal, you were required you to make disclosures applicable to the
situation, taking into account legislation and relevant codes of practice. If you do not
get this right you not only expose yourself to possible civil actions but also put your
Australian Credit Licensee at risk.
Therefore, please detail the disclosures applicable to the situation that meets the
requirements of the National Consumer Credit Protection Act 2009.
You may wish to review your course notes, topic 3.1 page 31. As an additional
reference, you may find useful ASIC’s Info Sheet 146 and the Mortgage and Finance
Association of Australia’s (MFAA) Code of Practice effective 4th September 2016 of
some use. In particular sections 9 to11.
(Hint – the disclosures also go beyond just detailing the amount of the
remuneration.)
You might want to review the Example Written Proposal Format available in
the course material.
Yes
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).
Student response to Task 6: Question 2(a)
 In New South Wales, the initial purchaser of the loan is eligible for the home purchaser grants and
the discussions from the government.
 The duty exemption on the existent new homes are valued to $650,000 and on the land that is
vacant coming to $350,000.
 If the sum of the new loan is lower than $600,000 or where the purchaser enters into the
comprehensive building contract or is the owner for which the amount is smaller then $750,000
then $10,000 would be availbale to the first purchaser as a grant.
 The exemption on duty on the new houses and on the existent one are priced among the value of
$650,0000 and $800,000 and on the vacant land that comes in between $350,000 and $450,000.
Assessor feedback: Resubmission required?
Competency Demonstrated No
Page 20 of 60

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.).
Student response to Task 6: Question 2(b)
The other expenses and fees that the client needs to be aware of are:
 Rate and taxes- $1397
 Stamp Duty- $15.74
 Pest Inspection- $300
 Building Inspection- $300
 Establishment and application fee- $138.80
 Mortgage Stamp Duty- $175
Assessor feedback: Resubmission required?
Competency Demonstrated No
Page 21 of 60

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)
Student response to Task 7: Question 1
The three parties are:
(1) Conveyancer/Solicitor: The legal side of the buying of the property is considered by a licensed and
eligible conveyancer. If a solicitor is even employed, then they can give out legal consultations
even. Their role has been to build the documents in order to guarantee that the transfer of
ownership of the property has satisfied the legal desires in the state or territory where the Clinton
and Jennifer resides.
(2) Accountant and financial advisor:A trained professional who aids the individuals to take care of
their finances by providing recommendations and advices on the finance related problems like the
investments, insurance, taxes, college savings, retirement and taxes, mortgages and planning of
estate by depending on the client demands and requests. In this circumstances, the couple is
purchasing an investment property and their accountant has been giving out various advices with
respect to the benefits of negative gearing.
(3) Mortgage Underwriter: The mortgage broker is the bridge between the borrower and the lender
who would have discussions on behalf of the borrower. They undertake various research works on
several products that are availbale in the market and legal jobs and even the process of settlement.
Usually, the mortgage broker does not impose any money from the broker as they receive
commission from the lender.
Assessor feedback: Resubmission required?
Competency Demonstrated
Feedback: Real Estate agent is another person.
No
Page 22 of 60

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)
Student response to Task 7: Question 2
After the meeting with couple ,it is very imporatant to to ensure the nine steps that would be explained
later requires to be taken.
1. Collection of information: The primary review of the application is a vital role for the intention of
the loan processing that has been operating effortlessly and during the time closage. This is the
time when together all suitable documentation for the client in order to avoid any unexpected
issues and delays.
2. Application for the loan: It is necessary for the couple to fill the form for the application of the loan.
In this scenario, it is requested to give out the present bank statements, description of the credit
activity and payslips of the client as supportive documents. It is important to communicate with the
couple regarding the sort of product and the interest rate they have been looking for it.
3. Getting the pre-approval: After the assessment of the overall application of the loan, the lender can
provide a pre-approval letter. It is a written document that provides the confirmation that the
buying price of the property that can be purchased by the client.
4. Evaluation process: during the security assessment, the lender may be in requirement of a
valuation on the property that is being purchased. There is a probability to arrange a valuation on
the part for the purchase of the property.
5. Receiving approval: In this circumstances, the home loan is granted unconditionally, with a formal
Offer Letter that has to be given out by the lender. After the offer has been permitted, the client
would be legally committed to go through the process of sale.
6. Insurance: After the loan approval, the closage of the documents reported and it is required in
order to bind an insurance for the new property. It is appropriate to meet with the insuarcxne
agent just before time so that they are ready so that theu do not postpone the closure.
7. Closing Disclosure: This even includes the tenure of the loan, the projected payments that has to be
done monthly and the money the couple would pay as fees and the o9ther expenditure in order to
gain the mortgage. It is a policy to have the closing disclosure prepared within a minimum of three
working days.
8. Loan settlement: It is necessary to let the couple know about the process of settlement of loan. In
this aspect, the documentation of the loan is given to the conveyancer or the solicitor of the client
who would then liase with the lender of the program with a settlement date. The first repayment of
the loan will usually be required in one month after the settlement date.
9. Loan Servicing: The steps that have been taken in order to prevail a loan from the time it is has
been closed until it has been paid like billing the couple, payment collection and making transitions
in the contract.
Assessor feedback: Resubmission required?
Competency Demonstrated No
Page 23 of 60

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)
Student response to Task 7: Question 3
The entire home loan procedure can be initiated at any point of time among 19 to 46 working days. The
operations with the mortgage broker abridges with the process as a regulation and is given to the borrower
through the approval phases and presentation and terminates the strain faced during buying the house.
If there is an existence of specific restrictions of demands or time while buying the property, the broker will
help in negotiating longer and shorter time of settlement and operate with the lender in order to statisy the
demands of the client.
Assessor feedback: Resubmission required?
Competency Demonstrated No
Page 24 of 60

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)
Student response to Task 8: Question 1(a)–(c)
The Reserve bank of Austyralia (RBA) is the Australian central bank and is obligated for maintaining the
trajectory of the certified cash rate for the country. The Reserve bank is even obligated for transferring the
rate of cash to aid in supervising the currency, inflation that is seen in the economy, interest rates and the
issuance of the bank notes. It provides distinct banking services as required by the Australian government
and their agencies and to numerous international central banks and corpoprate firms. Hence, all the banks
appreciate and therefore follow the cash rate provided by RBA. The Reserve Bank Board
undertakesdecisions related to the monetary policy in accordance to the cash rate – the rate of interest on
overnight loans in the money market. These decisions have an impact a level of other market and
institutional rates of interest.
The cash rate can have an impact on the rate of interest on the mortgage, it can have an impact on how
much interest on the savings might earn and on a wider scale, it is locked up with jobs,inflation and the
overall health of the economy. The cash rate is usually the lowest rate of interestat which banks derive
from each other and it acts as a benchmark rate in thenation.The cash rate have an impact on the other
rates of interest in the economy, having an impact on the behaviour of lenders and the borrowers,
economic operations and ultimately the inflation rate.
In deciding the rates of interest charged to borrowers, the banks take into account various factors that is
inclusive of the cash rate, the risk that the loan might not be repaid, the essentiallimits to create return for
shareholders, and the level of competition from the competitors.
When the RBA increases the rate of cashusually it is due to the fact that they want to put the limitations on
growth of demand and the inflation rate. Increased rate of interest rates incline to act as a limitation on
lending growth, which has a negative effects on the inflationanddemand.
If there is a fall in the cash rate, the RBA is looking to increase economic operations and the inflation by
inspiring the consumer expenditure and business investment – lower rates of interest that encourage
businesses and households to take loans rather than saving which would lift the economic operations.
The factor that needs to be known is that the interest rate will alter when the RBA undertakes the decision
of eithing cooling off or encourage the economic funcitons. If they are in the proposition of undertaking a
loan for buying the property, it is essential to prudently consider what the economy has been doing so that
certain ideas can be gained with respect to where the interest has been going. Explaining distinctly, rise in
the economic functions leads to higher rate of interest. During the property purchase during the time of
boom would indicate a rise in the purchasing price which may fall and there may be probabilities of lower
rates of interests and therefore the client may take the risk of paying more for the asset that may lower
thgeir value in the short run. During the long run, the real esatate increases their value. Hence, it is
advisable for them to have a fixed home loan as they have been offered already a special interst rate and it
would provide satisfaction in scenarios if there is a rise in the interest rate by the RBA.
Page 25 of 60

Assessor feedback: Resubmission required?
Competency not yet Demonstrated.
Insufficient explanation of the role of the RBA or why it is necessary to
have these controls. (Hint what does the RBA want to achieve?)Refer
to Part 1.1 in your course material. Please re-think your response in
regards to whether banks are obliged to follow the RBA cash rate in
view of the recent stance taken by banks on interest rates?
Yes
2. Explain to Clinton and Jennifer some of the advantages and disadvantages of fixing a loan. (150 words)
Student response to Task 8: Question 2
The clients are assured according to the repayments as it does not alter a distinct time limit. In
circumstances the interest rate rises over the rate that is fixed, the client would be happy and satisfied by
gaining knowledge about the fact that they are paying out lower than the rate that is variable. This would
explain that they would be able tp manage their finances earlier and maintain a specific standard of living
with a sense of confidence.
The con of fixing a loan has been that the client will not gain from the fall in the rate of interest in
circumstances when the Reserve Bank reduces the level of cash. The client may even miss out on the
benefit on a minimum amount of repayments that can be brought out by the variable rate.
The client would even have to pay for the fee for brokerage if they alter or even pay their loan within the
fixed rate of time. Also the fixation of the loan is not suitable in case they transform their mind and have
the idea of selling the house or would want freedom to switch the home loans if they find a more efficient
offers for home loan.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
Page 26 of 60

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)
Student response to Task 8: Question 3
It is seen that there have been a fixed home loan rate which is a legal agreement that has been guarntedd
for the repayment at a fixed interest value on the loan for a specific period of time. If the client tries to
close the contract by changing the lender, then the existing lender requires to be compensated for any sort
of loss that would be faced by them.
The other choice that has been available to the client is to take a bet on both the process of having a
section that is fixed and a part of the variable in the interest on the loan. A split loan would grant the client
to supervise various risks in accordance to the interest rate that raises while still being able to take extra
repayments.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
Page 27 of 60

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)
Student response to Task 9
After assessing, gaining and sanction of the application of the home loan, the lender will provide the
documents that have been given below:
Letter of Offer – The lender provides the letter of offer to the clients in a written format and duplicate
copies are given to all the associated parties who have eagerness in the eventual and loan application, for
instance the guarantors. It has the home loan information with the terms and condition with respect to
which the lender intends to approve and provide funds.
Mortgage document - An article that will be given by lender to the Territory or State as a part of amortgage
registering. The mortgage document name that the lender constructs has to be similar with the name given
in the transfer that the solicitor will write with the land titles office or else the mortgage paper is null and
void.
T&C letters: This paper is for the client to recognize the loan acceptance terms and conditions. If there are
two or more debtors, each party requires to sign the contract. Certain T&C letters have a part where the
borrowers provide data like the name of their conveyancer or the solicitor, information of the fund
disbursements and the nominated account for fees that is to be levied.
Witness acknowledgement - This is in need to be completed by a witness who is independent in order to
confirm the identity of the borrower. The witness who concludes and sign this agreement must be the
same person who witnessed the mortgage document signing for the credit provider.
Disbursement and settlement form – After all the documentation has been executed successfully, the
lender transfer the loanable funds to the borrower. Specifically, this document permits the lender to
extract the funds from their account to satisfy their full amount that is due at the settlement, or to deposit
funds that is surplus wherever applicable
Direct loan payment form – The borrower has to fill up the entire form if they desire to establish a recurring
payment to their linked loan accounts.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
Page 28 of 60

Section 2: Case study 2 — Tony and Lorraine Denton
Background
Tony and LorraineDentonhave a small cleaning business at which they have been working for the
lasteight years. As it is only the two of them in the business they operate as sole traders.
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 cleaning contracts.
After further questioning, you realise that the situation is more serious than they originally explained;
they have missed payments on their mortgage, only pay the minimum on their credit card of 3% each
month and the work car they have on lease is expiring. They have a $15,000 residual or balloon payment
due and do not have the funds available.
When they lost the major contract and fell behind on the mortgage payments, they spoke to their lender
(Popular Credit Union) and accepted a ‘hardship application’. The missing payments have now been
corrected by extending the term of their loan. Thishappenednine(9) months ago and no report was made to
the credit agency.
Page 29 of 60

After reading the case study aboveandreviewing their funding position below, answerthe questions that
follow:
Assets
23 Watkins Road, Central Park $450,000
Popular Credit Union savings account (joint) $1,200
Little Saving Building Society cheque account (joint) $2,300
Business debtors (unpaid invoices for work) $6,200
Ford Utility, 3 years old (work vehicle) $25,000
Holden Commodore, 7 years old (family car) $15,000
Superannuation — AMB Insurance (Tony) $36,000
Superannuation — AMB Insurance (Lorraine) $24,000
Household effects (insured value) $60,000
Liabilities
Lender Situation Interest rate Monthly repayment Debt
Popular Credit Union
(home loan — joint)
Currently up to date though had 3-month
extension to contract after hardship application
9 months ago
5.7% $1,567.00 $270,000
Big Bank Visa card
(Tony)
Only able to repay 3% per month for last
6 months
18.95% (pays 3% per month)
$230.00
$7,600
(limit $8,000)
Little Bank Visa card
(Lorraine)
Only able to repay 3% per month for last
6 months
Is over limit by $800
21.5% (pays 3% per month)
$90.00
$3,800
(limit $3,000)
Hardly Normal
Furniture Store
Did not keep to interest free contract and paying
debt by instalments
28.50% $380.00 $3,600
Super Car Loan lease 3-year contract expiring next month and need
$15,000 to pay residual
n/a $850.00 $15,000
(residual)
Cleaning Contract
Supplies
Purchase approx. $1,000 per month in supplies,
they are behind 1 month
n/a $1,000.00 $1,800
Total $4,117.00 $301,800
Page 30 of 60

Assignmenttasks(student to complete)
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)
Student response to Task 10
The Examples are :
Verbal communication
Verbal and oral communication is given with the assistance of speech. This explains that the speaker will
make use of suitable tone and look to deliver it to the auditor. For a fruitful discussion with the speaker
with the listener each one of them needs to engage in an active manner. The features of conversation
under verbal communication are explained as follows:
• Face to face
• Informal
• Sincere and open
• Two way process
• Desired and enjoyable
• Adjustedwith the scenario under which it takes place
• Establishes the ways to end
Written Communication
It is any sort of communication that are done with the alphabets that are in the form of writing. It is the
suitable and most general process of communication in any business and is developing with the reliance on
the e-mail ,SMSs, social media and other e-communication equipments. A productive written
communication for the purpose of business is given as follows:
• Is written with respect to the audience that has been targeted
• Is courteous, complete, concise, clear and correct
• Solves the questions like what, who, when, when and where
• includes the graphics and instances, if required
• Prevents abusive offensive and discriminatory terminology.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
Page 31 of 60

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)
Student response to Task 11: Question 1
The substantial hardship is defined as the unqiue, technological, demonstrable, legal, economic and any
kind of hardship for the individual who has asked for the variance or the waiver that impairs the capability
for the person in order to sustain working under the enclosed practices.
A loan will nopt be suitable if the client is unbale to meet the financial obligation of the contract or is not
able to meet without substantial hardship. Furthermore, the customer would be unbale to afford the loan
in situations like:
1. If the provider of credit after the assessment do not agree with the client with respect to whether
the repayment of the loan requires substantial hardship or not.
2. Where the loan has been planned from hiding the data that the repayment is not possible without
the substantial hardship. Where the consumer is unbale to pay out for the loan, the adviser shall
oppose that the client cannot meet the financial resposnsibilities without substantial hardship or
the loan is unbale to meet the criteria that has been demanded.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
2. What are the benefits of debt consolidation for Tony and Lorraine? (100 words)
Student response to Task 11: Question 2
The debt consolidation means taking out a new loan for the intention of repayment of the multiple credit
card debts and balance.
The vital benefit of the debt consoliodation for Lorraine and Tony has been that the entire property are free
of risk. Furthermore, the rate of interest can be more with respect to the secured loan but on the same
time can reduce in accordance to the interest rate on the credit cards. Thus, it will reduce their burden of
interest and its repayment. It even relates in having minimum payment amount required to be paid every
month and there is least possibility that the client will miss payments or would miss out payments.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
Page 32 of 60

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.
Student response to Task 11: Question 3
Lender Interest rate Monthly repayment Debt
New bank loan(home loan
joint)
4.5% $1378.00 $270,000
Other 4.5% $162.00 $30,000
Total
Page 33 of 60

Assessor feedback: Resubmission required?
Competency Demonstrated. No
4. What savings will Tony and Lorraine obtain in monthly repayments?
(Include calculation how you determined the savings.)
Student response to Task 11: Question 4
The total debt amount that is desired to be repaid with the assistance of the new loan at 4.5% has been
found to be $300,000. Thus, the interest amount would come to $1540. However, if the loan is not taken,
then they would have to pay a total interest that sums up to $4,117. Therefore, the savings would come to
$1557.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
Page 34 of 60

Task 12 — Self Employed special considerations
1. As Tony and Lorraine areself-employed,what documents will you need to obtain and assess their
income? (150 words)
Student response to Task 12: Question 1
It has been seen that Tony and Lorrained are self-employed and their revenue is earned from the sole
trading in the cleaning business and the most current return of the individual tax and assessment that has
been taken by the Australian Taxation Office (ATO) and the Profit and Loss Statement and defined balance
Sheet will be sufficient evidence for determining the income of the client. Additionally, where the balance
sheet, profit and loss statement, tax returns and tax assessment are provided and these documents need to
be supported by registered or certified accountant. Leaving this aside, the returns for the personal income
tax for every individual supported by the most current tax assessment provided by ATO and highlights the
liabilities of the company that includes the balance tenure and the rate that is needed to be submitted for
the assessment of their income.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
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)
Student response to Task 12: Question 2
The added documents required for low doc applications for assisting the mortghage or lending repayment
in a secured manner are given below:
 Bank Statements: the most efficient way for disclosing the performance of the self-employed
projects is providing the data with the assistance of the bank statement. This will revela the degree
of money within the account and the expenses that is paid for taking the profession.
 Letter from the accountant: The evidence from the accountant in the written presentation can be
proved beneficial from the implementation of the self-employed home loans. The letter shall
outline the scenario in accordance to the business finance and should help other documents that
are revealed to the lender.
 Statement of the business operations: The statement in accordance to the operations of the
business is altered by looking at the specifications of the firm and it discloses the obligations of tax
in accordance to which the firm is subject to. This includes the service tax and the goods tax
thorugh the PAYG instalments and withholding. Furthermore, the evidence in accordance to the
past 12 months is even provided.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
Page 35 of 60

3. Explain how applying for a ‘Low Doc Loan’ could lead the mortgage broker to be accused
of recommending an ‘unsuitable’ product. (250 words)
Student response to Task 12: Question 3
The loan that are inappropriate includes the contracts where it is projected that the borrower will be
unable to repay or can repay only with the assistance of the substantial hardship or the contracts that does
not satisfy the aim and the requirement of the borrower. Therefore, the mortgage broker shall undertake
reasonable enquiries in accordance to the financial circumstances of the borrower with respect to their
needs and aims. Leving this beside, they shall make reasonable efforts for reaching the requirements in the
report of the borrower. The use of this information would assist the mortgage broker to determinewhether
the recommendations of the loan product is suitable or inappropriate. If it is found that the credit products
are unsuitable, then the broker can move forward with respect to the recommnedatrions. However, in
accordance to the low-doc-application, the income and the financial circumstances of the borrower are not
evaluated in a proper manner by the mortgage broker and even the lender. Furthermore, under the low-
doc-application, distinctly the borrower does not have the current tax returns or complies with the tax
affairs, which in turn makes it very difficult to confirm their personal income. Therefore, under the Low Doc
loan the broker can be accused for recommending ineffective products.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
Page 36 of 60

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)
Student response to Task 13
The rules for the management of debt have been defined below:
 Receive immediate assistance
 Tally up the debts
 Prepare the budget
 Prioritising the debts
 Looking at the refinancing or the consolidation of the debts.
However, just before loan refinancing the following factors can be managed and each one of them are
given below:
 Looking at the other options that are available before refinancing
 Investigating whether the loan in accordance to the consolidation of the debt is appropriate for the
borrower or not
 Preventing the refinancing gaps
 Gain free assistance in accordance to the debt
The various strategies for managing the debt or the loan has been explained below:
Match the assets and the liabilities
Benefits: It helps in transferring from the stocks to the cash with the advent of time for the purpose of
saving for retirement and for scenarios when the consumer may have to bear huge expenses. It even helps
in assessing the assets that are availbale to the individual during the time when needed.
Disadvantage: The assets that are long term in nature will not be financed with the assistance of theshort
term credit for instance like the credit card. Furthermore, taking the long term financing and the short term
will even be prominent to be possible.
Prevail the liquid savings
Advantages: The refinancing of the mortgage at lower rates is an innovative idea. It would even simplify the
borrower to pay back the short term compulsions with the available liquid savings.
Disadvantages: The consumers may require to make payments from the closureof the out-of-pocket
expenditure and it has proved to be an intelligent idea only when the consumer starts to rebuild the liquid
savings immediately.
Reduce the expenses related to the regular debt
Advantages: The minimization of the debt expenses will help the individual to lower their every day
payment of interest and their instalments. Thus, is is a smart decision to eliminate the debt even if the loan
rates are at a favourable position.
Disadvantages: It has been generally observed that the debts are serviced every month and therefore
comes under the inescapable common expenses.
Page 37 of 60

Assessor feedback: Resubmission required?
Competency Demonstrated. No
Page 38 of 60

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. (Information can be sourced from the websites of credit reporting
agencies and <http://www.oaic.gov.au>.) (200 words)
Student response to Task 14: Question 1
At the present circumstances, there are three key credit reporting agencies that are operating in the
market of Australia. They are namely the Tasmanian Collection Service, Dun and Bradstreet and Veda
Advantage. It is seen that Veda Advantage os one of the well known consumer credit reporting agency that
defines that it maintains the credit worthiness related information for over 11 million consumers residing in
New Zealand and Australia. They have more than 5000 consumers from a wide range of companies that
includes the finance, telecommunications, banking, retail, trade credit, utilities, government, lenders, credit
unions and mortgages.
The data that are added in the credit report have been given as follows:
 First and Last name
 Date of birth
 Sex
 Current and previous two addresses
 License number of the driver
 The name of any credit providers that are given to the consumer credit and whether they are
licensed by the ASIC.
 The specific date on which the consumer credit was made available to the consumers and
eliminated
 The degree of limit on the consumer credit
 The distinct terms and conditions of the consumer credit that includes the limited data about the
obligations and payment of the interest
 Data regarding the repayment history, which is the information about whether they have
undertaken a consumer credit payments in an effective manner or whether they have missed any
kind of payments.
 Any judgment of the court made agaimst the client or the consumer that conmnects with the
credot amount that has been provided and even have been applied.
 The degree and the sort of commercial and the consumer credit that have been seen in the
application.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
Page 39 of 60

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)
Student response to Task 14: Question 2
Veda (Equifax): The option for this agency explains that one gains the copy of the credit report within a few
minutes after the purchase of any of their loan package and can even receive the free credit report which is
to be forwarded within the 10 working days. The cost related with the loan package have been given
below:
 Equifax Basic: It includes the current score form Equifax and the copy of the credit file and it has a
cost of $79
 Equifax Plus: It provides lone term support to safeguard the credit file and the identity and a cost
coming to $89
 Equifax Advanced: It helps in staying one step ahead of the identity of theft and helps in protecting
the identity. It has a cost of $104
 Equifax Premium: This gives out premium level of the identity and the credit protection which has a
cost of $119
Dun and Bradstreet: The client can receive the report for free within 10 working days or can even select the
fast-tracked online report within one working day by paying a charge of $10. It has been observed that
there has been a cost of $179 in order to receive the copy of the credit report from Dun and bradsheet.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
3. If there are errors on file, what is the procedure for Tony to follow in order to have these
errorsrectified?Hint: Refer to the Veda website. (150 words)
Student response to Task 14: Question 3
If one receives a copy of the credit report and the customer is in the idea that there are any defects in the
report, it is crucial to get it rectified as the information that is availbale in the credit report has an effect on
the credit rating and whether or not one may attin the loan, credit account or the credit card like the
electricity contract and the mobile phone
There are simple stages the client can undertake like:
 Condemn the present credit provider, the credit reporting organziations or the creditors who are
listed.
 Report to the commissioner and the Ombudsman scheme.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
Page 40 of 60

4. What are the Lender’s legal obligations if they decline an application due to the content of the
credit agency file? (100 words)
Student response to Task 14: Question 4
If the loan application is rejected by observing the information availbale in the credit agency file, then the
lender is accountable to provide the list of the factors for their decisions and the notice that defines the
crucial factors. It is essential to provide the following things:
 The credit score that is used for undertaking the decisions that are unfavourable or the dependents
that have an effect on the score
 The address, name of the credit reporting firm and the telephone number has to be provided with
the report
Define the procedure for rectifying the discrepancies of the report or adding in extra data for the
generation of the report in an effective manner.
Assessor feedback: Resubmission required?
Competency Demonstrated. No
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)
Student response to Task 14: Question 5
The options are:
 Find out why the loan application was denied.
 If the denial are based on correctable errors, then it has to be corrected.
 If the denial is due to poor credit report, it is essential to get a free copy of the report
 Get a second opinion
 Apply for a New Loan
Assessor feedback: Resubmission required?
Competency not yet demonstrated
The question clearly asks how you the broker can assist Tony &
Lorraine if their loan was rejected by the lender due to their credit
report? What other solutions can you offer to proceed with his loan
application?
Please re-submit
Yes
Page 41 of 60

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)
Student response to Task 15 Question 1
CIO provides anindependent, free and impartial disagreement resolution service to the clients. The
CIOenables the determination of complaints among the participants and the consumers of the scheme. In
doing so, CIO provides both financial services providers and consumers with asubstitute to legal actions for
determining financial services disputes. The CIO are not funded by the government, nor do they control the
financial services companies or self-control participants of the scheme.
The CIO are neededtosatisfyvarious benchmarks arranged by the Australian Securities and Investments
Commission (ASIC) and have been permitted by ASIC to function as an External Dispute Resolution (EDR)
scheme in the financial services company.
The Credit and Investments Ombudsman (CIO), earlier known as Credit Ombudsman Service Limited (COSL),
has been permitted by the Office of the Australian Information Commissioner (OAIC) to manage private and
credit documenting complaints under the Privacy Act 1988. All the credit providers are needed to be
aadherent of an EDR scheme identified by the OAICprior to they are allowed to reveal credit data to a credit
reporting agency or access such data. If an individual is discontented with the result of a credit reporting
agency or a credit provider about their criticism, or about the result of an access or alteration request, they
can protest to CIO about this as long as the credit reporting agency or credit provider who is a member of
CIO.
Assessor feedback: Resubmission required?
Competency not yet demonstrated
You are on the right track but as this Task is focused on explaining the
role of the CIO. Can you please expand your response and advise if
CIO does make a determination is the member (the Lender) and the
complainant bound by that decision?
Refer your course notes and resubmit.
Yes
2. What could be the maximum financial compensation limitimposedby the CIO?
(You can obtain this information on the CIO website.) (10 words)
Student response to Task 15 Question 2
The maximum level of panelty that can be charged by the CIO is to the highest value of $309,000 and
furthermore other remedies like the apology that may be requested.
Assessor feedback: Resubmission required?
Competency demonstrated No
Page 42 of 60

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 Lorraineareaway 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 assistin solving
this problem? (100 words)
Student response to Task 16
The documents can be sent with the assistance of various service providers who aids in sending bigger files
through email. In this scenario, the client can make use of Sendspace and DropSend applications that can
assist in sending these big files. These webistesoffer security in scenarios when the desktop or the phone is
lost or damaged.
Assessor feedback: Resubmission required?
Competency not yet demonstrated
You have not addressed the question "his email provider has a size
limit on the data that can be sent via email" What other technology
can be implemented to send large files?Please refer to Topic 2-3
section 2.9.
Yes
Page 43 of 60

Appendix 1: Client information collection
tool/Fact Finder
Appointment date:
Appointment time:
Applicant 1 Applicant 2
Surname ANDREWS ANDREWS
Other names CLINTON JENNIFER
Contact details Address 17 MOSS AVE, EAST HILLS, NSW,
2213
17 MOSS AVE, EAST HILLS, NSW,
2213
Phone (W)
Phone (H) 02 7061 2111
02 6051 2121
02 9940 3677
02 60512121
Mobile
Email [e-mail] [e-mail]
Employment PROJECT MANAGER ACCOUNTS ASSISTANT
How long? 16 YEARS 7 YEARS
Previous employer (if less than 2 years) NA NA
How long? NA NA
Employment status FULLTIME FULLTIME
PAYG $19284 $15948
Self-employed NA NA
Gross income (p.a.) $85000 + $180 (INTEREST
INCOME)
$74000 + $180 (INTEREST
INCOME)
Number of dependants 2 2
Motor vehicles 1 1
Loan purpose INVESTMENT PROPERTY
Purchase price/Valuation $450,000
Deposit $65,000
Loan amount $413,627
GenworthBorrowing capacity (Task 3) Maximum value is $11,68,697 and minimum amount will be $892,341
Page 44 of 60

Assets and liabilities
Assets Liabilities
Details Market value Details Monthly payments Amount owing
Owner Occupied
Property at:17 MOSS
AVE, EAST HILLS,
NSW, 2213
$850,000 Mortgage with:
BIG BANK
$1020 $190,000
Investment Property at: NA Mortgage with: NA NA
Investment Property at: NA Mortgage with: NA NA
Cash at bank
(includes fixed deposits) $10,000 Car leasing NA NA
Other cash
(includes offset accounts) $180,000 Personal loans
1.
2.
NA NA
Deposit paid on property NA Overdraft NA NA
Motor vehicles:
1.
2.
$15,000
$5,000
Other loans:
1.
2.
NA NA
Personal effects NA Credit card limit:
$8000 (COMBINED)
$240 (COMBINED) $2,000
(COMBINED)
Business value Credit card limit:
$NA
NA NA
Shares and investments NA Other: NA NA
Superannuation $136,000
COMBINED
Other:
Other assets (give details) $80,000 Other:
Total assets $12,76,000 Total liabilities $1,260 $192,000
Surplus: $8627
Page 45 of 60

CURRENT MONTHLY LIVING EXPENSES (Provide a breakdown of the total amount listed in the case study – use your discretion)
Food/housekeeping $1400
Insurance (e.g. motor vehicles, home contents/ building, medical, life/income protection) $150
Utilities (e.g. rates, gas, electricity, transport) $550
Transport (e.g. public transport, petrol, registration, repairs) $300
Education (e.g. school, college, university) $300
Dependents support(e.g. childcare, child maintenance) $200
Entertainment $300
Other (detail below:
MONTHLY LIVING EXPENSES $3200
Page 46 of 60

Needs analysis
1 Name of your current lender? BIG BANK
2 What type of mortgage loan do you have? STANDARD HOME LOAN, P&I REPAYMENT
3 Why did you choose this particular loan and lender? NO FEE AND OFFSET ACCOUNT
4 What is the interest rate? 5% VARIABLE
5 What are your payments? Amount $1020
6 Frequency MONTHLY
7 Do you know the fees and charges? NO FEES
8 What is your proposed purpose for the loan you are
applying for? INVESTMENT PROPERTY
9 Branch access available with current lender YES
10 Internet banking available with current lender YES
11 Phone banking available with current lender YES
12 Lenders not to be considered BIG BANK
13 Type of loan sought RESIDENTIAL INVESTMENT LOAN
14 Preferred Interest rate range 4.5% - 5.25%
15 Payment frequency FORTNIGHTLY
16 Redraw YES
17 Offset YES
18 Salary crediting YES
19 Low fees and charges YES
Page 47 of 60

Notes
Page 48 of 60

NB:Providing substantive notes is a compulsory part of your assessment.
There have been various projections that have been undertaken where the information was not provided
and the income from the interest has been segmented with a percentage of 50% for both Jennifer and
Clinton and added their gross income.
The gathering of the information is specifically during the primary stage and shell be complete. By
observing the customer category and service, the demanded data at this phase is inclusive of:
 Data of the sustaining relationship with the customer and the credit provider
 Business and personal information with respect to the customer
 Services and the products that have been purchased previously by the customers
Recording of the information:
The selected information and the document shall be the part of the credit application. The information
and the documentation will be gathered accordimng to the process and the policies according to the
regulatory requirement. The requirements of documentation can be satisfied with the help of:
 Making use of the lopan calculator or any other equipments delivered by the organization.
 Notes and minutes of the meetings with the customers
 Documentary evidence given by the clients
 Forms that are completed.
Page 49 of 60

Anticipated fees and charges
Anticipated purchase price: $450,000
Deposit : $45,000
Loan amount : $405,000
LVR : 90%
Purchase costs : 20,000
Stamp duty on transfer (include transfer fee) :
$15,740
Solicitor/conveyancer (estimate) : $1500
Rates and land taxes (estimate) : $1397
Pest inspection (estimate) : $300
Building Inspection (estimate) : $300
Borrowing costs : NIL
Application/establishment fee : $600
Valuation fee : NIL
Security admin fee : NIL
LMI : $8627
Registration of mortgage : $175
Release of mortgage : $175
Search fees : $136.30
Other : NIL
Total of purchase costs : $470,000
Page 50 of 60

Funds to complete
PURCHASE AND LOAN COSTS: AVAILABLE FUNDS:
Purchase price: $450,000 Deposit paid $65,000
Lender application / valuation fees: $138.80 Cash savings: $7,113
Transfer stamp duty $15,740 Sale proceeds: NIL
Legal and registration fees: $138.80 Gift: NIL
FHOG: NIL
Other: NIL
LMI: 1. 2. No $8,627
TOTAL COSTS (A): $450,000 TOTAL OWN FUNDS (D): $45,000
LOAN AMOUNT REQUESTED (B): $413,627 OWN FUNDS REQUIRED (A-B) = C: $36,373
OWN FUNDS REQUIRED (A-B) = C $36,373 SURPLUS/SHORTFALL (D-C) $8,627
Page 51 of 60

Loan interview diary
Name(s) of client(s) present at interview
CLINTON ANDREWS
JENNIFER ANDREWS
Date of interview:
Location of interview
NSW, SYDNEY
Indicate all clients who were interviewed in person
CLINTON ANDREWS
JENNIFER ANDREWS
Do all of the clients appear to clearly understand English? Y
If not, have the services of an interpreter been recommended? N
Do all of the clients clearly benefit from taking out this loan? Y/N
If not, what inquiries have been made to ascertain the level of benefit to each party of the loan?
The clients had knowledge regarding the benefits they can attain by undertaking the services of the
consultants.
Additionally, the consultant would even provide prospectus that will be inclusive of the conditions, terms
and the covered services and the structure of the fee that will enable the clients to get effective
understanding.
Page 52 of 60

Are any clients acting as though they are under duress or other disability? N
Are any clients acting as though they are unsure of anything about the loan? N
Are any of the clients acting as though they are unable to comprehend their obligations? N
Are there any guarantors? N
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? Y
Provide details of other pertinent information obtained during the loan interview which
may be of interest or of any unusual circumstances you may wish to record.
Page 53 of 60

Appendix 2: Serviceability calculator
Page 54 of 60

Loan details
Loan amount $405,000 Security value $450,000
Loan term (in months) 360 Actual rate 4.78%
Repayment type Principle and interest Interest only period (in years) 0
LVR 90%
Page 55 of 60

Applicant details
Applicant type Select applicant type
No. of applicants (maximum 6) 2
Applicant 1
Applicant name CLINTON ANDREWS Joint with applicant… 2
Marital status Couple No. of dependents 2
Residential suburb EAST HILLS Residential postcode 2213
PAYG
Gross
Base income $85,000 Base income frequency Annually
Self-emplyed/sole trader/partnership
Current year Previous year
Net profit (loss) before tax (NPBT) 0 0
Interest 0 0
Other add-backs 0 0
Depreciation 0 0
Variable income calculation
Income type Select income type
Frequency Weekly Amount
Rental income calculation
Rental type Standard Amount $450
Frequency Weekly Ownership (%) 50%
Amount of investment loan $405,000 Amount of interest add-back $10,226.25
Total rental income $11,700
Non-taxable income calculation
Non-taxableincome $
Applicant 1:Totalnet income $73,786.86
Page 56 of 60

Applicant 2
Applicant name JENNIFER ANDREWS Joint with applicant… 1
Marital status Couple No. of dependents 2
Residential suburb EAST HILLS Residential postcode 2213
PAYG
Gross
Base income $74,000 Base income frequency Annually
Self-emplyed/sole trader/partnership
Current year Previous year
Net profit (loss) before tax (NPBT) 0 0
Interest 0 0
Other add-backs 0 0
Depreciation 0 0
Variable income calculation
Income type Select income type
Frequency Select frequency Amount
Rental income calculation
Rental type Standard Amount $450
Frequency Weekly Ownership (%) 50%
Amount of investment loan $405,000 Amount of interest add-back $10,226.25
Total rental income $11,700
Non-taxable income calculation
Non-taxableincome $
Applicant 2: Total net income $66,581.86
Total net income for all applicants $140,368.71
Page 57 of 60

Commitments
Actual living costs $38,400 HEM living costs $48,971.52
Total credit card limits $8000 Commitments (maximum 8) 1
Commitment type Amount Frequency Limit/scheduled balance(plus redraw)
Commtiment 1 Other mortgage $1020 Monthly $190,000
Commtiment 2 Commitment type $ Select frequency
Commtiment 3 Commitment type $ Select frequency
Commtiment 4 Commitment type $ Select frequency
Commtiment 5 Commitment type $ Select frequency
Commtiment 6 Commitment type $ Select frequency
Commtiment 7 Commitment type $ Select frequency
Commtiment 8 Commitment type $ Select frequency
Total commitments $51,829.76
Page 58 of 60

Serviceability calculations
NDI ratio 1.76:1 Net disposable income $91,397
Assessment rate 7.30% Monthly repayment $2,776.56
Maximum loan amount $885,954
Page 59 of 60

Actual rate serviceability calculations
NDI ratio 2.08:1 Monthly repayment $2120
Actual interest rate 4.78% Maximum loan amount $1,160,333
Page 60 of 60