Mortgage Broking Assignment: Financial Analysis, Risk, and Policies

This mortgage broking assignment solution encompasses various aspects of the profession. Assignment 1 focuses on client details, including financial information, assets, liabilities, and net worth, alongside a needs analysis for a loan, covering loan purpose, facility details, security, risk assessment, and recommendations. Assignment 2 involves preparing needs analysis and proposal documents for clients, outlining loan terms and lender details. Subsequent assignments delve into complex lending requirements, information gathering, client interactions, broking solutions, and risk management. The solution also covers financial statements, including balance sheets and profit/loss statements, alongside definitions of financial instruments and risk management principles. Further, it addresses the scope of a sustainability policy, stakeholder consultation, strategy development, policy recommendations, implementation methods, and performance indicators. References are included to support the analysis and recommendations provided.

MORTGAGE BROKING
Table of Content

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ASSIGNMENT 1......................................................................................................................................1
ASSIGNMENT 2......................................................................................................................................5
PART A THE CLIENT................................................................................................................................5
1. Prepare needs analysis and fact finding document.......................................................................5
2. Proposal Documents......................................................................................................................6
PART B THE LENDER...............................................................................................................................9
ASSIGNMENT 3....................................................................................................................................14
QUESTION 1.........................................................................................................................................14
Describe gathering of information when establishing the client’s complex lending requirements. 14
QUESTION 2.........................................................................................................................................14
Describe how you record and document your interaction with clients...........................................14
QUESTION 3.........................................................................................................................................14
Describe how you research and consider complex broking solutions based on client’s needs.......14
QUESTION 4.........................................................................................................................................15
Describe evidence of how you identify and manage risk when dealing with clients with loan
requirements...................................................................................................................................15
QUESTION 5.........................................................................................................................................16
Give example of presenting loan options to the client....................................................................16
QUESTION 6.........................................................................................................................................17
Before presentation, identify any concerns that the client may raise and what preparations was
completed to respond these concerns............................................................................................17
ASSIGNMENT 4....................................................................................................................................18
QUESTION 1.........................................................................................................................................18
PART A.................................................................................................................................................18
PART B.................................................................................................................................................19
PART C.................................................................................................................................................19
QUESTION 2.........................................................................................................................................20
A TRUST...............................................................................................................................................20
What is a Unit Trust?.......................................................................................................................20
What is a Discretionary Trust?.........................................................................................................20
What is a Hybrid Trust?...................................................................................................................20
What is a Trustee?...........................................................................................................................20
Difference between different kinds of trust....................................................................................20

Provide an example of different types of Trust...............................................................................21
B COMPANY.........................................................................................................................................21
What are the legal requirements of a company?............................................................................21
What are the personal obligations of directors by law?..................................................................21
Can anyone be a director of a company?........................................................................................21
What is the minimum number of directors required?.....................................................................22
QUESTION 3.........................................................................................................................................22
What is a Balance sheet?.................................................................................................................22
What is a Profit and loss statement?...............................................................................................22
What is Depreciation?.....................................................................................................................22
What is Liquidity ratio?....................................................................................................................22
What is current ratio?......................................................................................................................22
What is Debt to equity ratio?..........................................................................................................22
What is cash flow statement?.........................................................................................................23
What is an asset?.............................................................................................................................23
What is Liability?..............................................................................................................................23
How is a Net profit determined?.....................................................................................................23
How would you define equity?........................................................................................................23
Allowable expenses under Australian taxation conditions..............................................................23
QUESTION 4.........................................................................................................................................24
Define the following........................................................................................................................24
Commercial Bank Bill.......................................................................................................................24
Invoice or Factoring finance............................................................................................................24
Chattel Mortgage.............................................................................................................................24
Asset finance product or Equipment Finance..................................................................................24
QUESTION 5.........................................................................................................................................24
List 6 risk management principles and state brief about the principle............................................24
QUESTION 6.........................................................................................................................................25
Explain the importance of categorizing all the risks........................................................................25
ASSIGNMENT 5....................................................................................................................................25
Define scope of sustainability policy................................................................................................25
Gather information from different sources to develop the policy...................................................25
Identify and consult stakeholders for the development of policy...................................................26
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Craft strategies for decreasing use of reducing toxic material and hazardous chemical use and
employing life cycle management approaches................................................................................26
Make recommendations for policy options based on likely effectiveness, time and cost...............26
Develop policy that reflects the organisation’s commitment to sustainability as an integral aspect
.........................................................................................................................................................26
Methods of implementation and performance indicators..............................................................27
Promote workplace sustainability policy.........................................................................................27
Inform those involved in implementing the policy about the expected outcome...........................27
Develop and communicate procedures to implement workplace sustainable policy......................27
Execute strategies for continuous improvement.............................................................................27
Establish and assign responsibility for recording systems...............................................................27
Document Outcomes and provide feedback to key personnel and stakeholders...........................27
Monitor records to identify trends that may require remedial action and promote continuous
improvement of performance.........................................................................................................28
Modify policy or procedures as required to ensure improvements are made................................28
REFERENCES........................................................................................................................................29
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ASSIGNMENT 1
Borrower Details
Borrower 1
Name Andrew Mark Bisset
DOB 29/07/1965
Driver’s License 2945758
Address 12 Currumbin Close, Carindale QLD 4152
Period:
Tel: Mobile:
Status: Married Dependants:2
Employment Employer: Bisset’s real estate Ltd
Occupation: Real estate agent Period: 22
years
Income: $78000
Assets House at 12 Currumbin Close Carindale
QLD $560000
Share Portfolio $345000
Motor vehicles $60000
Furniture $85000
Cash at Bank $45000
Business Goodwill $250000
Plant Equipment $35000
Debtors $30000
Total $1410000
Liabilities Home loan with ABZ Bank $190000
ABZ Bank Credit Card $10000
ABZ Bank Overdraft $30000
Total $230000
Net worth $1180000
Borrower 2
Name Jane Elizabeth Bisset
DOB 15/06/1967
Driver’s License 2786454
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Address 12 Currumbin Close
Carindale QLD 4152 Period:
Tel: Mobile:
Status: Married Dependants:2
Employment Employer: Bisset’s real estate Ltd
Occupation: Property manager
Period: 21 years
Income: $43000
Assets House at 12 Currumbin Close Carindale
QLD $560000
Share Portfolio $345000
Motor vehicles $60000
Furniture $85000
Cash at Bank $45000
Business Goodwill $250000
Plant Equipment $35000
Debtors $30000
Total $1410000
Liabilities Home loan with ABZ Bank $190000
ABZ Bank Credit Card $10000
ABZ Bank Overdraft $30000
Total
Net worth $1180000
Background Positive aspects of Andrew Bisset is his
long-term experience in real estate
business for 22 years that shows the
total corpus held by them. He jointly
owns 6 shops at 55 park road, Belmont.
Under the name of Bisset’s family trust,
they also run a shopping center whose
earlier value was $1450000 and at
present bank mortgage value is
$625000.
Out of 6 owned shops, 5 are rented out for a
sum of $96000 and the last one is utilized by
Bisset’s real estate business which pays the
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annual rent of $42000 top family trust that it
means total rental income of the family trust
is $118000 as this amount excludes the
excess $138000. The owner has spent the
longest time as a real estate agent and his
wife Jane as real estate manager for 21 years
but Bisset’s real estate business has just
formed in the last financial year. Higher
experience of these two borrowers ensures
the timely payment of the loan instalments on
time.
Loan Purpose Existing banker of the client Andrew and
Jane is ABZ bank who handles all the
business transactions of the clients. Shifting
from ABZ banker to another banker is due to
the higher interest rate on the commercial
loan is 7% and 9% for an overdraft. These
two rates are not suitable for an entity as their
quantity of business transactions is higher
than another business.
Land located at 423 Belmont road $600000
Total purchase price $600000
Add: Stamp duty $25000
Total funding required $625000
Less: Contribution $20000
Loan sought $605000
Facility Details Investment loan of $605000 taken by the
client for a long-term period of 10 years at
3% interest rate. The fixed interest rate is
considered by the client as variable interest
rates will increase the cost burden incurred
on an entity in a given span of time.
Funds Position Land located at 423 Belmont road $600000
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Total purchase price $600000
Proposed Loan $605000
Borrower’s equity $5000
LVR= 99.17%
Servicing capability Debt service coverage ratio
Profit after tax
Net profit* (1-30%)
$50000*(1-30%)
= $35000
Interest $52000
Depreciation $25000
DSCR= PAT+Depreciation+Interest/ Interest
= $35000+52000+25000/52000
= $112000/$52000
= 2.15
Higher debt service coverage shows the
caliber of an entity in paying off all their
debts with the available income held by an
entity.
Security Existing property held by Andrew and Jane
utilize as a collateral security in meeting
higher debt incurred by the business concern.
The shopping centre, 55 park road, Belmont
QLD 4171, Lot 43 on RP 9542, Zoning
commercial and Area of 1850 are existing
property held by the client used as a
collateral security.
Risk assessment and management The clients have good credit history as they
have taken home loan from ABZ bank and
bank overdraft secured by their residence for
$40000. The capacity of Andrew and Jane is
higher as they have salary income, rental
income, and partnership income to meet their
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future obligations. Ownership of residence
and shops will act as a collateral security.
Recommendations  Joint ownership of shops to ensure
higher earnings
 Good credit history of the borrowers
 Net surplus of the borrower is
$1180000.
 Available cash at bank of $45000
 Higher Debt service coverage ratio of
2.15
 Higher rental receipts of $138000
 Existing properties held by all the
individuals Represents good source of
income
Attachments  Serviceability assessment
 Identity card of the client
 Bank Statements of Andrew and Jane
 Property papers of Bisset’s real estate,
and family trust
 Copy of home loan statements
 Copy of borrower’s income
 Copy of credit card statements
 Copy of bank overdraft
 Partnership deed
 Rental income copy
ASSIGNMENT 2
PART A THE CLIENT
1. Prepare needs analysis and fact finding document
 What type of loan you want to take?
 What is the maximum period of loan you want to take?
 Do you choose variable or fixed interest rate and why?
 From which sources, do you earn income?
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 Do you find stable or decreasing financial position of your firm?
 What is the current interest rate of your loan and how you compare the current interest
rate with the earlier loan?
 Do you think your current loan is better than your previous loan?
 What additional fees you need to pay for the current loan?
 Are you confident about the decreasing of debt over the years or not?
2. Proposal Documents
Submission for the client
To- Ray Henley and Steve Manning
Subject- Commercial Equipment Finance
From- XYZ broker
Date- 29-11-2017
Hi Ray and Steve,
This is to inform that your loan application has assessed after analyzing your firm’s
financial position to ensure the future cost compensation by you people. You run a successful
business of transportation with wide client’s base located in a conscious management
strategy. Payment terms and contract deadline is set as 30 days term period. They have
trading experience in this sector for 34 months with the solid business plan.
Security
They have seed capital of 500k taken from a private investor on a guaranteed return of
45k annually for a term of 5 years. Principal instalment payment of 100k annually along with
Owner occupied the property of $850000 with credit card limit of $25000, superannuation
$550000 and a motor vehicle worth $40000. Steve manning’s occupied the property of
$500000, credit card limit of $10000, superannuation worth $1500000 and motor vehicle of
$25000. Common cash account for their business is $25000.
Facility
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Current loan application of Ray and Steve is for commercial equipment
finance raised through this loan. This equipment finance has arranged to expand it’s in the
future to increase the overall earnings. Actual limit of the equipment finance is 500k to
purchase trucks and dog trailers. This loan is requiring in funding the lease of the second
depot at cost of $6000 per month to retain the current depot.
Lender details
A future plan of the client is to acquire Henman transportation to boost the current
earnings of the business concern. It is recommended to the client to convince the lender in
investing their business to get the desired return in exchange. They have two option available
to them includes meeting the leasing costs or arranging the whole sum of 500k for the
expansion projects.
Confirmation of requirements
Approval of the overall requirements of the ray and Steve to purchase the commercial
equipment finance of 500k for the expansion project will be approved by analyzing the entire
performance of the clients. A broker will give quotations of all loan offers by different
lenders to consider the best suitable loan as per the current position of an enterprise.
Personnel
Financial advisor of the Ray and Steve play an important role in guiding the business
towards the best suitable path to get the desired return over the years. Acquisition of Henman
transport is a result of the advice of the accountants who assess the financial performance of
the business.
Process
The current process is use to arrange the finance from the lender within 5-15 working
days.
 Generate reliable information and required documentation from the clients
 Provide proposal documents to client along with broker’s recommendations
 File completed application to the lender to seek their consent
 Lender investigates credit history of the client and confirms the loan application
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 Property inspect by the lender’s selling agent
 Values of the property analyze b the actuarial department to assess the worth of the
collateral security.
 Broker advises the client about the minimum sum of insurance based on the
recommendation letter.
 Authenticity of the application checks by the broker to remove all the errors
 Returning attest mortgaged documents to the lender
 Broker will confirm the settlement between the client and the selling agent
Documentation
 Copy of application letter given to the lender
 Copy of property papers
 Copy of financial statements
 Copy of bank statements
 Copy of possession of land and income
 Copy of Guarantor of the application
Fees and charges
Particulars Interest rate Establishment fee Monthly fee
CBA 6.50% $750 Nil
Bank West 6.51% $700 Nil
Westpac 6.65% $850 $8
ANZ 6.49% $750 $10
NAB 6.69% $600 Nil
These are predictive 5 year fixed rates of different securities offers by different bank
along with different establishment and monthly fees. These interest rates will help an
individual in considering the best suitable future options.
Notes
It will include the summary of difficulties faced by the client while submitting their
loan application with the lender. Approval of the lender plays a significant role in getting the
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