End Of Chapter Questions Assignment

END OF CHAPTER
QUESTIONS

Table of Contents
CHAPTER 4....................................................................................................................................5
4.1 Email designed to overcome the reluctance of the clients.....................................................5
4.2 ................................................................................................................................................6
(a) Software applications to calculate a client's financial position..............................................6
(b) Audit Program to evidence that clients received the So Sweet credit guide..........................6
(c) Email to the mentor summarizing broker's efforts on a weekly basis....................................6
(d) Mechanism to ensure the currency of regulatory literature is distributed in a timely fashion
in accordance with organisational policy. ...................................................................................6
(e) Ensuring operational procedure is updated and reflects changes to regulation and
legislation as well as their implications.......................................................................................7
(f) Calculate the cost of implementing triple bottom line principles in an office with no eco
policies.........................................................................................................................................7
(g) Email enquiring if any staff would like to undertake the triple bottom line implementation
process as a business opportunity. ..............................................................................................7
4.3 Situation when a finance broker act as a limited agent of a credit provider..........................8
4.4.................................................................................................................................................8
(a) Developing and cultivating the relationship, in order to market and benefit the organisation
......................................................................................................................................................8
(b) Cooperating with other professionals and third parties to expand and enhance the
reputation of the organisation and to identify new and improved business practices.................8
(c) Following up with referrals to secure the new business relationship.....................................8
(d) Media , Marketing and public relations tools used for the business......................................9
(e) Identifying potential buyer’s motives and approaches related to each...................................9
4.5 Case Study.............................................................................................................................9
CHAPTER 5..................................................................................................................................14
5.1 Documentation of changes in First Home Owners Grants and Stamp Duty Concessions. .14
5.2 Concept of a 100% loan.......................................................................................................14
5.3 Concept of split and blended loans......................................................................................14
5.4 ....................................................................................................................................14_final

(a)Concept of a line of credit loan ............................................................................................14
(b) Concept of Interest-only Loan..............................................................................................15
5.5 Case Study...........................................................................................................................15
CHAPTER 6..................................................................................................................................15
6.1 Stages involved in Loan Application Process......................................................................15
6.2 The 5Cs important in establishing credit-worthiness..........................................................17
6.3 Concept of Loan-to-Value Ratio (LTV)..............................................................................18
6.4 Difference between Pre-approval and Pre-Qualification.....................................................18
CHAPTER 11................................................................................................................................19
11.1 Difference between Contract Law and Common Law......................................................19
11.2 Key elements within Insurance Contracts Act, 1984........................................................20
11.3 Credit Activities defined under the National Consumer Credit Protection Act (NCCPA),
2009............................................................................................................................................20
11.4 Obligations of an ACL Licensee as well as penalties prescribed under National Credit
Act in regards to non-compliance with legislations and obligations.........................................20
11.5 Case Study:.......................................................................................................................21
CHAPTER 12................................................................................................................................22
12.1 The most common risk assessment techniques..................................................................22
12.2 External and Internal Risk Drivers....................................................................................23
12.3 The risk management process and treatment options available to manage risk................23
12.4 Distinctions between Monitoring and review processes in risk management...................24
12.5 Case Study.........................................................................................................................24
CHAPTER 13................................................................................................................................27
13.1 Diversification or Cross-Sell..............................................................................................27
13.2 The industry participants that may help to build a mortgage/finance brokers’ business...27
13.3 Ways in which a Mortgage/Finance Broker develop and nurture professional
relationships...............................................................................................................................27
13.4 Importance of maintain business relationship ...................................................................28
13.5 Case Study.........................................................................................................................29
CHAPTER 14................................................................................................................................32

14.1 Ways to manage interaction between credit risk and business objectives in an
organization................................................................................................................................32
14.2 Lenders deals with debtors in different circumstances......................................................32
14.3 Typical circumstances that lead to personal insolvency situations...................................32
14.4 Ways in which a lender can register security for a loan ...................................................33
CHAPTER 15................................................................................................................................33
15.1 Invoice discounting............................................................................................................33
15.2 The appropriate procedures involved in the implementation process of a complex
business loan structure ..............................................................................................................34
15.3 Various entities who may wish to purchase a vehicle the appropriate finance options as
part of the implementation solution...........................................................................................34
15.4 Documentation needed in each of the steps arranging a novated lease.............................35
15.5 Case Study.........................................................................................................................35
CASE STUDY...............................................................................................................................36
1. Eligibility of clients under First Home Owners Grants or Stamp Duty Exemptions
applicable in Victoria (VIC)......................................................................................................36
2. Documents required by clients to be submitted for the application of a mortgage loan and
their need....................................................................................................................................37
3. Responsibilities as a mortgage broker under the anti-money laundering legislation............37
4. Measures to avoid committing unconscionable, misleading or deceptive conduct...............38
5. Loan recommended to the clients..........................................................................................38
6. Recommending a portability feature within the loan for clients............................................38
7. The loan-to-value ratio and its implications on the lender's decision for granting loan........38
8. Monthly payments of an interest-only loan if the interest rate is 7% per annum..................38
9. The initial monthly repayment for a variable loan if the interest rate was 7% and the loan
term was 25 years.......................................................................................................................39
10. Detailed remuneration arrangement in regards to the services provided.............................39
REFERENCES..............................................................................................................................41

CHAPTER 4
4.1 Email designed to overcome the reluctance of the clients
ABN 00 313 577 213
100 Arthur Street Fitzroy Vic 3065 || [phone] || [e-mail]
11th March 2019
Mr. & Mrs. Basil Butler
6/175 Fitzroy Street,
Fitzroy, Vic 3065
Dear Basil and Daisy
Subject:
In Response to the query of recommended variable interest rate product including
offset account
We thank you for the opportunity for choosing us as your priority lender. As per our last
discussion regarding the suitable loan for your requirements, it was concluded that mortgage
loan with a variable interest rate inclusive of an offset account would be most desirable for you.
Variable home loan may benefit you by enabling lower interest payments in the initial years.
Also, it has low redrawing facility as compared to other loan products. An offset account in the
loan plan will help you link your savings or transactions with home loan account easily. This
option shall help you in providing you a daily 'offset', thus, charging interest on the difference
between the total loan and offset amount.
This would result in saving thousands of dollars paid as interest on the loan taken. Hence,
proving cost-effective instead of being an expensive investment. The common wall between the
two apartments is actually a weight bearing wall. That is why there is a lot of work; we have to
install the iron beams to maintain support structure of the building while taking away sections
of the wall to make the access you need.
Please reconsider the option recommended. We look forward to discussing this in detail with

you.
Kind Regards,
XYZ
4.2
(a) Software applications to calculate a client's financial position
Serviceability calculator has been used to calculate the financial position of Basil
(Eldridge and Crombie, 2013).
(b) Audit Program to evidence that clients received the So Sweet credit guide
Procedures Checklist
Receive client information ✓
Communicate with prospective client ✓
Provide Client with loan application form ✓
Provide Client with So Sweet Guide ✓
(c) Email to the mentor summarizing broker's efforts on a weekly basis
Internal monitoring programme include:
 audit of disclosure documentation
 financial service reforms
 loan documentation audit
 monthly journal audit
 qualification checks
(d) Mechanism to ensure the currency of regulatory literature is distributed in a timely fashion in
accordance with organisational policy.
Organizations create rules for the creation of documents to provide uniformity including
layout, heading styles, spelling, abbreviation, punctuation, capitalization, tone and register.
The Corporations Act in section 286(1) states that a company must keep written financial
records that:

 correctly record and explain its transactions and financial position and performance,
and
 would enable true and fair financial statements to be prepared and audited
Financial records are defined in section 9 of the Corporations Act as including:
 invoices, receipts orders for the payment of money, bills of exchange, cheques,
promissory notes and vouchers
 documents of prime entry
 working papers and other documents
Implementation of these laws as organisational policies will help in the assurance of
distribution of regulatory literature in a timely fashion.
(e) Ensuring operational procedure is updated and reflects changes to regulation and legislation
as well as their implications
(f) Calculate the cost of implementing triple bottom line principles in an office with no eco
policies
Work planning in organizational frameworks is now to incorporate and support triple
bottom line principles. It therefore falls to the financial services industry (and indeed, to all
industries) to identify sustainability issues where they arise and then incorporate principles,
practices and available tools and techniques of sustainability management that are relevant to the
context of the financial services industry. This of course takes some degree of skill and planning
to implement. As there are no eco policies implemented in the office, it is difficult to calculate
the cost for such principles based on dollars. However, most of the businesses use TBL Index
that is based on taxes paid, average hours of training of an employee, water consumption and
amount of waste generated.
(g) Email enquiring if any staff would like to undertake the triple bottom line implementation
process as a business opportunity.
ABN 00 313 577 213
100 Arthur Street Fitzroy Vic 3065 || [phone] || [e-mail]
11th March, 2019
Dear Staff,

Greetings for the day!
This is in regards to the triple bottom-line implementation in the firm. It has come to our
knowledge that a triple-bottom principle would help in enhancing sustainability and
profitability in the organisation. For this purpose, we would like to have some volunteers from
the staff willing to undertake this business opportunity. Please provide us with your details by
14.00 hours by March 8, 2019.
Thank you.
Kind Regards,
XYZ
4.3 Situation when a finance broker act as a limited agent of a credit provider
Cases where agents might be approved to bind the principal in a contract with a third
party and with regards to some types of credit facilities finance broker may act as limited agent.
4.4
(a) Developing and cultivating the relationship, in order to market and benefit the organisation
Networking groups and events is preferred to gather various brokers. It is more reliable as
large amount of brokers can be informed and made available at one place. From personal
network telemarketing mode of communication is selected as they can be given complete details
directly over telephones. Understand buyer motive and explaining them the benefits ensuring
them that they have a call to action to solve their grievances. The usual time-frame for
prospecting may be on a daily, weekly, monthly or quarterly basis.
(b) Cooperating with other professionals and third parties to expand and enhance the reputation
of the organisation and to identify new and improved business practices
To enhance the reputation of the organisation it is important to cooperate with other
professionals and third parties. In order to do so, one can follow-up with referral businesses
using appropriate medium of communication to nurture and develop new as well as
existing relationships (Khanam, 2016). Also, professional networking modes are also
utilized to promote market and enhance goodwill of the organisation. This can be done
through award ceremonies, seminars and conferences as well as sports and special events
or outings.

(c) Following up with referrals to secure the new business relationship
Using appropriate channel of communication including the following methods referrals
may be secured to develop new business relationship:
 Cold Calling
 Advertisements
 Referral Methods
 E-Mails
 Personal Contact
(d) Media , Marketing and public relations tools used for the business
Media tools used include:
 Cold Calling
 Client Database
 Internal Call-in
Marketing tools used include:
 Recommendations from clients
 Community events
Public Relation Tools include:
 Seminars
 Networking
(e) Identifying potential buyer’s motives and approaches related to each
Potential Buyer's Motive Approach to address the motives
Urgency Motive Mirroring and framing information positively
for the client.
Economic Motive Attract client by listing advantages to them in
relation to the pricing of the product
Quality delivered Enhance rapport with the client based on the
goodwill of the business to attract the clients
by pinpointing the previous similar loan
applications as well as past experience.

4.5 Case Study
(a)(i) Analysis of Basil and Daisy's financial position based on the information disclosed by them
Using Serviceability Calculator on Mozo (Loan Calculator, 2019), it is disclosed that
Basil and Daisy's financial position is derived as follows:
This shows that the client's financial position is really good when the loan is taken for 25
years worth $510,000 under the variable interest rate scheme with an offset account as they are
able to save on interest payments using offset facility, ongoing fees not applicable and unlimited
free redraws (Bates and Robb, 2015) .
(a)(ii) The relevant processes for proper execution of loan documentation to determine whether
you will be able to implement the necessary actions within the neighbour’s time-frame
The loan documentation process takes about five to three business days if the buyer is
ready with all the necessary paperwork. This includes:
 Pre-Approval/Conditional Approval
 Property valuation
 Formal Approval
 Issuance of Loan offer
 Settlement
The time-frame given by the neighbour includes a 30-day deadline whose extension is non-
negotiable. Therefore to finish the documentation process early, the buyers need to be ready with
necessary framework.
(a)(iii) Submission of the documentation to the appropriate lender in an appropriate manner to
protect client confidentiality.
The necessary documentation would be submitted to the appropriate lender through
signed copies attested by concerned government authorities.

(a)(iv) Short Report based on client information to enhance Basil and Daisy in making correct
decision
Based on the information furnished regarding the value of property to be purchased and the
basic details regarding financials of Mr. and Mrs. Butler, it is found out that they require a
product that is easily available under the 30-day time-frame provided by the neighbour.
Therefore, based on this, a 25 year variable interest rate home loan is recommended to the party
which includes an offset account at an initial interest rate of 3.48%. This will help them in
repaying debts on the Apartment located in Fitzroy, Cars as well as save thousands of dollars
for the couple.
(a)(v) Email to Basil and Daisy to establish and confirm their priorities.
ABN 00 313 577 213
100 Arthur Street Fitzroy Vic 3065 || [phone] || [e-mail]
11th March 2019
Mr. & Mrs. Basil Butler
6/175 Fitzroy Street,
Fitzroy, Vic 3065
Dear Basil and Daisy,
Subject:
Enquiring the goals, expectations as well as risk tolerance regarding the investment
We thank you for the opportunity for choosing us as your priority lender. As per our last
discussion regarding the suitable loan for your requirements, it was concluded that these
products are best suited to their loan application:
 mortgage loan with a variable interest rate inclusive of an offset account.
 Interest-only Home loan.
 Fixed-rate home loan with offset facility.
We would like you to provide us with the additional information in order to complete your

analysis in accordance with our firm’s credit policy along with the goals and expected risk you
are ready to take in terms of interest rate as well as collateral.
As far as the above loan options are concerned the following table shows there merits:
Loan Type Strengths Weakness Benefits Risk Fees/ Charges
Variable Interest
Loan with
Offset Account
Low interest
rate; higher
savings due
to offset
facility.
High
fluctuations in
later years;
uncertain.
More Savings. Highly
uncertain
No fees or
annual charges.
Interest-only
Home loan
Interest
payments;
low burden
on client in
initial years.
Later years
include higher
payments
inclusive of
principal and
Interest
payment.
Lower
frequency of
payments.
Highly
Probable
therefore
low in risk.
No application
fee or charge.
Fixed-rate
Home loan with
offset
Budget-
friendly.
Changes in
future rates
are not
applicable
making it
costlier
No
fluctuations in
the interest
payments,
thus, no
changes in
budget need to
be made.
Highly
certain
therefore
low in risk.
Include a break
fee.
This would help us in providing you with the most accurate plan to go forward with the loan
application process. Kindly provide us with the same as soon as possible.
Kind Regards,
XYZ

(b) A confirmation email to Basil
ABN 00 313 577 213
100 Arthur Street Fitzroy Vic 3065 || [phone] || [e-mail]
11th March 2019
Mr. & Mrs. Basil Butler
6/175 Fitzroy Street,
Fitzroy, Vic 3065
Dear Basil and Daisy,
Subject:
Enquiry about the basic requirement of loan and other related information
As per our last discussion regarding the suitable loan for your requirements, it was concluded
that these products are best suited to their loan application:
 mortgage loan with a variable interest rate inclusive of an offset account.
 Interest-only Home loan.
 Fixed-rate home loan with offset facility.
As per the basic financial information provided on your part it was recommended that a
variable interest rate product with an offset facility would be most desirable. The following
information regarding the same have been provided below:
 Loan Amount : $510000
 Term: 25 years
 Rate of Interest: 3.48% (variability rate)
The recommended product has a strategic as well as a commercial relationship with our firm as
it is highly demanded product of the company with a 70% applicants using this product. In
order to complete the compliance requirements as per our firm's policy, the documents attached
include:
 Pre-approval Letter.

 Pre-Qualification Letter.
The loan application is expected to be approved in three to five business days. Thank you for
choosing us. For any further queries, feel free to contact us anytime in the business hours.
Thank You.
Kind Regards,
XYZ
CHAPTER 5
5.1 Documentation of changes in First Home Owners Grants and Stamp Duty Concessions
The prevalent exemptions provided under the aforementioned scheme in Victoria were
subjected to change due to which any amount equivalent or below $650000. Apart from this, any
amount ranging between $650001 and $750000 has been shown below:
Value of Property ($) Standard Duty ($) Additional Duty imposed after
concession ($)
625000 31https://mozo.com.au/home-
loans370
1045
650000 34070 11356
700000 37070 24713
745000 39770 38444
Data has been taken from the following site: <https://www.sro.vic.gov.au/fhbduty>
5.2 Concept of a 100% loan
100% loan is a type of mortgage loan under which the loan seeker receives a loan amount
that is equivalent to the total value of the property that is to be purchased.
5.3 Concept of split and blended loans
Such loans have one component of repayment that is based on variable interest rate and
other part includes fixed interest rate (Becker and et.al., 2016).

5.4
(a)Concept of a line of credit loan
A loan refers to a borrowed amount of money taken by a person from the lender, usually
in lump-sum, with an interest rate attached to it and is required to be repaid over a given period
of time. A line of credit is a revolving account which limits the drawing as well as the
expenditure to a certain extent. It also allows the borrowers to repay the money (including
interest) and spend it again. One such example of this type of account is Credit Card.
(b) Concept of Interest-only Loan
An interest-only loan is one under which the borrower pays monthly interest on a
mortgage for fixed term, say, 5 to 7 years. During this fixed term, the principal balance remains
unchanged. After this term ends, the borrower must:
 renegotiate for another such mortgage which includes payment of principal too; or
 convert the loan to principal plus interest payment loan, if agreed previously.
5.5 Case Study
(a) Circumstances under which the decision is to be referred to Robson:
As per the organization's Policy, a loan decision is to be referred to the approving personnel, in
this case, Robson under the given circumstances:
 Where the decisions related to advance funds or extend credit which fall outside the
purview of the authority limits of the mortgage broker.
 Loan decisions made by the broker need to prepared in a systematic format and must be
forwarded to Robson with an inclusion of recommendation to accept or reject an
application.
Under both the circumstances whether to accept the application or reject the application it
is expected to refer to Robson.
(b) Financial and legal reasons including the security used to justify review decision
For the Credit Loan Application No. ABC 1234586 of Mr. Basil, it is recommended that a
variable interest loan worth $510000 at the rate of 3.48% with an offset facility is most suitable
as per the financial information disclosed to the Bank. This is due to the fact that as per their
requirements, the borrowing would include a 30-day deadline as well as less burden on the
borrower's initial years.

CHAPTER 6
6.1 Stages involved in Loan Application Process
Loan Application Process is a detailed procedure that involves an in-depth analysis in
regards to the borrower's financial position, credibility as well as capacity to repay the loan being
taken. This involves a careful analysis on lender's part using qualitative as well as quantitative
statistical methods or techniques that require minimal human interference. Usually, this process
has certain set of predefined criteria against which borrower's are given a score and help in
isolation of poor credit risk through historical data. These stages are explained below:
 Preliminary Stage:
Any borrower seeking home loan has two alternatives. Either they can apply for a loan directly
with a traditional lender or they can apply for it through a professional mortgage broker. In the
former's case, there is a direct relationship between the lender and the borrower. However, in
latter's case, the borrower has to first go through an initial screening process which includes an
interview between the loan receiver and broker. This involves a discussion regarding the loan
requirements. This usually concludes with a pre-qualification or a pre-approval between the
client and the borrower (Worthington, 2012).
 Application:
This involves documentation of financial information in regards to income, assets as well as
liabilities. Application stage usually starts with a issuance of pre-qualification letter. Also,
alternatives are also presented during this stage so as to enable the buyer to assess the products
which suits them best. Usually, clients focus on interest rates, penalties of any kind as well as
other costs and fees.
 Approval:
Once all the paperwork has been documented properly, lender carries out a critical review of
applicant's information, followed by issuance of a pre-approval letter. This also includes
substantiation of applicant's employment. If the borrower has an existing first mortgage, then a
consent from prior mortgagee is obtained to confirm the subsequent application of second
mortgage. The lender is also responsible to check the property and carry out a property appraisal.

This shows that the estate is worth the amount borrower has agreed to pay which would enable
the seller to recover the payments from the buyer in case they turn out to be a bad-debt.
 Settlement:
This is the last stage in the loan application process. It involves transfer of ownership from seller
to the buyer of property. On settlement, the parties to contract meet and exchange documents as
well as money to seal the deal. The sale or disposal must be regulated by governing law in
writing and must be duly signed by both vendor as well as the purchaser. Once all the paperwork
regarding the contract of sale or disposal is completed, it should be submitted for stamp duty
assessment and payment. The contract term in this case commonly extends to approximately 28
days. This is generally carried out by the solicitor of the purchasing party.
6.2 The 5Cs important in establishing credit-worthiness
 Character:
This factor looks at the borrower's reputation as it is important that the borrower has not made
any defaults in regards to his or her past. If the reputation of the borrower in the market is
maligned, it is possible that they would default in paying the loan applied for.
 Capacity:
It measures the borrower's ability to repay loan. This can be done by comparing their income
against their past debt. A borrower must be able to repay their debts. If they are not capable, the
loan should not be provided to such parties. Lenders consider borrower's cash flows, repayment
timings, probability to repay the loan successfully and contingent situations under which the loan
seeker may fail to repay his debts. It is easier to gauge the capacity for a purchaser who is
employed irrespective of the mode of employment, that is, whether they are full-time, part-time,
casual or contractually employed. However, loan approval does not come through for those
applicants that have recently changed jobs as they do not reflect job stability (Pearson, 2016).
 Credit or Capital:
This component focuses on the credit history of loan seekers. Credit reporting bureaus such as
Veda Advantage collect databases in a chronological order for individuals and trading
organizations through which a 'credit rating' can be attributed to organizations. However, it is not
applicable for individuals as they may or may not have a credit history especially in the cases
where a consumer newly arrives in the country. Commonly, this component focuses on
consumer credit enquiries, defaults, legal actions taken against individuals or organisations,

directorships and proprietorships as well as bankruptcies. If a party has an 'adverse' credit
history, the lender declines their application request their and then as they pose a higher risk of
defaulting as compared to others.
 Collateral:
A collateral refers to an asset that is pledged as security against a loan taken by the loan seeker
and which can be forfeited in the event of any default made or incapacity to repay the loan. The
asset may be a home, in case of a consumer and a capital or personal asset in case of a trading
organisation. A guarantee, conversely, is a document signed by another party that promises to
repay the loan if the borrower fails to do so. It helps the lender to secure their contingencies in
regards to future bad-debts and thus, enhance the credit-worthiness of a loan seeker.
 Conditions:
This component relates to those issues which are related to both local as well global economic
climate and may affect the borrower's ability to repay borrowings. Apart from this, the lender
carries out an environmental assessment of the applicant to identify risks as well as assure that
such risks are successfully mitigated. If the lender finds that a certain risk poses a grave threat to
the borrower, the former may decline the loan to the seeker (Bessis, 2015).
6.3 Concept of Loan-to-Value Ratio (LTV)
Every lender has an array of loans which have a minimum as well as maximum limits.
These limits are determined based on certain criteria. A minimum limit is determined by
calculating an average economic cost of assessing and administering a loan. Whereas, the
maximum limit varies on the basis of borrowing capacity and level of assessed risk of the
potential loan seeker. The concept of Loan-to-Value Ratio focuses on the determination of
maximum amount that a lender would sough to approve. It signals the level of leverage that a
borrower has at the time of application of loan. It takes into consideration the value of the loan in
respect to the market value of the property in question. For a loan, LTV would include both the
deposit as well as the property's acquisition price. This ratio also helps in indicating the amount
that a lender would able to recover in case of a default made on the borrower's part or if the value
of property deteriorates. It also affects the expected payment performance of the borrower. A
high LTV signals a high chance of default committed on the loan taken. As remote locations are
considered as less liquid, LTV is highly dependent on this factor too. Therefore, it may be low

for such locations as compared to those areas that are highly populated. Nonetheless, this ratio
varies from case-to-case (Lui, 2016).
6.4 Difference between Pre-approval and Pre-Qualification
Pre-Approval Pre-Qualification
A documentation of financial history is
compulsory for mortgage application along
with verification of assets, liabilities and
incomes.
A documentation of financial history is not
required for mortgage; it can be self-reported.
Pre-Approval, usually, is the next step to the
Pre-qualification in the mortgage process.
It is usually the first step involved in the
mortgage process.
A pre-approval letter can only be issued by the
lender once the necessary document
verification can be completed. Hence, it is very
time-consuming.
A pre-qualification letter can be issued by the
lender on the basis of borrower's primary
financial information. Thus, it does not take
much time on the part of both parties.
It is not applicable on “low doc” loans. It is applicable on all types of loans.
It signals the borrower's qualifications as well
as intentions in regards to buying a home.
It only reflects the basic information regarding
the buyer's financial capacity. It does not
reflect their intentions to buy a home.
CHAPTER 11
11.1 Difference between Contract Law and Common Law
Contract Law Common Law
A contract law is an agreement enforceable by
law between two or more parties.
A common law is usually a case law which is
formed by a judge and is derived from judicial
as well as tribunal decisions made in court of
law.

All agreements made under this law are legally
binding on the parties and must be enforced.
Common law does not enforce all the
agreements made under this law.
Its framework is based on the predefined
statutes and legislations.
It is based on primary judicial opinions only.
Any breach of contract has specific legal
remedies that may be compensatory in nature
or require the defaulting party to execute a
specific action.
As the system of laws is only influential in
nature and not completely binding, not all
breaches of contract can be compensated under
this law.
11.2 Key elements within Insurance Contracts Act, 1984
This act applies to most insurance contracts having an Australian connection and aims to
strike the perfect balance between the interests of both parties to the contract, that is, the insurer
and the insured (Kotey and Sorensen, 2014). The key elements of this contract include:
 The Duty of Utmost Good Faith (Part II)
 Insurable Interests (Part III)
 The Duty of Disclosure (Part IV Division 1)
 Misrepresentations (Part IV Division 2)
 Remedies for non-disclosure and misrepresentation (Part IV Division 2)
11.3 Credit Activities defined under the National Consumer Credit Protection Act (NCCPA),
2009
National Consumer Credit Protection Act or National Credit Act, 2009 focuses on the
credit reforms made under the lending conduct requirements, licensing regime influencing
consumer credit and services as well as sanctions and enforcement powers for ASIC as a
regulating authority. There are six credit activities defined under this act and are explained as
follows:
 Credit Contracts
 Credit Service
 Consumer Leases
 Mortgages
 Guarantees

 Prescribed Activities
11.4 Obligations of an ACL Licensee as well as penalties prescribed under National Credit Act
in regards to non-compliance with legislations and obligations
There are five obligations to satisfy compliance:
 Organisational Competence.
 Qualification and experience requirements by key people in business.
 On-going training for key people and their representatives.
 Representative Training.
 Tier 1 training requirements for representatives.
The penalties prescribed under the Act in regards to non-compliance of its regulations include
significant criminal and civil penalization that may be imposed for licensee misconduct. The
maximum penalty goes as high as $360,000 for an individual and $1,800,000 for a corporation,
partnership or multiple trustee. A convicted person may be sentenced to a maximum term of two
years in prison.
11.5 Case Study:
(a) Standard procedures for resolving complaints internally and externally
Internal and External Standard procedures of NATHWHICHPAC Bank include a
procedure that state that any loan request shall deemed to be dismissed on the grounds of job
instability. As Alex was working as a freelancer at the time she approached the bank, the
employment related to her income as well as financial position turned out to be inconsistent and
unreliable.
Internal Procedures: Any statement of dispute is treated as a grievance unless it escalates to a
stage where it can no longer be resolved by mere discussions. A standard procedure prescribed
by ASIC to resolving this complaint would include prompt reactions from the manager
accountable using a user-friendly complaint handling system to accept feedback.
External Procedures: In case of complaint resolution, referring the dispute to external
authorities such as 'The Australian Financial Complaints Authority' is the external dispute
resolution scheme (EDR scheme) approved by the Australian Securities and Investments
Commission (ASIC).
Alex can opt for an external procedure in order to resolve disputes as no information regarding
her credit assessment can be disclosed by the Bank.

(b) Communication channels when dealing with Alex's Complaint
As a mortgage broker needs to evidence every transaction and complaint that comes its
way, the best communication channel that can be maintained between the Bank and Alex would
be in writing. Hence, an email would be the most adequate channel. However, any complaint
resolved in five days will not require a written response except in the case where the customer
demands so or such a complaint is related to any hardships.
(c) Maintenance of communication channels following the complaint handling procedures
In regards to complaint handling procedures the complainant must be duly notified about
the Bank's Internal Dispute Resolution (IDR) policy as well as the EDR Scheme. At the first
point of contact, the employee must try to resolve the complaint in a speedy and effective way. If
this does not go well, they are required to record the issue in Complaint And Breach Register
maintained by the organisation.
(d) Exercising restraint when dealing with this conflict situation with Alex
When dealing with a conflict situation similar to that of Alex, it is important to not lose
cool and be patient and calm as the complainant is already agitated. One must try to resolve the
dispute verbally by trying to calm the person down and then discuss a remedy suited to both the
bank as well as the customer.
(e) Industry regulations and codes of practice to interpret and comply in relation to this
complaint
In relation to this complaint, the industry regulations that would be applicable and must
be complied with relate to National Credit Act, 2009 as far as the duties and responsibilities of
Credit Representative are concerned; ASIC as far as external and internal procedures of dispute
resolution are concerned to understand the complaint handling process, communication channels
as well as the options available to both bank as well as Alex in relation to the aforementioned
complaint (Belk, Scott and Askegaard, 2012).
CHAPTER 12
12.1 The most common risk assessment techniques
Risk assessment is that part of risk management process which relates to the analysis and
evaluation of the hazards and enables decision-making on the part of the risk manager. The most
common techniques are listed below:

 Questionnaires and Checklists.
 Brainstorming and Workshops.
 Audits and Inspections.
 Flowcharts and Dependency Analysis.
 HAZOP and FMEA Approach.
 SWOT and PESTLE Analysis.
12.2 External and Internal Risk Drivers External Risk Drivers: Such risks arises due to an economic event external to an
organisation. These drivers include financial, marketplace, reputational and infrastructure
risks. They are not controllable by a single body corporate and are highly uncertain in
nature.
 Internal Risk Drivers: Such risks arises due to an economic event internal to an
organisation's structure. These drivers include human-factor, liquidity, technological,
physical and system risks. They are easily controllable by a single body corporate in
which they arise and can be forecasted easily.
12.3 The risk management process and treatment options available to manage risk
The risk management process includes the following steps (7Rs and 4Ts):
 Recognition or Identification of risks
 Evaluation of risks
 Responding to Significant Risks
 Tolerate
 Treat
 Transfer
 Terminate
 Resourcing Controls
 Reaction Planning
 Reporting and Monitoring risk performance
 Reviewing the risk management framework

To manage risks, there are three main treatment options available to a risk manager. These are
listed below:
 Reduce the likelihood of the risk turn out; or
 Reduce the consequences of the risk if it occurs; or
 Improve the controls rating to “Adequate” or “Excellent”.
12.4 Distinctions between Monitoring and review processes in risk management
Although the two concepts are used interchangeably and are treated as related process in
the discipline of risk management, the two can be distinguished as follows:
Monitor Review
It is a continuous activity complementary to
the occurrence of risk management process.
It is a continuous activity which initiates at the
time when the risk management process ends.
It looks at the benchmarks and ensures that
each step of the process is followed in line with
the set guidelines.
It looks at the results and indicates the changes
which are required to be made in the overall
process.
12.5 Case Study
(a) A written report to Ezekiel regarding Harry’s loan prospects
LOAN PROSPECT REPORT
Harry Hausman is a small pyrotechnics owner who seeks finance from the bank for
expansion of his business operations. His business has a long-term negotiated contract with
'Wacker Speedway' as its exclusive supplier of firework displays for all the special events. Also,
this company is the largest client of Hausman.
Identification of Risk Clusters and their Rankings:
There is high financial, environmental, health and safety risk attached to this client
where they may be ranked as under:
Risk Cluster Likelihood of Risk
Occurrence
Estimation
Financial Risk 76.00% Highly Probable

Environmental Risk 65.00% Moderately Probable
Health and Safety Risk 85.00% Highly Probable
Risk Assessment:
 As the likelihood of his events happening depend on rain forecasts made by Bureau of
Meteorology, it cannot be determined with certainty whether the said party will be able
to repay the loan. However, the client proposes that the increased revenue from his
contract would suffice repayment of loan, if granted by our bank.
 The firework display requires minimum of 3 individuals to be positioned in the interior
of the speedway field during the ongoing races. This imposes not only health and safety
risk for the individuals but also for the animals. The environmental risk attached to fireworks is already high due to global and statutory
climate change regulations as it requires Harry to hold the event fortnightly which would
highly impact the atmosphere.
Exposure Levels, Residual Risks and Mitigation:
Based on the risk levels, the liability attached with this client is high when compared to
the existing industry and statutory regulations of the firework industry. However, there is a
residual risk of environmental deterioration that remains even after the event occurs. In order to
mitigate this risk it is important to ensure that proper measures are taken by Mr. Hausman. This
includes requiring the individuals involved in the fireworks display in field to wear protective
headgear provided by the owner.
Recommendations:
It is recommended that the risks involved in Mr. Hausman's case, no matter how
serious, can be mitigated if they make a few changes in their plan. As most of their risks include
environmental disruption as well as safety of the employees, audience and the horses. It would
be better if they were to postpone their display until all the races end. Also, proper head gear
and protective uniforms shall be provided to avoid any kind of accident in the event of the
display.
(b) Relevant Stakeholders and laws and/or organizational guidelines protecting them

In the context of given case scenario, the relevant stakeholders include:
 The owner of fireworks business, Harry Hausman;
 Employees;
 Customers;
 Regulators;
 Bank or other financial institutions; and
 Document the broking recommendations and loan structures that you will present to
Alex and Christopher according to the organisational guidelines and procedures.Society.
The laws and/or organizational guidelines protecting them National Consumer Credit
Protection Act (2009).
(c) Interactions with the stakeholders might be considered by Harry or the financier and their
impact on implementation of treatment plan
Interactions that Harry or the financier may consider include proper consultation and
communication of risk identified and assessed. This would ensure stakeholder engagement and
enable the business as well as the financier to come up with solutions to improve the treatment
plan through mutual interest and common plan. This is important as the interests of such parties
lie with the objectives of the business and any kind of threat to business is a threat to their
investment. Hence, a treatment plan must be reviewed internally and communicated to both
internal as well as external stakeholders.
(d) Risk assessment of the case study assuming the position of an independent finance/mortgage
broker rather than as an employee of NATWHICHPAC.
As an independent finance/mortgage broker, the finance application of Mr. Harry
Hausman would include a direct face-to-face contact with the owner. They are registered with
ASIC as a credit representative. Unlike a bank, the services provided by such a broker are not
bound to specific hours and may require scheduling of appointments. Mr. Hausman requires
finance for his business expansion for which a collateral and a sponsorship have been offered.
Therefore, it would be easier for the business to get a customized loan product.
The auditing risks attached to this
(e) Compare and contrast the risks that exist in this case study against the risks that relate to
investing in property.

The risks involved in the case of Harry Hausman pertain to finance, environment as well
as health and safety. These type of risks have are highly dependent on macro as well as micro
economic variables such as changes in interest rates, employee satisfaction and safety along with
risk of damaging reputation of the business. Investing in a propery, on the other hand, demand
risks such as compliance, strategic, operational, political and economic risks. These tend to be
affected based on customer demands, legislation, technological changes and prevalent business
cycles in the economy.
CHAPTER 13
13.1 Diversification or Cross-Sell
Cross sell means selling the products and services to existing customers for more profit.
This type of sell depends upon some factors like size of business, type of business etc. Basic
objective of cross selling is to get higher revenue and building relationship with clients. For
example selling of different investment services, tax services to the clients etc. includes in cross
selling.
13.2 The industry participants that may help to build a mortgage/finance brokers’ business
Participants to build financial broker's business- Mortgage originator- Mortgage originator is an institution or an individual who helps a
person in providing loan. Aggregator- Aggregators are financial institutions which purchase mortgage at lower
price and sell them by transferring them into mortgage backed securities at profit.
 Security dealers- Security dealers are those persons who purchase and sell securities on
their own account and takes the ownership till selling of securities. Requirement to build mortgage relationship- Maintain credit score- It is essential for a client to maintain credit scores high because on
the basis of this loan is granted. Compare rates- Rates of loans are different so it is necessary to compare rates of
different loan providers.
 Ask right questions and read documents- Client should ask right questions which are
essentials for loan and also read documents of terms and conditions.

13.3 Ways in which a Mortgage/Finance Broker develop and nurture professional relationships Build trust– Trust is very important to develop and maintain professional relationship.
Financial broker should maintain good relationship with the customers so that client can
trust on the financial broker. Be consistent– It is very important for the financial broker to be consistent in his/her
work. Brokers should perform all the task which they promise to clients. Consistency is
must to maintain relationship. Focus on quality- Brokers should focus on quality work. They should analyse that what
is the requirement of clients and after that fulfil the requirement of clients. This will help
in create strong relationship. Provide strategic advice- Every client needs advices from the financial brokers so it is
necessary that brokers should give strategic advices to the clients which can help clients
in profit gaining.
 Personalize interaction- Interaction is must between clients and brokers. Interaction
makes personal relationship between client and brokers and this will make a strong
relationship.
Importance of making relationship with customers- Important to retain clients- Relationship is important to retain the clients because strong
relationship makes client's trust on brokers. Indicates repurchase- Relationship between clients and brokers important because it
shows that client will repurchase the services of brokers.
 Establish new connection- Relationship is also important in making new connections
with new clients, because if existing clients are happy than they will bring new clients.
13.4 Importance of maintain business relationship Improves communication skills- Strong business relationship increase the
communication skills because for make a strong relationship it is required to
communicate with customers, suppliers and others. Develops friendship- Business relationship is important in making friendship with clients
and other business parties.

 Improves team work- Business relationship is important in making strong team of
workers. If relationship is strong between employees and manager then, there would be a
positive environment of work. Helps in difficult time- If business relationship is strong then a company can survive
strongly in the difficult time.
 Helps in promotion of business- Business relationship helps in promotion of business
because if a business have strong relationship then business can promote anywhere by
customers.
13.5 Case Study
(a) Assessment of impact of taxation on Alex and Christopher
Alex and Christopher’s investment and financial requirements – Impact Table
Taxation
Interest is
deductible
as it is
mortgage
loan.
Taxation
Capital
Gain Tax
is
Applicabl
e for the
seller of
property.
Economi
c impact;
Current
business
cycle
includes
boom
stage and
is highly
profitable
for the
current
economy.
Social
Security
They are
eligible for
social
assistance
but they do
not require
it as they
both are
self-
employed
with good
earning
capacity.
Government
Policy
There have
been changes
in the child
support
system. In
July 2018,
Child Care
Subsidy
replaced
Child Care
Benefit. Tax
changes
Child
Support
payments
It is tax-
neutral
event. It is
not
deductible
by the
payer.
Child
Support
payments
It will
positively
affect the
couple as
they will be
able to get
additional
assistance
for the
upbringing
of child.
(b) (i) Investment characteristics and related options for Alex and Christopher

As per the current financial markets, Alex and Christopher should make an investment
that has a fixed maturity date, creates savings for them as well as does not get affected by
volatility in financial markets. For this purpose an interest-only loan or the fixed-rate loan would
be suitable for the couple. Also, an offset facility would help them in able to fund the child's
need as well as their business expansion requirements.
(b) (ii) Documentation of research to justify recommendations
Step 1: Enlisting and identification of financial requirements required for the couple.
Step 2: Requirement of savings account to nullify the interest account. Thus, an offset account.
Step 3: Research on the offset account facility related loan products.
Step 4: Determination of two options: Fixed Home loans with offset facility and Interest omly
home-loan.
(b) (iii) Document the broking recommendations and loan structures that you will present to Alex
and Christopher according to the organisational guidelines and procedures.
Broking Recommendations: Adoption of a interest-only loan or a fixed-rate home loan
with offset facility.
Loan Structures:
Interest-only Home Loan: (Interest-Only Mortgage Calculator, 2018)
Fixed-rate Offset Facilities: (Fixed-rate Offset Facilities, 2018)
Loan Structure Interest-only Home Loan Fixed-rate with Offset Facility
Property Amount 500000 500000
Less: Savings
Alex -39527 -39527
Christopher -41881 -41881
Loan Amount Required 418592 418592
Interest Rate 4.50% 3.00%
Monthly Repayment 2120.94 1985
Loan Term 30 years 25 years

(c) Establishing appropriate audit trails and effectively document records and data in relation to
Alex and Christopher’s needs analysis
To establish appropriate audit trails and effectively document records as per the needs
analysis carried out for the couple, both physical as well as electronic records would be taken up
in chronological order for the events, procedures, history regarding documentation as well as
operational actions. Therefore, paperwork regarding their business, house property as well as
child support shall be required to create appropriate audit trail.
(d) Email to Alex regarding Conditional Approval
ABN 00 313 577 213
100 Arthur Street Fitzroy Vic 3065 || [phone] || [e-mail]
11th March 2019
Mr. & Mrs. Basil Butler
6/175 Fitzroy Street,
Fitzroy, Vic 3065
Dear Basil and Daisy
Subject:
Confirmation of Conditional Approval
We thank you for the opportunity for choosing us as your priority lender. As per our last
discussion regarding the suitable loan for your requirements, it was concluded that mortgage
loan with a fixed interest rate inclusive of an offset account (Offset Facility Accounts, 2019)
would be most desirable for you. We assure you that there would be appropriate level of contact
and support provided with the help of our assigned broker who will assist you throughout the
broking process. As the conditional approval has been provided which will be completed as
follows:
Loan Amount credited to Personal Account 13/03/19

Contact to Seller 15/03/19
Approval of Meeting Date with the Seller 19/03/19
Settlement 21/03/19
Transfer of Ownership and Land
Documentation
22/03/19
This email exchange shall be recorded and documented in the company's records as per the
current industry documentation requirements. Also, a copy of the email shall be sent to your
shared residence address to ensure proper communication of the mail. You can reach us any
time within the business hours for any queries. We look forward to discussing this in detail with
you.
Kind Regards,
XYZ
(e) The roles of associated financial advisers and other specialists who may be able to assist
Alex and Christopher over the course of the next two years.
In order to provide assistance to Alex and Christopher, a financial consultant would be
assigned would be responsible for the related paperwork as well as the child support anomaly so
that the couple has smooth transition from their previous location.
CHAPTER 14
14.1 Ways to manage interaction between credit risk and business objectives in an organization
The risk management process of a business must adapt itself to the organization’s
existing hierarchical management structure. Credit Risk in a bank is the exposure of the bank to
defaulting in repayment of loans on client's part. In order to manage credit risk and business
objectives must be mentioned in the mission statement. Application of softwares such as ERM
will help in mitigation of such risks by forecasting them even before they materialize. Some
businesses may aggressively seek new business and accept failures whereas others will reject
applications in a more stringent way to reduce both loan amount as well as the associated credit
risk.

14.2 Lenders deals with debtors in different circumstances.
Various ways in which lenders can deal with debtors in different circumstances are :
 Contacting the debtor with general reminder: The lender should contact the debtor
with a general reminder through mail or phone.
 Demand Payment: it contacting with reminder doesn't work, then the lender puts a
pressure on the debtor for demand payment.
 Third party agreement: The lender agreements with a third person to deal with the
debtor.
14.3 Typical circumstances that lead to personal insolvency situations.
Various typical circumstances that leads to personal insolvency situations are:
 Excess use of credit: When people can not control their spending, it leads to insolvency
situations.
 Unexpected expenses: There are various unexpected expenses in any business which
makes a situation of insolvency.
 Separations: Separations between partners create tremendous financial situations which
makes them insolvent.
 Gambling, Speculations: When a person is so much involved in the gambling &
speculations and losses creates a situation of insolvency.
14.4 Ways in which a lender can register security for a loan
A secured loan requires registration of security which, in case of default, is seized by the
lender and is sold to get the pending amount on the loan. The lender can adopt the following
ways to register security for a loan:
 Guarantee
 Specific Security Agreement
 General Security Agreements
 PPSR Registration
CHAPTER 15
15.1 Invoice discounting
It is an confidential funding design for the organisation to improve the cash flow by
providing funding against the outstanding amount. Company allow the funding up to 90 percent

of the amount listed in invoice. It is basically used by the established organisation that have
credit management and in house collection department.
Organisation deliver products and services to their customers after generating invoices it
will be forward to the accountant. Accountant verify all the invoices and provide up to 90
percent unpaid amount in advance with in 24 hours. Organisation regularly check the availability
of funds and the requirement also. Remaining amount of invoice is to be paid at the time of full
payment maid by the consumer. It is important for the debtor finance relationship to fulfil all the
required obligations. Only finance broker can manage the relationship by adding some values on
behalf of consumers. Only finance broker and have ability or skills to manage this relationship
with consumer not every people have that ability.
15.2 The appropriate procedures involved in the implementation process of a complex business
loan structure
The appropriate procedures involved in the implementation process of a complex
business loan structure are as follows:
Step 1: Selection of a vehicle and ensuring the quote received by the broker provides a full
break-up of the vehicle’s price, options, on-road costs and GST. If the vehicle is new, the broker
should obtain the details of the vehicle in relation to correct model year, kilometres travelled and
date of it was last serviced.
Step 2: Estimation of expected distance to be travelled by borrower.
Step 3: Clarification of details between broker and client regarding vehicle description, annual
expected travelled distance, annual gross salary and number of years of loan taken.
Step 4: Preparation of Salary Packaging Estimate by broker with a breakdown of costs involved
in financing and operating the chosen conveyance including savings.
Step 5: The finance broker presents the plan to the client for their approval with a duly signed
copy sent to broker from both client and HR Manager .
Step 6: Finance application form completed and the client should bring a copy of their drivers
licence and a confirmation of income (recent payslip or Letter of Employment).
Step 7: Finance is approved. Vehicle is ordered by dealer and a small down payment is made on
client's part that is refundable at the time of delivery.
Step 8: The finance broker will prepare the necessary documents and forward them to the client
and the HR Manager to sign.

Step 9: The finance broker files all the completed documents returned from the client along with
any other requested supporting documents.
Step 10: Once settlement has occurred, the client is allowed to collect the vehicle.
15.3 Various entities who may wish to purchase a vehicle the appropriate finance options as part
of the implementation solution.
Car finance structure is very complex but finance broker have ability to make it easier for
the consumers and reduce the complexity process. Support the client by providing proper
guidance regarding car financial structure. Arrange the finance for the purpose of purchasing
vehicle is very difficult because it involve the huge research, comparison and it also required to
fill loan application form. After that it required to obtain approval and arrange the progress. It is
important for the finance broker to make it correct decision because wrong decision is not
affordable by the client and broker as well. Because it will take time as well as enough
investment to proceed this process and role of finance broker is important in the car finance
process.
15.4 Documentation needed in each of the steps arranging a novated lease
Step 1: Quotations from the preferred dealers.
Step 2: Estimation of Number of kilometres travelled.
Step 3: Salary income before tax and details regarding the time period of lease taken.
Step 4: Salary Packaging Estimate, saving details of the client and their salary.
Step 5: Duly signed copy of the estimate by client and HR Manager.
Step 6: Copy of Driver's Licence and a recent payslip or Letter of employment.
Step 7: Broker obtains approved dealer's information.
Step 8: Duly signed novation and finance documents by client and HR Manager.
Step 9: Certificate of Currency from client's side.
Step 10: Client obtains the car ownership documents as well as the vehicle.
15.5 Case Study
(a) Reassuring the couple-Richard and Pamela
As Richard and Pamela are friends of Alex who was not satisfied with the services. It is
very important for the management broker to build rapport with the couple by providing them
appropriate information of the loans, interest rate and brokerage so that they can be satisfied with

the services. The rapport can be build by providing exact information of the loan that they are
willing to acquire.
(b) Determination of opportunities and constraints for Richard and Pamela
Constraints: As per the case study, Richard and Pamela have been facing a financial crisis in
regards to the funding as well as there has been an incremental effect that the couple has been
experiencing in regards to their accounts receivables account. This poses high risk as the
liquidity of the business has become locked in this account which can ultimately lead to
bankruptcy for the business.
Opportunities: However, the business has been in a growth phase, which indicates that the
couple has an option to increase profits by harnessing funding through leasing of equipments as
well as taking up more projects. One such project is that of tender advertised for deep sea
goggles for Navy complete with Government Funding. However, it poses high risk for the
business as no one is capable of sufficiently providing for the aforesaid tender.
Recommendations: The couple can opt for a government grant or demand its debtors to repay
the money in order to compensate and increase operational efficiency of the business. Also a
long-term lease of equipments would help the couple in securing necessary assets to take up and
complete new projects.
(c) Negotiating a solution for the couple
Richards decided to buy a car by Pamela doesn't thinks the same. A conflict among both
of them takes place and the management broker is required to negotiate a solution for the couple
is exchanging the old car with the new car. Along with this, the excess amount received after
exchanging the car would be treated as the loan amount for the same purpose.
(d) Recommendation and Documentation required for the successful completion of process
Considering financial constraints of Richard and Pamela, a car loan would only increase
their burden. Therefore, in order to buy a luxury car, the couple may require filing of financial
information and may require the couple to undergo a background check. Looking at their limited
resources, it is recommended that the couple does not buy a luxury car as it will put pressure on
the couple's already stressed situation in regards to business.
(e) Appropriate fees charged to the client
Looking at the recommendations made in (b) or (d), the appropriate fees charged to the
client would be $150 per hour.

CASE STUDY
1. Eligibility of clients under First Home Owners Grants or Stamp Duty Exemptions applicable
in Victoria (VIC)
As per the prevalent guidelines regarding the grant in Victoria, an eligible client must
have met with the following criteria:
 They must be first home buyer as an individual.
 Permanent resident or Australian citizen or whose spouse is one.
 Applicant, or their spouse or partner or co-purchaser must not have owned a property or
interest in land before July 1, 2000.
 Applicant, or their spouse or partner or co-purchaser must not have lived in an owned
residential property before July 1, 2000.
 The first home must be occupied as the principal place of residence within 12 months of
its construction or purchase.
Since Peng and Mia meet all the above criteria, they are eligible under the said grant
scheme.
2. Documents required by clients to be submitted for the application of a mortgage loan and their
need
In order to complete the application process of a mortgage loan successfully, the clients
would be required to furnish the following documentation:
 A copy of passport. For 457 visa holders, an evidence of approval shall be mandatory.
 A copy of email from Department of Immigration confirming visa approval.
 Short application form provided by the broker.
 Three Identification forms such as driving licence, Medicare card and passport.
 Two years personal tax returns, tax assessment notices and financial statements.
These are required to corroborate the fact that whether the client has the creditworthiness
to repay the loan they aim to borrow from the lender.
3. Responsibilities as a mortgage broker under the anti-money laundering legislation
In order to fulfil the duties of a management broker under The Anti-Money Laundering
and Counter-Terrorism Financing Act 2006, the young couple's copy of customer records of
seven years will be retained by the Retaining Entities (RE). These RE are the persons that help in

identification of customers before provisioning them with a loan, report transactions and
suspicious matters. The broker would be required to submit an accreditation document and
require the following supplementary paperwork:
 Copy of Driver's Licence
 Certificate of Business Registration.
 Certificate of ABN Registration.
 Deposit Slip or Bank Statement to confirm bank account for funds receipt at time of
settlement.
4. Measures to avoid committing unconscionable, misleading or deceptive conduct
As per the Competition and Consumer Act, 2010 a person or an organization must not
trade on the grounds of unconscionable, misleading or deceptive conduct. In order to avoid such
a situation, proper means of communication must be used in order to relay the correct message
and information to the clients. This may include hiring a translator or appointing a person on
behalf of the clients which is able to communicate their discussions to the other party easily.
5. Loan recommended to the clients.
The most suitable loan product for Peng and Mia would be an interest-only mortgage that
allows its users to pay only the interest amount in the first five years from the date of loan
payment initiates after which it changes to a 'principal plus interest payment' plan. This is the
most suitable as the couple prefers a loan product which does not require them to pay principal
amount in the initial years.
6. Recommending a portability feature within the loan for clients
It is recommendable that the couple choose a portability feature within the loan for first
home as it will allow them to retain their existing loan terms and conditions in the course of
moving to a new property. Since they want a baby in the near future, they may require to move
to a larger apartment. Therefore, keeping such an option open to them would give them huge
benefits in future.
7. The loan-to-value ratio and its implications on the lender's decision for granting loan
Particulars $
Property Price (A) 410000
Personal Savings (B) 95000

Mortgage Price [(C)=(A)-(B)] 315000
Loan to Value Ratio [(C)/(A)] 0.77
Since the LVR value is below 80%, such a loan is considered to be of low risk for
standard conforming loans and hence can be considered by the lender. In each of the steps
arranging a novated lease what documentation is needed?
8. Monthly payments of an interest-only loan if the interest rate is 7% per annum
Loan Amount 315000
Interest Rate 7.00%
Number of years 25
Interest Only period (years) 5
Monthly Fees 10
Monthly Payments 1837.5
9. The initial monthly repayment for a variable loan if the interest rate was 7% and the loan term
was 25 years
Principal (L) 315000
Rate of Interest (per annum) 0.07
Number of years (n) 25
Monthly interest rate (c) 0.0058333333
(1+c)^n 1.16
Monthly Repayment (5 years) (P) 13577.72
Variable Loan would include Interest Plus Principal. It has been calculated using the
following formula:
P = L*[(c*((1+c)^n))/ (((1+c)^n)-1)] where,
P = Loan amount
c = Monthly Repayments
n = Number of years
10. Detailed remuneration arrangement in regards to the services provided
Dear Peng and Mia,

Greetings for the day,
As we have decided that you are going to take an only interest loan. The brokerage which is
going to be charged on the loan will be in two parts upfront and trail commission. For both of
them it would be as follows:
Upfront commission: 0.65% (+GST) to 0.7% (+GST)
Trail commission: 0.165% (+GST) to 0.275% (+GST)
The trail rate will vary year to year:
First year: 0%
Second year: 0.165%
Third year: 0.22%
Fourth year: 0.275%
Fifth year: 0.33%
From sixth year onwards: 0.385%
Thanks and Regards
Management Broker
XYZ