Finance Brokerage Report: Detailed Analysis of Finance Topics

This report provides a detailed analysis of various aspects of finance brokerage, addressing topics such as email communication with clients, software applications for financial calculations, audit programs, and mechanisms for ensuring regulatory compliance. It covers the roles and responsibilities of finance brokers, including acting as limited agents, developing client relationships, and utilizing media and marketing tools. The report also examines concepts like loan applications, creditworthiness, loan-to-value ratios, and the difference between pre-approval and pre-qualification. Furthermore, it explores legal frameworks, risk assessment techniques, risk management processes, and strategies for business development, including diversification and relationship management. The report also delves into managing credit risk, lender-debtor interactions, and personal insolvency, along with topics like invoice discounting and complex business loan structures. Finally, it includes case studies that cover eligibility for grants, required documentation, anti-money laundering, and loan recommendations, offering a comprehensive overview of the finance brokerage landscape, all available on Desklib.

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