LOAN APPLICATION PROCESS ASSESSMENT
Task 1: 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.
Either the Mortgage Finance or Motor Vehicle Equipment Checklist must be submitted with the fully completed assessment. This must encompass all documents from initial contact with the clients until settlement of the loan. Documents must be submitted in a suitable logical order and consist of all relevant NCCP documents.
The documentation required should be consistent for all submissions, however student submissions will vary in regards to outcomes based on the interpretation of the data and "client" responses during the interview process.
Task 4: You are required to have a third party to observe this role play in a simulated environment. You will need to provide the observer/third party declarer with the role play guidelines and marking/sign-off sheets to ensure they are fully conversant with what is being asked of them.
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 only one of the case studies presented below, prepare a loan file from your initial contact with the clients to preparing the loan application for lodgement with the client's lender of choice, through to settlement. Please refer to the document checklists in this Task for the relevant steps required.
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
Background
Henry Leslie from Leslie Accounting Services has referred you his clients Frederick John and Margaret Anne Everybody. He has mentioned that they are looking to purchase their first home. Whilst in their early ‘40s, they have previously not owned a home due to the husband being an engineer with the Australian Defence Forces. Because of this and constant moving they really weren't in a position to buy in one location. Frederick has since left the services and has been working with BHP Billiton on their mining projects. This entails working on a ‘two weeks on, one week off' basis. Frederick enjoys an annual income, paid monthly, of $115,000 with a subsidised rent when on location on the job.
Margaret works at the local council child care centre on a permanent/part time basis and earns $29,000 annually, paid weekly. She is a qualified nurse.
They have two children. Joshua, 18, is employed fulltime, lives at home and pays $75.00 per week board. Melanie, 13, is in her first year at high school and is dependent on her parents.
Currently the couple is renting in a suburb near you and paying $420.00 per week to the local Ray White real estate office. Due to diligent saving and being beneficiaries of a family deceased estate they find themselves in a sound financial position and ready to purchase their own home and settle into one area. They are conscious of the current economic times and wish to entrench their current situation by also considering future investment opportunities.
One of the most important questions you will ask when completing your Client Needs Review 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 Margaret have to visit Centrelink if an unforeseen event happens to Frederick? Should they have to change their lifestyle? Just remember your Duty of Care.
They have around $184K plus the FHOG available and are looking to buy land with a purchase price of $240K and construction in the vicinity of $350-360K. (Students in all jurisdictions will have to adjust the land and construction costs to fit in the capped amount criteria.) They estimate they will spend an additional $60K on furnishings and garden. 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. They normally clear (swipe) their credit cards monthly with the exception of Mrs Everybody's Myer 1 account.
It may be to their benefit to clear the car loan account with Esanda. These are the points of discussion that should appear in your interview notes.
CASE STUDY ASSESSMENT OPTIONS:
1. If you are in a State or Territory that FHOGs are available to both forms of home purchasing, choose either an existing or new home acquisition for your case study (you do not have to complete one of each).
2. If you are in a State or Territory that only offers a FHOG on new and not established homes, you will have to choose that option for a case study.
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.
Case study B
(Plant & Equipment, Motor Vehicles)
Billy and Lisa Smith have decided to upgrade their main vehicle and will give their Mitsubishi to their son. The Holden ute will still be used by Billy to travel to work.
They are seeking to fund the full purchase of a Nissan X Trail and have provided you with 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 Smith have full time employment and been working for the same companies for over 5 years since moving from interstate.
Mrs Smith is the bookkeeper for FSR Consulting Pty Ltd and is responsible for all invoicing and reporting. Mr Smith works fulltime for Large Mining Group Pty Ltd.
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
- May look to purchase own premises in about two years
- 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
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 lenders 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. Although the case studies provided did not require LMI it is helpful to understand policy guidelines as many types of lenders and loans require LMI cover.
- Explain the approval guidelines i.e. who can approve/delegation; timeframes etc.
- Ensure you are adherence 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. You would include e.g. 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:
1. 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
2. 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.
3. 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.
4. 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: Activity and Short Answers
Create a customer/referrer database
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 will be required to submit the Excel file (or PDF/screenshot if other software is used), showing your database layout.
Please answer the following questions in relation to your database and building/managing your business contacts:
1. Why is important to build a database of clients/referral sources?
2. Why is it important to develop professional relationships?
3. When is it not appropriate to contact a person and why?
4. 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?
5. Explain why you think it would be important to follow up any business referrers as quickly as possible.
6. What methods could you use in developing new business i.e.; advertising and promotion of your services?
Attachment:- Loan Application Process Assessment.rar