The Assignment on Certificate IV in Finance and Mortgage Broking

Certificate IV in Finance and Mortgage Broking
(CIVMB_OR_Audio_v5A1)
Student identification (student to complete)
Please complete the fields shaded grey.
Student number
Oral assignment result (assessor to complete)
Result — first submission Not yet demonstrated
Parts that must be resubmitted
Result — resubmission (if applicable) Not applicable
Result summary (assessor to complete)
Time First submission Resubmission (if required)
Preparation
for oral
assessment
Part 1: Instructions n/a n/a
Part 2: Preparation for oral assignment Not yet demonstrated Not applicable
Oral
assessment
Part 3: Oral response to questions 10 minutes Not yet demonstrated Not applicable
Part 4: Role play 10 minutes Not yet demonstrated Not applicable
Part 5: Role play 5 minutes Not yet demonstrated Not applicable
Part 6: Role play 5 minutes Not yet demonstrated Not applicable
Total time required 30 minutes
Feedback (assessor to complete)
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CIVMB_OR_Audio_v5A1

Part 3: response to questions
Questions Summary of oral response (assessor only)
1. You are a broker who charges a fee for your service.
You are meeting a new client, Stephanie Jones, for the
first time at your office after an initial cold call.
The purpose of the meeting is to start to gather
information about her existing financial situation,
goals and needs.
To comply with organisation policy and legislative
requirements and to ensure that Stephanie can make
informed decisions moving forward, there are two
documents you must provide to Stephanie.
(a) Name the two (2) documents you must provide to
Stephanie.
Credit Guide which provides information regarding the
mortgage broker to the client
Proposal Document which lists out the costs to the
consumer of using the mortgage broking service and the
same includes all charges and commissions
(Disclosures should include, but are not limited to, the range and limitation of
your services, complaint handling process and the way you are remunerated.)
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Section 1: Case study 1 — Philip and Jennifer Brown
Background
Philip and Jennifer Brown are a young couple about to buy their first home. They have
been married for five years and during that time have rented an apartment while saving for their
own home.
Following a personal referral from Glenn Brown, Philip’s brother you have already had a first
meeting with Philip and Jennifer to discuss their objectives and needs. They admitted they have
little time to do much research of lenders, have limited knowledge of the loan products available
and have approached you to guide them through the process as they are confused.
During (and subsequent) to your first meeting, Philip and Jennifer have provided the basic
information documents — pay slips, tax returns, bank statements, property details for
review/verification. You have now undertaken your preliminary assessment and need to discuss and
present to them the proposal covering the options and your recommendations. It is important to get
the proposal moving quickly, as the agent has indicated other parties are interested in the property.
They have been looking at properties for the past three months and have found a 10 year old
established apartment that has really caught their eye, although they have some concern over the
kitchen which requires some minor renovations.
They have not paid a deposit at this stage, but the Real Estate Agent has provided some guidance on
additional fees and charges.
Following is a summary of the details of the property they wish to purchase, the couple’s financial
and employment details, and the loan features they require.
The property
Address Unit 1, 92 Seaside Lane Edgartown (Your state)
Purchase price $490,000
Description 2 bedroom, 2 bathroom Strata Title apartment
Agent details Stephanie Jones
Phone [phone]
Mobile [phone]
The couple
Current address Unit 12, 22 Wentworth Lane, Highville, (Your state)
Philip and Jennifer have lived there since March 2012
Home phone [phone]
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Funds position
Purchase price $490,000
Clients’ estimate of costs $25,000
Total required $515,000
Loan $440,000 + LMI
Clients’ total contribution (including deposit of $50,000) $75,000
Use fees and charges applicable to your state. If a servicing calculator you are using requires a
postcode, select one that would represent a reasonable suburb/location in your city or state.
Assets
Capital Bank savings account (joint) $78,000
Capital Bank cheque account (joint) $1600
Holden Commodore SS 2007 (Philip) $25,000
Kia Cerato Sport 2015 (Jennifer) $9000
Superannuation — Capital Bank (Philip) $28,000
Superannuation — Capital Bank (Jennifer) $62,000
Household effects (insured value) $40,000
Liabilities
Capital Bank personal loan (Philip) $5,600 (repayments $180 p.m.)
Capital Bank Visa card (Philip) $200 (limit $4,000)
Capital Bank Visa card (Jennifer) $1,600 (limit $5,000)
Payments have always been met on time and any prior loans repaid in terms of contracts.
The minimum monthly commitment on each of the credit cards should be calculated at 3% of the
credit limit.
Living expenses
Annual expenditure for living expenses — $33,000.
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Employment and income
Philip (date of birth 21/2/87)
Position Team Leader (full time)
Employer ACE Limited 101 City Rd, Westside (Your state)
Phone [phone]
Income (gross) $58,000 p.a. monthly gross income: $4,833
Employer contact Dwayne Johnson, HR Manager
Length of service Since October 2005
Driver’s licence 8855KL
Email [e-mail]
Jennifer (date of birth 8/10/88)
Position Accountant (full time)
Employer Tech city 804 High Street, City East (Your state)
Phone [phone]
Income (gross) $95,000 p.a. monthly gross income: $7,917
Employer contact Bruce Wayne, HR Manager
Length of service Since March 2006
Driver’s licence 17016C
Email [e-mail]
Solicitor’s details
Jones and Co
22 High Street, City East (Your state)
Phone: [phone]
Email: jonesandco.net.au
The solicitor has quoted a fee of $1,500 for the conveyance.
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The loan requirements
• 30 year term
• premium option home loan features
• variable interest rate (for this case use 4.5% p.a.)
• LMI to be capitalised
• proposed settlement date — six weeks from exchange of contracts
• ability to make additional payments from time to time without penalty
• fortnightly repayment option
• redraw facility
• funds access via card.
Note: Loan application fee is waived under Special Offer.
Other information
• They have advised that the Real Estate Agents have indicated they need to make a formal offer within
the next 10 days, however they are reluctant to do so until they obtain an approval.
• Jennifer has asked if there are any professional package benefits available because she is an accountant.
However, she did confirm she has not maintained her continuing professional development.
• Jennifer previously owned and lived in an apartment with her two older sisters when they attended
university but they sold this before she married — they did not make a lot from sale.
• Family plans are five years away.
• They do have plans to take a major overseas trip before family comes along.
• Philip is hoping for a promotion within the next 12 months upon possible retirement of a long-term
employee where he works.
 They have also expressed a concern about the possibility of interest rates increasing.
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Borrowing options
Although Philip and Jennifer are looking to borrow at approximately 90% LVR, what other
options could you present that would avoid the cost of LMI? (100 words)
Student response
LVR should be lower because the lesser the LVR the more positive it is for the borrower. Therefore
it can be said that it would not be a wise decision to opt for a 90% LVR. The only possible solution
available to the applicants is that he needs to increase his savings so that their loan to value ratio
becomes lower as compared to the borrowing amount otherwise they may high amount as a
repayment and interest to the lender at the end.
One other option which is available to the Philip and Jennifer is to keep the LVR at less than 80%
which would also means that the percentage of deposit should be more than 20% which would help
the clients to avoid LMI costs. I would suggest that you take loan from Star essential home loans
which would serve your needs in an effective manner.
Borrowers could also seek help from friends or family to increase funds which is available to them
as deposit hence reducing here LVR.
Philip and Jennifer from Case study 1, have called to discuss whether they should fix the interest rate on
their loan after having received several conflicting viewpoints from family and friends.
(a) Explain the process you would use to research and identify the various product options available to
meet the needs of Philip and Jennifer(150 words)
Student response
If the applicants do not have a clear idea regarding the loan then in such cases they can go for
consultation or for a professional advice. They need to consult a professional in order to make a
sufficient decision regarding the best course of action which is available to them. I would be
reviewing the serviceability capacity of the clients and on the basis of which take decisions which
loan product would assist the clients to meet their needs in an effective manner.
I will also give them an example of a loan product that has both variable and a fixed rate. I will
show them how the interest rates in these products would behave in different adverse economic
conditions that include upward and downward interest rate fluctuations and explain their
consequences so as to make them get the picture and also show them how important it is to fix the
loan so as they could plan their finances as their liabilities will be fixed to avoid getting caught up
in the economic adversities.
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