Certificate IV in Finance and Mortgage Broking Assessment Task - Desklib

This assessment task is to demonstrate that you have the skills and knowledge required to conduct a client relationship and comply with statutory, industry and organization compliance requirements. It includes elements like identifying and interpreting compliance requirements, delivering and monitoring a service to customers, contributing to OHS hazard identification & risk assessment, managing personal work priorities and professional development, developing and nurturing relationships with clients, other professionals and third party referrers, promoting the effective use of credit, and preparing a loan application on behalf of mortgage broking clients. The assessment task also includes a case study on evaluating and processing a loan application.

Certificate IV in Finance and Mortgage Broking
Assessment Task
FNS40815
Your details:
Name:
Address:
Phone:
Company name
Email:
Your assessment task
You are required to keep a copy of your assessment task for a period of 12 months.
Submit your assessment to our Education Team via [e-mail]
Plagiarism Statement
All assessments must be your own work and not a result of plagiarism or collaboration
with other students or workmates.
Assessment
The pass mark is 70% for each element. If you do not achieve this, you will receive
feedback via your email address and be asked to resubmit your assessment for a second
marking. Assignments will not be returned to you as they need to be retained for by us for
verification and audit purposes.
Task Assessments Target
Mark
Pass
Mark
Actual
Mark
1 Identify and Interpret Compliance Requirements 27 18
2 Deliver and Monitor a Service to Customers 39 27
3 Contribute to OHS Hazard Identification & Risk Assessment 41 28
4 Manage Personal Work Priorities and Professional Development 24 16
5 Develop and Nurture Relationships with Clients, Other
Professionals and Third Party Referrers
17 11
6 Promoting the Effective Use of Credit 15 10
7 Prepare a Loan Application on Behalf of Mortgage Broking
Clients
64 44
8 Steps Taken by the Credit Provider 23 16
Total 250 170
Assessor’s Initials: ____________________
Assessment Date: ____________________
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Introduction
Objective The objective of this Assessment Task is to demonstrate that you have the
skills and knowledge required to conduct a client relationship and comply with
statutory, industry and organization compliance requirements.
Elements to
be assessed
To achieve this objective, you will need to demonstrate your ability to:
The assessment tasks in this assessment will allow you to demonstrate your
knowledge and skills in relation to these elements.
Assessment
process
Start by:
1. Reading the Assessment Task.
2. Type your answers to the assessment tasks into this template document
(hand-written answers are not accepted)
3. Submit your completed document by uploading it on the ‘Ready for
Assessment’ area of www.CPDplus.com
Don’t forget to keep a copy and retain it for 12 months.
Need help? If you have any questions or would like to request a digital copy of this
assessment task, please email the Mentor Support Team at
[e-mail]
Statement of
Completion
Upon successful completion of this assessment you will be awarded the
Statement of Completion for FNS40811 Certificate 4 in Finance and Mortgage
Broking.
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Task 6: Promoting the Effective Use of Credit
Read the following scenario then answer the questions that follow.
Roslyn qualified as a schoolteacher some years ago, but failed to take up a teaching position
after graduating because she became a single mother. Fortunately, she has been able to live with
her widowed mother, but now that her daughter has reached school she is taking up a position as
a schoolteacher some suburbs away.
Because of the distance of her new school from her parent’s home she will need to buy a car.
After careful consideration, she has chosen a small hatchback that has an on-road cost of
$15,800.
She will be working full time with a starting salary of $50,000.
She knows little about finance and has come to you for advice. She would prefer to finance the
full cost of the car because she has little in savings.
Task 6.1.
(i) Suggest two financing options that Roslyn might consider.
(ii) Explain the main features of each.
(iii)Choose one of these options and explain your choice. Are there any disadvantages that need
to be considered?
No. Mark
1. The two financing options suggested for Roslyn has been considered with taking a
car loan and dealer finance.
/1
2. Some of the main features of the car finance is understood with variable interest
rate, fixed interest rate, comparison rate, extra repayments, redraw facility,
frequency of payment frequency and loan term. In dealer finance the term varies
from three to four-year terms. Dealer finance allows for balloon payment which is
payable end of the term. It offers lower interest rates than car loans, however the
low interest may be applicable to only specific models and makes of car.
/2
3. As Roslyn has newly started with her job, the dealer finance usually needs good
credit for eligibility. Therefore, car loan is recommended as the main financing
option. This will provide a range of competitive loan options and allow for the
repayments to be repaid in full amount at the end of LT (Loan Term). However,
Roslyn needs to be particularly aware of the higher interest rates than the dealer
finance and she may need to pay upfront and ongoing fees during the entire loan
period.
/2
Sub-total /5
Continued
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Task 6: Promoting the Effective Use of Credit Continued
Task 6.2.
Write a letter to Roslyn letting her know about your preferred, explain how she will make
payments and giving your reasons for choosing it as the option more clearly meeting her needs.
You should take care to proofread your letter.
Mark
Dear M/s. Roslyn,
This is to inform you that based on your decision to buy a small hatchback
I would suggest you that you choose the option of taking a car loan. Firstly, with a
starting salary of $50,000 you will have several repayment options based on the rate of
interest for the loan amount $ 15,800. Secondly, there is no need for balloon payment.
The secured car loan needs to be paid with a monthly repayment of $ 317.78 at 6.99%
fixed interest rate over a term of 5 years. This is inclusive of the total interest charge of $
2,967 and loan establishment fees of $ 350. In this way you will need to pay a total loan
amount of $ 18,767 over a period of 5 years. In compare to the dealer finance this option
will save you $ 3,160 of balloon value charged at 20% rate of interest. Moreover, being
new employed in the job there is less scope attaining the eligibility of dealer finance.
Henceforth, this car loan option will be the suitable technique to efficiently use the credit
amount.
Yours sincerely,
/4
Task 6.3.
Roslyn is concerned that the lender will apply for a credit report. Explain:
(i) The procedure and cost involved in obtaining a copy of her credit file.
(ii) The right of a lender to access credit report information.
No. Mark
1. The main information which needs to be maintained for obtaining a copy of credit
file includes “Income – gross (before tax) and net salary (after tax), employment
details and other income (from shares, rental property”. In addition to this, Roslyn
should have the on-hand information of the approximate “values of property,
vehicles, savings and superannuation”. Some of the other information needed is
seen with “loan balances, repayment amounts, credit card or overdraft limits”. She
needs to pay loan establishment fees of $ 350 for obtaining a copy of credit file.
/2
2. “Credit reporting body (CRB)” is seen as the only authority to give consumer the
right to take part in the “consumer credit reporting system”, along with a limited
people and organizations. The organizations such as Trade insurers, credit
providers and mortgage insurers have the right to access the credit report
information.
/2
Task 6.4.
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Further information
Roslyn mentions that her mother’s washing machine has broken, and she urgently needs a
replacement washing machine. The cost is less than a thousand dollars and she plans to use her
credit card for the purchase. She tells you that she will make the minimum required repayment per
month until she pays the machine off.
Draft a letter to Roslyn providing advice about her plan.
Mark
Dear Roslyn,
I have considered the price of washing machine to be $ 800. The market analysis
has suggested that the average rate prevailing in Australia is seen to be 13.5% for credit
cards. In case you wish to repay the credit amount with higher repayments, you will be
able to save $ 162. This is considered with making a payment of $ 38 each month over a
period of 2 years. In this way you will need to pay a total amount of $ 907. In case, you opt
for the minimum repayment option then you need to pay $ 20 for a period of 4 years 6
Months. In this way you will be able to need to pay total amount $ 1069 which is higher
than $ 907. Therefore, it is recommended to choose the higher repayment option for
taking a credit of $ 800.
/2
Sub-total /10
Total /15
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Task 7: Prepare a loan application on behalf of mortgage broking
clients
Case Study — Evaluating and processing a loan application
Read the following case study then answer the questions that follow.
Ross and Melissa Cooper are a young couple who have been married for five years, during which
they have been renting an apartment while saving to buy an apartment of their own. They do not
have any children at this stage.
After some months searching, they have found a small two-bedroom apartment that suits their
needs. The purchase cost of the property is $480,000, and they have provided a deposit of
$60,000. You are recommending a standard variable loan.
Ross has been working at Gaines Consulting Pty Ltd. for 12 years and has a salary of $80,000.
Melissa has been working at Jackson Equipment Hire Pty Ltd for 8 years and has a salary of
$70,000. Neither has had previous employment, apart from casual work when they were younger.
The full details of Ross and Melinda that you have collected are as follows:
Applicant 1 Applicant 2
Loan purpose Purchase home (owner occupied)
Amount and type of loan sought $480,00, standard variable rate
Deposit $60,000
Address Unit 2, 27 High St.,
Mackville, NSW. 2080
Unit 2, 27 High St.,
Mackville, NSW. 2080
Status Renting Renting
Years there 5 years 5 years
Contact details Phone (W)
Phone (H)
02 9200 1111 (w)
02 9400 9900 (h)
02 9310 2000(w)
02 9400 9900 (h)
Mobile [phone] 960 000
Email [e-mail] [e-mail]
Number of dependants Nil Nil
Employment Gaines Consulting Pty. Ltd Jackson Equipment Hire Pty Ltd
How long? 12 years 8 years
Gross income ( p.a.) $80,000 p.a. $70,000 p.a.
Credit history Personal loan to purchase a car — since
repaid.
Personal credit card with Central Bank with
a limit of $3,000. Current balance: $300
Personal credit card with Northern with a
limit of $2,000. Current balance: $300
Store card with Wilson’s Department Store.
Current balance: S250
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Note: All credit cards are repaid in full when
due.
Note: All credit cards are repaid in full when
due.
ASSETS AND LIABILITIES
Assets Liabilities
Details Market value Details Monthly
payments
Amount owing
Cash at bank $15,000 Credit card limit:
$2,000
$3,000 $300
Deposit paid on
property
$60,000 Credit card limit:
$3,000
$2,000 $300
Motor vehicles:
1.
2.
$15,000
$7,000
Other:
Personal effects $30,000
Business value Nil
Total assets $127,000 Total liabilities $600
Surplus/deficiency: $126,400
OTHER DETAILS:
They are seeking a loan term of 25 years. Other requirements are:
 proposed settlement date — 6 weeks time
 ability to make additional payments from time to time without penalty
 monthly repayments
 redraw facility.
The applicants will have no other financial commitments other than their monthly mortgage
commitments, rates and utility costs and strata fees.
The current variable home loan rate is 6% pa.
Note: For the purposes of this assignment, any first home purchase assistance should be
ignored.
OTHER INFORMATION
APRA is concerned that interest rates may rise and because of this it is requiring all lenders to
“stress test” all housing loans at a borrowing rate of 7% p.a.
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Task 7.1.
Apart from requiring the presentation of a Credit Guide, the NCCP Act says nothing about what a
mortgage broker should say about him/herself at the beginning of a client interview. In the space
below, make a few brief points about what you would say about yourself and your firm at this
stage. Remember that at the outside the client is primarily looking for assurance that the broker is
concerned about them and their interests.
Mark
Some of the important terms and conditions for the clients include:
 Despite of the final recommendations the client needs to consider the market risks
which are associated to the credit borrowing
 The firm is not responsible for compensating any loss as a result of market
volatility
 The firm is not responsible for assisting with repayment in case of any default of a
particular
 The client’s needs to be aware of the any previous history of default in the
payment which may significantly affect the credit scoring of the present borrowing
/2
Task 7.2.
List in point form the important information a Credit Guide conveys to the credit applicant.
Mark
 Provide Information about the Commonly used lenders (“Commonwealth Bank, ANZ, Westpac, NAB,
AFG Home Loans, St George Bank”)
 Fees to be paid by the clients to the third party (“credit application (loan) is submitted, you may need to
pay the lender's application fee, valuation fees, or other fees” which needs to be considered even if the
loan is ultimately unsuccessful
 Payments received by the licensee (The different types of the fees may be received in form of “fees,
commissions, or financial rewards from Lenders or Lessors in connection with any finance“
 Fees payable by the licensee to the third parties (Taking note of the credit quote provided by the firm.
In case the credit note is not supplied this will indicate consumers are not charged any additional fees).
 Volume bonus arrangement with (AFG ltd. and AFG members may be receiving the additional
remuneration as bonuses)
 Information about the Commonly used lenders by the broker (suggested with 6 most commonly used
lenders such as “Suncorp, Macquarie Bank, AFG Home Loans – Edge, ING Direct, ME and ANZ”
/3
Task 7.3.
Under the Anti-Money Laundering and Counter-terrorism Financing Act 2006 (AML/CTF Act),
mortgage brokers are required to establish the identity of their clients. To do this they must cite
original copies of at least three primary documents and one secondary document. List three
primary documents and one secondary document below.
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Mark
Primary Document
 “Collection of certain minimum ‘know your customer’ (KYC) information”
 Providing the verification of customer information
 “Provide for the collection of information about the agent of a customer”
Secondary Document
 “Agents acting on behalf of a customer”
 “Incorporated and unincorporated associations”
 “Registered Cooperatives”
/3
Sub-total /8
Continued
Task 7.4.
Mortgage brokers should present adequate information to clients to enable them to make a
choice between loans. This involves conducting research to determine suitable loans and
presenting clients with a choice among, say, three loans that are considered to be suitable for the
client’s requirements. The characteristics of the three selected loans are then presented to clients
in a way that allows a comparison to be made. The presentation may be made a piece of paper,
or other means such as a Powerpoint overhead.
You are now required to use the internet or other sources to choose three loans that you believe
will meet the requirements of Ross and Melissa. The relevant details should be placed in the
spaces provided.
Mark
Credit Provider ANZ
Commonwealth
Bank
Westpac /6
Product Name
ANZ Standard
Variable home
loan
Commonwealth
Bank Standard
Variable
Rocket
Repay
Home Loan
Interest Rate Type (%) 5.20% 5.22% 5.24%
Comparison Rate (%) 5.30% 5.36% 5.38%
Minimum Loan Amount ($) 250,000 150,000 150,000
Maximum Loan Amount ($) 499,999 249,999 249,999
Minimum Loan Term 1 Year 1 Year 1 Year
Maximum Loan Term 30 Years 30 Years 25 Years
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Maximum LVR (%) 90% 90% 90%
Maximum Insured LVR (%) 80% 80% 80%
Mortgage Offset Account
(Yes/No) Y Y
N
Loan Redraw Facility (Y/N) Y Y Y
Split Loan Facility (Y/N) Y Y N
Fixed Interest Option (Y/N) N N N
Task 7.5 (a)
Explain significant features of the loan products that you have chosen in words that the client
would understand. Your answer should be restricted to features relevant to the clients.
Mark
The three loan products range from ANZ Standard Variable home, Commonwealth Bank
Standard Variable and Rocket Repay Home Loan by Westpac. The significant features
such includes facilities such as redraw, flexibility in choosing the loan term, saving on
interest payable by maintaining offset account, making interest only repayments and
option to split loans.
/2
Sub-total /8
Continued
Task 7.5 (b)
Credit providers always have other fees and charges beyond their stated interest rates. Select
one of the loans you have set out in Task 7.4 as the one preferred by Ross and Melinda and
explain any additional fees and charges in a manner that your clients can understand.
Mark
The selection of the loan stated in the Task 7.4 has been made with ANZ Standard
Variable home. The loan needs to have a loan administration charge of $ 5 per month.
The loan needs to further have an additional Renegotiation fee of $ 200 or $ 350
depending on requested change. Ross and Melinda need to pay monthly repayment of $
264 by taking this loan. They also need to pay the “Lenders Mortgage Insurance (LMI)”.
/2
Task 7.6
It is important to verify the information that you obtain from clients, particularly information that
relates to income. List the documents that you should ask for and then examine to verify the
incomes of Ross and Melissa.
Mark
Ross and Melinda need to keep the details of their income, expenses, assets and
liabilities, driver’s license and An ANZ account number. As per the salary of Ross and
Melinda both are eligible to apply for the loan. In order to verify their incomes, the main
documents needed are copy of Latest Bank Statement, “Latest 6 Months Salary Slip with
all deductions and last 2 years”.
/3
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Task 7.7
In dealing with clients, it is important to explain technical concepts in ‘plain English’ so that they
understand them. In the first two spaces below, explain the terms ‘LVR’ and ‘insured’ LVR’ in
terms that that your clients will understand. Then, in the third space, explain how Lender’s
Mortgage Insurance is normally paid, once again expressing yourself in a way that the clients are
likely to understand.
No. Mark
1. The loan to value ratio is the lending risk assessment ratio which the “financial
institutions and others lenders” examine prior to approving of a mortgage. It is the
amount of the mortgage lien divided by the appraised value of the property in terms
of percentage. A higher percentage of LVR represents higher risk and such
approval is seen with a higher risk. A loan with a high LTV will need the borrower to
“purchase mortgage insurance to offset the risk of the lender”.
/1
2. Lender’s Mortgage Insurance is identified as that condition of borrowing home loan
where the mortgage lender may require to make an off payment to protect the
lender against the events which might lead to failure in making the loan
repayments. Insured LVR is designed to protect the borrower in case of loan
default.
/1
3. In general, the lender will need to pay for a lender to pay for the lender’s mortgage
insurance if the home loan deposit is less than 20% of the total value of the
mortgage. However, the individual lender may require more or less than a 20% of
the deposit to avoid paying LMI.
/1
Task 7.8
Mortgage brokers assist their clients to complete their preferred lender’s credit application form,
as well as applications for the First Home Buyer’s Grant and (where applicable) stamp duty
exemption. Examples of these forms are set out over the following pages and you are required to
complete them on behalf of Ross and Melissa. Remember that each form must be signed by the
client, so facsimile signatures must be attached,
Mark
The forms for the following pages can be found at: http://www.pwloans.com.au/ANZ
%20full%20application.pdf
http://www.osr.nsw.gov.au/sites/default/files/file_manager/ofh001.pdf (application form
only) http://www.osr.nsw.gov.au/sites/default/files/file_manager/oda066.pdf ((application
form only)
/15
Sub-total /23
Continued
Task 7: Prepare a Loan Application on Behalf of Mortgage Broking
Clients Continued
Task 7.9.
It is important to keep clients informed about the steps involved in the credit approval process.
Indicate how your organization keeps your client informed as the loan application proceeds. What
are the likely normal time intervals for each step that you explain to your clients.
No. Mark
1. The broking firm will ensure that the clients are informed at every stage from the
loan application process to the disbursement of the loan amount. The initial 3-4
days will be spent on the preparation of the documents, this will consist of the
/2
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various document ranging generating a credit eligibility rating based on the
previous borrowings. The next stage will involve will involve input of the loan
application in into the core banking system of the bank. The customer will be
informed when the initial processing is charged as soon as the loan account is
opened. This stage will be followed with creating an entry in the memorandum of
the bank. The customer will be duly informed about the drawing process of the
loan. This will done in the 4th day from the application process.
Task 7.10
Assess the loan application of Ross and Melissa Cooper against the five C’s.
a) Character
How would you assess the applicants’ character?
Mark
Both Ross and Melisa are having a good reputation of repaying loans. This is evident with
Ross’s “Personal loan to purchase a car — since repaid” and Mellissa’s paying the dues
of the credit card amount.
/2
b) Capacity
(i) What will the applicants’ monthly payment be, given the current variable lending rate of
6% p.a.? (Hint: visit a website such as: http://www.yourmortgage.com.au/calculators/).
(ii) Using the ‘income percentage method’, assess the applicants’ capacity to repay the loan
(25 words)
No. Mark
1. Estimated monthly payments are $2,877.84, and Ross and Melisa need to pay
$556,023.31 in interest over the total 30 years loan period.
/1
2. As per the income percentage method the monthly repayment is seen with $
309.26. This calculation is considered on a “loan amount of $48,000 with an
interest rate of 6.00% and a loan term of 25 years”. Ross and Melisa cooper both
have more the same capability to repay the loan amount
/1
Sub-total / 6
Continued
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Task 7: Prepare a Loan Application on Behalf of Mortgage Broking
Clients Continued
c) Capital
(i) How would you verify the equity the applicants intend to contribute to the purchase?
(ii) What should you be careful about regarding this contribution? (50 words)
No. Mark
1. The verification of the equity is determined with Full-time and part-time employment
assessment, Commission, bonuses, overtime and allowances, Self-employed
applications, rental income
/1
2. A deposit of $ 60,000 paid on the property shows that borrowers are having the
ability to repay a loan by comparing “income against recurring debts and assessing
the borrower's debt-to-income (DTI) ratio”. However, they need to ensure that the
borrower has a sufficient DTI ratio.
/1
d) Collateral
(i) Assuming the valuation placed on the property is $480,000, calculate the loan to valuation
ratio (LVR).
(ii)Given the LVR that you have calculated, what steps might the bank take to protect its
position? (25 words)
No. Mark
1. The total Loan to Value Ratio has been depicted as 100% /1
2. Based on the high loan to value ratio Ross Cooper needs to apply for insurance
LVR. The bank needs to ensure that the loan amount is supported with a guarantor
/1
e) Conditions
Using the information that has been presented, identify any ‘conditions’ that might impact on
this loan application. How should they be handled?
Mark
The conditions of the loan are seen to be specific with standard variable loan. The
conditions of the loan application process need to be handled with Pre-Qualification,
Mortgage Programs and Rates.
/2
Task 7.11
What is your organization’s policy about notifying applicants of the outcome of their application?
Mark
The updating process of the loan amount needs to be ensured with sending regular emails
and SMS in the client’s email id and personal number.
/2
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Sub-total /8
Continued
Task 7.12
The credit application that is forwarded to the credit provider is accompanied by supporting
documentation used to verify the information concerning the financial position of the client. List
four types of document that are likely to be forwarded. In the case of Ross and Melissa Cooper.
No. Mark
1. Valid Proof of Applicant's Identity /1
2. Latest 3 month's Salary Slips /1
3 Current Employment Certificate /1
4. Latest 6 month's statement from bank /1
5. Proof of Age /1
6. Proof of Residence /1
Task 7.13
What should be the rules regarding access to client files?
Mark
The access to the client’s files needs to be ensured with “confidential information of
current and former clients not be disclosed outside the law firm except” in some of the
specific ways as stated in Rule 1.05. The client also needs to ensure “TDRPC Rule
1.15(d) of the Texas Disciplinary Rules of Professional Conduct states”.
/2
Task 7.14
There are times that you might suggest to clients that they should have a fixed interest loan for a
period. Explain why you would do this.
Mark
“When a loan is fixed for its entire term, it remains at the then-prevailing market interest
rate, plus or minus a spread that is unique to the borrower”. In general, “if interest rates
are relatively low, but are about to increase, then it will be better to lock in your loan at that
fixed rate”.
/1
Task 7.15
List the information you should include on a client file.
Mark
 “Proof of Identity”
 “Proof of Residence”
 “Latest 6 months Bank statement”
 “KYC Documents: Proof of Identity; Address proof; DOB proof”
 “Office address proof”
 “Proof of residence or office ownership”
 “Proof of residence or office ownership”
/2
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Sub-total /11
Continued
Total /79
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