Process Applications for Credit Assessment
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Task 1: Case Study – Loan application preparation
You will notice that there are two options of Case Study within this assessment – the first (A) is more specifically for Mortgage Brokers, the second (B) for brokers in the Plant &Equipment and Motor Vehicle field. Please complete only the stream relevant to you and indicate this on the assessment cover sheet.
Choosing one of the case studies presented below, prepare a loan file from contact with the clients to preparing the loan application for lodgement with the client’s lender of choice.
In completing this task, you need to demonstrate to your assessor that you are competent in the following areas and able to:
- communicate ideas and information
- collect, analyse and organise information
- plan and organise activities
- work with others in a team
- use mathematical ideas and techniques
- solve problems by providing solutions
- use technology.
To do this you will need to compile a report (Client Needs Review/Fact Find) indicating your thoughts and processes on different aspects of your application. These may include, but are not limited to:
- the choice of loan product for your client and the information about the loan product that you presented to them. Where you located the product information. Remember there is no right/wrong answer to this area, it is always subjective.
- the use of technology to compare the product/fees, find information on the products etc.
- how you would work in a team situation with your co-workers, lenders, real estate agents, mentor etc.
In areas where you do not have copies of actual supporting documentation, insert a page with the name of the document you would include e.g. copy of driver’s licence for the client.
There are a number of templates in the Member’s Area under ‘Useful Resources’ that you could use in your submission.
Remember there is no right or wrong answer as each client you see presents a new challenge and if you can provide solutions for those challenges you will be well regarded and successful in this industry.
Because this course is taken nationally, we ask that you localise addresses and places of employment so that you can have familiarity with the assessment.
You will have to take into account any necessary adjustment of stamp duty concessions for first home buyers. This will have to be considered when discussing and setting out the fees and costs with your clients. You will have to contact your Office of State Revenue to determine the correct amount of benefits to which your clients are entitled.
Case study A (Residential mortgage)
BACKGROUND
Mark Armstrong, a friend from the local tennis club, has suggested you contact a couple known to him (the Hendersons) who are seeking their first home loan. They have been renting and wish to establish some permanency by purchasing a block and building a home. A referral agreement with Mark has been completed in compliance with regulations.
Currently the family is renting in a suburb near you and paying $475 per week in rent to the local Ray White real estate office. Due to diligent saving after very heavy previous medical expenses for their son Michael, they find themselves in a satisfactory financial position.
They have purchased a block of land within reasonable distance from the high school and are negotiating with a builder.
When completing your Fact Find/ Client Needs review please remember the Duty of Care.
One of the most important questions you should ask is about Risk Protection. Have the clients considered the ramifications of financial hardship caused by illness, accident or death?
The Q & A component of the CNR covers this adequately. You are made aware their contents are insured but they have no insurance policies covering life, trauma and income protection. This is where you ask what cover they consider is enough in view of the financial commitments they are now planning? Will Cheryl have to visit Centrelink if an unforeseen event happens to Alan and vice versa? Should they have to change their lifestyle? Not if the Broker carries out all the requirements to provide the clients’ needs.
CASE STUDY ASSESSMENT OPTIONS:
- If you are in a State or Territory that FHOGs are available to both forms of home purchasing, choose a new home acquisition (Block ‘n’ Build) option for your case study (you do not have to complete one of each).
- If at some later stage the FHOGs rise or fall, please adjust the applicable purchase prices to cater for those changes as this task forms an important part of the assessment process and must be completed.
- Students in all jurisdictions will have to adjust the land and construction costs to fit in the capped amount criteria.
SCENARIO:
The Hendersons:
- signed a contract of sale subject to finance for three (3) weeks
- have $110K in a savings account
- are eligible for FHOG (don’t forget to add the FHOG amount to their funds to complete and remember to make up a maiden name for the female applicant)
- paid a $24K deposit (from the $110K in the savings account) on the $240K block of land
- estimate construction costs will be in the vicinity of $350-360K
- estimate they will spend an additional $32K on new furniture and curtains
- wish to use $78K of their savings as equity/deposit
- pay off their credit cards in full every month.
You are to interview the clients and propose a loan structure that will suit their needs. They have indicated that they would like to be provided a minimum of three (3) sound lending strategies acceptable with different providers.
The above are points of discussion that should appear in your interview notes to ensure that what you are proposing is not unsuitable for the clients for you to address responsible lending.
Case study B (Asset Finance Motor Vehicles)
John and Samantha Brown have decided to upgrade their main vehicle and will give their 1995 Mitsubishi to their son. The Holden ute will still be used by John to travel to work.
They are seeking to fund the full purchase of a Holden Captiva Active 7 seater and have provided an invoice from the dealer.The new vehicle is required to do a lot of country travel and tow a caravan as they intend to take a number of trips.
Mr and Mrs Brown have full time employment and been working for the same companies for over 5 years since moving from interstate.
Mrs Brown is the bookkeeper for FSR Consulting Pty Ltd and is responsible for all invoicing and reporting. Mr Brown works fulltime for Build It Right Carpentry Pty Ltd as a carpenter.
They have also completed a personal statement of position which is enclosed with the documents.
Other information provided:
- Intend to keep the vehicle for at least 5 years
- Wish to keep repayments as low as possible
- Happy to consider a Residual which would be reflective of the value of the vehicle at end of loan
- Fixed Rates and flexibility important with the loan being sought
- Have asked for advice on Insurance for the vehicle.
- Have own superannuation funds but not averse to having them reviewed
- Both clients are unsure of what personal insurances they have but have made an estimate of coverage
Client statement of position |
|||
| Referred by: | Peter Michael | Consultant: | Ian Harris |
| Date: | 05/03/2019 | Source:
|
Accountant- 3 Smith St, Melbourne- Ph 03 94250000 |
| Applicant 1: | Mr/ Mrs/ Ms/ Miss | Applicant 2: | Mr/ Mrs/ Ms/ Miss |
| Surname: | Brown | Surname: | Brown |
| First name: | John | First name: | Samantha |
| Date of birth: | 21/10/72 | Date of birth: | 13/06/74 |
| Address: | 1 Bourke Street | Address: | 1 Bourke Street |
| Point Cook VIC 3030 | Point Cook VIC3030 | ||
| Phone: | 03 93850000 | Phone: | 03 93850000 |
| Mobile: | 0417000000 | Mobile: | 0418000000 |
| Employer: | Build It Right Carpentry Pty Ltd | Business: | FSR Consulting Pty Ltd |
| Occupation: | Carpenter | Occupation: | Office manager |
| Income-gross/net | $78,308 / $61,517.44 | Income-gross/net | $54,086/ $44,961.05 |
| Current lender:
|
Westpac
|
FSR bank detail | Westpac 032 000 123456 |
| Estimated market value: | $600,000
|
Mortgage balance:
|
$120,000
|
| Payment: | $1,197.00 | Mthly/Fortnightly/Weekly | |
| Years to run: | 10 | Interest rate: | 3.69% |
| Asset values $ |
Liabilities amount owing $ | Monthly payments $ |
Lender
|
|
| Existing properties: | ||||
| 1. | 600,000 | 120,000 | 1,197.00 | Westpac |
| Other personal assets: Caravan | 20,000 | |||
| Furniture | 100,000 | |||
| Motor vehicles: | ||||
| 2002 Holden Ute | 25,000 | |||
| Credit card (1) Limit $5000 | 1,000 | 150.00 | ANZ | |
| (2) Limit $10000 | 3,000 | 300.00 | Citibank | |
| Overdraft | ||||
| Personal Loans: | ||||
| Superannuation: | Mr 160,000 | |||
| Mrs 80,000 | ||||
| Insurances: Mr Mrs | ||||
| Life: y/n 400,000 300,000 | 700,000 | |||
| Trauma: y/n100,000 50,000 | 150,000 | |||
| Income prot. 61,50240,564 | 102,066 | |||
| Wills: y/n | ||||
| Power of attorney: y/n |
| Undelivered notices should be returned to:
GPO Box 5300
Samantha Brown Date Issue Income Tax Assessment Act 1936 Your Taxable Income is $54,086 $ Tax on Taxable Income A 9124.95DR Medicare Levy O 1081.72DR
PAYG withholding credits E 1020.20CR Tax Offsets and other credits G 484.00 CR Balance of this assessment L 3523.43CR A refund cheque for this amount is below
**************************Additional information*************************** Tax offsets and Other Credits include $20.00 Franking tax offset.
PLEASE SEE THE REVERSE FOR IMPORTANT INFORMATION ABOUT YOUR ASSESSMENT.
S.C. Ashmore-Smith |
| Undelivered notices should be returned to:
GPO Box 5300
John Brown Date Issue Income Tax Assessment Act 1936 For the year ended 30 June 20XX (or substituted accounting period) Your Taxable Income is $78,308 $ Tax on Taxable Income A 16790.56DR Medicare Levy O 1566.16DR
PAYG withholding credits E 0.00CR Tax Offsets and other credits G 340.00CR Balance of this assessment L 1234.00CR A refund cheque for this amount is below
**************************Additional information*************************** Tax offsets and Other Credits include $20.00 Franking tax offset.
PLEASE SEE THE REVERSE FOR IMPORTANT INFORMATION ABOUT YOUR ASSESSMENT. S.C. Ashmore-Smith |
| Burrows Holden
ACN: 009 071 444 |
TAX INVOICE
|
||||
| To:
John and Samantha Brown |
For delivery to:
John and Samantha Brown |
||||
| INVOICE DATE | INVOICE/STOCK NO | NEW/USED | VEHICLE MAKE | MODEL | REGISTRATION NUMBER |
| 17/10/20XX
|
1425361
|
NEW
|
HOLDEN
|
CAPTIVA AUTOMATIC | TBA
|
| ENGINE NUMBER | CHASSIS NUMBER
|
COMPLIANCE DATE | COLOUR
|
CONTACT
|
ORDER NUMBER
|
| QR25230948
|
JNITBNT30A0044491
|
20XX
|
TWILIGHT
|
CLINT NESBITT | Due on receipt
|
| QUANTITY | DESCRIPTION | AMOUNT | |||
| 1
|
Holden Captiva
Window Tint Genuine Tow Bar Dash Mat Floor mats Rear Cargo Tray Full tank Pre Delivery |
$34,718.18
450.00 450.00 Included Included 110.00 Included 995.00 |
|||
| Sub Total | 36,723.18 | ||||
| GST | 3,672.32 | ||||
| Stamp Duty | 2,379.00 | ||||
| Registration | 816.50.00 | ||||
| Total Price | $43,563.00 | ||||
| Total amount payable | $43563.00 | ||||
| Make all cheques payable to Fantastic Holden | |||||
| ABC ABC Financial ServicesACN: 91 987 987 987 ABN: 04 791 987 987 |
TAX INVOICE
Date: October 29, 20XX INVOICE 78 |
||||
| To:
Macquarie Leasing Pty Ltd |
|||||
| DESCRIPTION | AMOUNT | ||||
| Upfront broking commission
|
$ 500.00
|
||||
| Sub Total | |||||
| GST | |||||
| Total price | |||||
| Payments/credits | |||||
| Balance due | $500.00 | ||||
| Make all cheques payable to ABC Financial Services
Thank you for your business! |
|||||
NB:Where evidence is required i.e. payslip/offer & acceptance/financials etc., AAMC Training will accept the evidence being typed on a blank piece of paper rather than supplying copies of the required evidence.
For example:
FSR Consulting Pty Ltd PAYSLIP
ABN: 11 123 456 789
ACN: 123 456 789
1 King Street, Melbourne VIC 3000
Employee ID: 5245 Bookkeeper
Samantha Brown
1 Bourke Street, Point Cook VIC 3030
Period End: 30/06/20XX Tax Code:
Payments Type Rate Hours Amount
Ordinary Pay Weekly full time salary $27.7364 37.50 $1,040.11
Total ordinary payment 37.50 $1,040.11
Summary
Ordinary pay and leave $ 1,040.11 Deductions $ 175.47
Taxable Allowances $ 0.00 P.A.Y.E $ 9,124.95
Non Taxable Allowances $ 0.00 Tax Credit $ 0.00
Gross pay $ 1,040.11 Net Pay $ 864.64
Year to date $ 54,086.00 Benefits $ 0.00
Leave Balances Hours 175.87
Direct Credit Details
Samantha Brown Westpac Bank Account BSB 032 000 A/C 123456 $864.64
Build It Right Carpentry Pty Ltd PAYSLIP
ABN: 11 123 456 987
ACN: 123 456 987
1 King Street, Laverton VIC 3000
Employee ID
John Brown
1 Bourke Street, Point Cook VIC 3030
Period End: 30/06/20XX Tax Code:
Payments Type Rate Hours Amount
Ordinary Pay Weekly full time salary $40.157 37.50 $1,505.92
Total ordinary payment 37.50 $1,505.92
Summary
Ordinary pay and leave $ 1,505.92 Deductions $ 322.91
Taxable Allowances $ 0.00 P.A.Y.E $16,790.56
Non Taxable Allowances $ 0.00 Tax Credit $ 0.00
Gross pay $ 1,505.92 Net Pay $ 1,183.01
Year to date $ 78,308.00 Benefits $ 0.00
Leave Balances Hours 203.81
Direct Credit Details
John Brown Westpac Bank Account BSB 032 000 A/C 123456 $1,183.01
Task 2: Report/Written Test – Process Applications for Credit (Mortgage Loans Only)
You are required to demonstrate that you understand the lenders policy and procedures for processing an application for credit, i.e. from the point of view of a lender’s credit analyst. Once your loan application is ready to be submitted you must provide supporting evidence that:
- You have checked and verified application details including all information to support the application are in accordance with the lenders credit policy and procedures.
- Your assessment decision to recommend the credit application refers to/is within the lenders policy and procedures.
- Maintaining application records and completing necessary documentation are according to the lenders legislative requirements and lenders organisational policy and procedures.
Overall, to support your understanding of how an application for credit is processed by the lender, you are required to complete research and provide the following information which is also covered in the learning material:
- Detailed notes regarding the lender’s organisational approval policy and procedures for the chosen product in your selected case study. Briefly explain why the loan met the policy guidelines and how you researched the product and the guidelines. Including maximum LVR, serviceability ratio, minimum loan etc. If you are unable to access the lenders information readily the alternative is to access the Lender Mortgage Insurers (i.e. Genworth/QBE) guidelines which are readily available on their web pages.
- Explain the approval guidelines, i.e. who can approve/delegation; timeframes etc.
- Ensure you adhere to relevant legislation with reference to checking and verifying application/client details and maintaining records, i.e. how file and records are maintained, how movements/milestones are monitored, etc.
Task 3: Report/Written Test – Completing Customer File
You are to submit a fully completed loan application form as well as:
- A lenders cover sheet detailing the background of the applicants, structure of the loan, loan product applied for, serviceability criteria.
- Supporting documents for the loan submission as requested by the lender.
Finally as a result of your client interview, completing relevant client documents, and loan application for the lender, you are now required to complete the remainder of customer file supporting several of your obligations and responsibilities as a Finance Broker. These important steps being the approval process, documentation, settlement and ongoing relationship management. In areas where you do not have copies of actual supporting documentation, insert a page with the name of the document, an explanation of the document and its purpose. For example, you would include: copy of formal/unconditional approval stating conditions of settlement.
There are a number of templates in the Member’s Area under ‘Useful Resources’ that you could use in your submission.
You are required to submit your customer as determined by the chosen case study. Therefore your file information must contain the following:
- Adding to your Interview Notes – Customer Contact Sheet/Record
You should have already documenting regular communication pre your loan submission. These interview notes incorporate all the correspondence from initial contact to loan preparation and submission. You are now required to provide interview notes from loan submission to post loan application process; with all parties specifically including:
– Customer
– Bank/s
– Referrer/s
– Government bodies, i.e. Stamp Duty, FHOG/ Revs
– Property Valuators
– Settlement Agent
- Advice of Loan Approval
Evidence of communication with customer and other relevant parties regarding:
- Communication of formal/unconditional approval to customer i.e. lender letter of offer;
- Letter to client regarding documentation/settlement expectations;
- Communication with Real Estate Agent, Settlement Agent, etc.
- Document Sign-Up/Settlement Preparation
- Document sign-up checklist and covering letter /communication;
- Correctly signed mortgage documents;
- Insurance details;
- Authority to disburse funds;
- Settlement checklist.
- Advice of Transaction Completed/Finalised
- Communication of successful settlement;
- Letter/survey to client asking for client satisfaction feedback on services/support provided. You may wish to ask for referral to friends and family.
Task 4: A (Activity) and B (Short Answers) – Create a customer/referrer database
A. The relationships built in Task 1 Case Study were the clients, referrer, settlement agent and real estate agent.
Prepare a database on contacts made from this task by using your internal customer record system or suitable program, i.e. Microsoft Excel spreadsheet. You are required to submit the Excel file (or PDF/screenshot if other software is used), showing your database layout.
B. Additionally, answer the following questions in relation to your database and building/managing your business contacts:
- Why is important to build a database of clients/referral sources?
- Why is it important to develop professional relationships?
- When is it not appropriate to contact a person and why?
- Why is it important to have effective interpersonal styles and methods when dealing with clients/referrers? Why is it important to consider special needs, culture, race, religion, origin, demographics?
- Explain why you think it would be important to follow up any business referrers as quickly as possible.
- What methods could you use in developing new business i.e.; advertising and promotion of your services?