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.
APPLICANT DETAILS
Alan Jacob Henderson of 17 Capital Court, In a suburb near you. (4 years)
DOB 04.01.1982
EMPLOYMENT Marketing Manager – National Clients
EMPLOYER Hi-Temp Gas
ADDRESS 21 Alwyn Street, In your City
CONTACT Tel: (H) 91000000 (B) 87643210 (M) 0419999999
Facs: 91000001
Email: hendo@hitemp.com.au
Website: www.hitempgas.com.au
PERIOD 6 YEARS
GROSS INCOME $111,000 p.a
MOTOR VEHICLE Fully maintained
Cheryl Ann Henderson of 17 Capital Court, In a suburb near you. (4 years)
DOB 07.03.1981
EMPLOYMENT Law Clerk
EMPLOYER Smith, Smith and Smith
ADDRESS Suite 14, 12 Flinders Street, In your City
CONTACT Tel: (H) 91000000 (B) 65432101 (M) 0416667901
Facs: 03 10000001
Email: cherylann@smithys.com.au
Website: www.smithslegal.com.au
PERIOD 6 YEARS
GROSS INCOME $65,000 p.a.
OTHER DETAILS
DEPENDENTS Jennifer Ann Henderson DOB 07.03.2004
Michael Alan Henderson DOB 07.03.2004
NEAREST RELATIVE NOT LIVING WITH APPLICANT John Joseph Henderson (Brother)
108 Budburst Ave, In a suburb near you
0410000000
BANK DETAILS NAB – BSB: 001 002 A/c Number: 1234567
REAL ESTATE AGENT Flying High Estate Agents
4 Birdsnest Avenue, In a suburb near you.
CONTACT: Hugh Talon
Tel: 10000700 Facs: 10000080
Email: hught@gmail.com
BULDER Homes Plus More (Master Builders)
38 Archdeacon Street West, In a suburb near you.
CONTACT: Grace Love
Tel: 40000000 Facs: 40000003
Email: grace@hpm.com.au
CONVEYANCING FIRM Lightning Settlements
Suite 3, 4 Business Ave, In a suburb near you.
CONTACT: Louise Stratton
Tel: 10004000 Facs: 10005000
Email: lulu@lightningsetts.com.au
PROPOSED ADDRESS Lot 47 Eaglehawk Circle, In a suburb near you.
LAND DESCRIPTION Lot 47 on Plan of Subdivision 731680Z
PARENT TITLE Volume 11580 Folio 996
Created by instrument PS725680G 04.04.2018
VENDOR Inspired Developments Pty Ltd
Suite 114/ 100 Bridge Road, In a suburb near you.
Tel: 50000001 Facs: 50000002
Email: Info @inspired.com.au
SETTLEMENT DATE 14/00/20XX
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:
1. 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).
2. 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.
SCENARIO:
The Hendersons:
• signed a contract of sale subject to finance for 3 weeks
• have $110K savings
• are eligible for FHOG (don’t forget to add the FHOG amount to their funds to complete)
• paid a $24K deposit on the $240K block of land
• estimate construction costs will be 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.)
• 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.
AAMC TRAINING DOCUMENT CHECKLIST
LOAN APPLICATION PROCESS ASSESSMENT
MORTGAGE FINANCE
Must be completed and included in your uploaded Assessment
EVIDENCE ?
1. A fully completed AAMC Training Assessment Cover Sheet ?
2. A fully completed AAMC Training Document Checklist (this page) ?
Case Study – Loan Application Preparation (Task 1)
3. File notes from first contact through to settlement in chronological order ?
4. Authorised Credit Representative Credit Guide and Licensee Credit Guide ?
5. Privacy Statement and Consent form ?
6. Client Needs Review or Fact Find ?
7. Combined Credit Quote and Proposal ?
8. Product Comparison Report (at least three options) ?
9. Preliminary Assessment ?
10. Costing sheet for Fees and Charges ?
11. Fully completed Lender Loan Application or Copy of Online lodgement
Select a lender of your choice there are some forms in useful resources. ?
12. Lender’s loan Document Check List (Normally forms part of loan application)
Select a lender of your choice there are some forms in useful resources. ?
Process Applications for Credit (Task 2)
13. A completed serviceability calculator (refer to useful resources)
Select a lender of your choice there are some calculators in useful resources. ?
14. Loan Comments/Lender Comments. Notes to the lender in support of the application. ?
15. Evidence of Income (Pay slips, Employers Letter, PAYG Summaries) ?
16. Evidence of an Offer & Acceptance or a Contract of Sale or a Purchase contract ?
17. Evidence of Council approved plans (House and land, off the plan packages)
Plus a Fixed Price Building Contract ?
18. Evidence of savings/equity and other loan commitments ?
19. Evidence of Valuation successfully completed ?
20. First Home Owners’ Grant application (These can be downloaded from your local state revenue office) ?
21. Anti-Money Laundering/Counter Terrorism Financing ID requirements
Note: 2 forms of identification are required for each applicant to the loan and a separate AML ID form is required for each applicant. ?
22. A Compliance file checklist ?
Completing Customer File (Task 3)
23. Fully completed Settlement document pack (Refer to the Settlement File Checklist to ensure all relevant documents are completed and submitted) ?
24. Create a customer/referrer database (Task 4 A)
You are required to prepare and submit your data-base on contacts made from this transaction by using your internal CRM or a suitable program i.e. Excel/Word. ?
25. Short Answer Questions (Task 4 B)
Complete and submit all Short Answer questions ?
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: “This represents the payslips for Billy Smith for the periods ending 14th and 28th Month 20XX.”
*Samples of the abovementioned forms can be found under Useful Resources of the Utilities tab at your login Dashboard – either in the Loan Application, Complex Lending or Useful Forms folders.
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/n 100,000 50,000 150,000
Income prot. 61,502 40,564 102,066
Wills: y/n
Power of attorney: y/n
Undelivered notices should be returned to:
GPO Box 5300
Melbourne VIC3001
Samantha Brown
1 Bourke Street Your Tax file number is
Point Cook VIC 3030 456 XXX XXX
Date Issue
3 July 20XX
Income Tax Assessment Act 1936
NOTICE OF ASSESSMENT
For the year ended 30 June 20XX (or substituted accounting period)
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
Deputy Commissioner of Taxation
Sydney Office, Sydney NSW
Undelivered notices should be returned to:
GPO Box 5300
Melbourne VIC3001
John Brown
1 Bourke Street Your Tax file number is
Point Cook VIC 3030 456 XXX XXX
Date Issue
3 July 20XX
Income Tax Assessment Act 1936
NOTICE OF ASSESSMENT
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
Deputy Commissioner of Taxation
Sydney Office, Sydney NSW
Burrows Holden
ACN: 009 071 444
ABN: 47 009 071 444 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 Services
ACN: 91 987 987 987
ABN: 04 791 987 987 TAX INVOICE
Date: October 29, 20XX
INVOICE 78
To:
Macquarie Leasing Pty Ltd
GPO Box 5435CC
Melbourne VIC 3001
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
AAMC TRAINING DOCUMENT CHECKLIST
LOAN APPLICATION PROCESS ASSESSMENT
MOTOR VEHICLE & EQUIPMENT
Must be completed and included in your uploaded Assessment
EVIDENCE ?
1. A fully completed AAMC Training Assessment Cover Sheet ?
2. A fully completed AAMC Training Document Checklist (this page) ?
Case Study – Loan Application Preparation (Task 1)
3. File notes from first contact through to settlement in chronological order ?
4. CombinedCredit Guide and Credit Quote ?
5. Privacy Statement and Consent form ?
6. Client Needs Review or Fact Find ?
7. A. Product Comparison Report (at least three options). B. Research Explanation. ?
8. Preliminary Assessment ?
9. Combined Credit Quote and Proposal ?
10. Costing sheet for Fees and Charges ?
11. Fully completed Lender Loan Application or Copy of Online lodgement ?
12. Notes to lender with details of clients’ background and requirements. ?
Process Applications for Credit (Task 2)
13. A completed lenders serviceability calculator (refer to useful resources) ?
14. A. Evidence of Income (Pay slips, Employers Letter, PAYG Summaries), savings and other lenders loan and credit cards, if applicable.
B. Completed brokerage invoice addressed to lender
C. Dealer invoice
D.Evidence of Motor Vehicle Registration Papers (some lenders require this information).
E. Evidence of Trade-in equity, cash contribution (receipt), if applicable. ?
15. Anti Money Laundering/Counter Terrorism Financing ID requirements
Note: 2 forms of identification is required for each applicant to the loan and a separate AML ID form is required for each applicant. ?
16. A Compliance File Checklist ?
17. Completed AAMC Training Broker/Customer File checklist ensuring all requirement for PEVC are ticked. ?
Completing Customer File (Task 3)
18. Fully completed Settlement instruction document pack (Refer to the Settlement File Checklist to ensure all relevant documents are completed and submitted) ?
Create a customer/referrer database (Task 4A)
19. You are required to prepare and submit your data-base on contacts made from this transaction by using your internal CRM or a suitable program i.e. Excel. ?
Short Answer Questions (Task 4B)
20. Complete and submit all Short Answer questions ?
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: “This represents the payslips for Billy Smith for the periods ending 14th and 28th Month 20XX.”
*Samples of the abovementioned forms can be found under Useful Resources – Forms, Documents & Templates of the Utilities tab at your login Dashboard – either in the Loan Application, Complex Lending or Useful Forms folders.
Settlement File Checklist
The provision of all the information detailed below will ensure prompt issuance of your qualification. Any omissions will cause AAMC Training to seek the missing data which can prove costly to both parties. You must include this checklist in the submission of your assessment.
DOCUMENTS
MORTGAGE (M) AND/OR
PLANT, EQUIPMENT, VEHICLE FINANCE/COMMERCIAL LENDING (PEVC)
Type Data ?
M/PEVC File Notes from first contact through to Settlement in chronological order ?
M/PEVC Evidence of loan approval ?
M only Loan/letter of offer from lender ?
M/PEVC Borrowers checklist (Document sign-up) ?
M only Correctly signed home loan contract (including transfer of land and mortgage of land relevant to the State.) ?
PEVC Correctly signed Consumer Loan contract for the Lender chosen ?
M/PEVC Insurance details – Home Certificate of Currency or Motor Vehicle Certificate of Currency ?
M only Borrowers Authority and Instructions ?
M only Evidence of settlement related communications between all parties (Broker, Conveyancer, Lender, Client) e.g. a letter or email showing settlement communications between all parties. ?
M/PEVC Letter of successful settlement from broker ?
M/PEVC Service Questionnaire or relevant example of feedback from client ?
?
?
?
Samples of the below-mentioned forms can be found under Useful Resources of the Utilities tab at your login Dashboard – either in the Loan Application, Complex Lending or Useful Forms folders.
1. Financial Services Credit Guide/Credit Guide Along with the ACR’s profile this guide is handed to the clients at initial interview and it sets out the services that are offered along with the Privacy Policy of that organisation and the complaints procedure.
2. Authority to Act & Privacy Consent Form The authority to act allows the finance broker to act on behalf of the client when dealing with the lender and other related parties to loan. The privacy consent form allows the finance broker to store and use relevant client information to assist in the loan application process without breaching privacy laws. This will most likely be contained in the credit proposal (mentioned below).
3. Authorised Credit Representative profile This form is which sets out the Authorised Credit Representative’s profile and authority to act on behalf of a credit licence holder and what products the ACR can introduce to under that authority. At initial interview the clients must be handed a copy. This may be an addendum to the Credit Guide.
4. Data Collection – Business or Personal Consumer Client Needs Review/fact Find By using a Client Needs Review/Fact Find you will have all the information required to form an opinion as to what type of loan best suits the clients’ requirements. At the same time you are acting with due diligence in asking the clients questions about their financial security in the event of an unforeseen circumstance that causes financial hardship. You have a legal obligation to yourself and the clients to make them aware of the ramifications of an unexpected illness, accident or even death. By signing a Client Needs Review they can accept your offer of a referral to an insurance professional or alternatively decline your recommendation, thereby you have documentary evidence of your professionalism. You do not have to sell Risk Products but you have complied with the requirements under the Duty of Care by having adopted the above actions.
5. Costing sheet for fees and charges Estimate of total fees and charges payable to the financier in relation to applying for the finance will form part of the credit proposal. However the broker may want to complete a cost analysis to determine savings or equity versus costs associated with the purchase and finance. This is not a requirement of the submission but may rather be a process you may want to adopt for purchases.
6. Interview notes A file copy of your interview notes will go a long way to avoid any adverse opinions from any audit that may be undertaken by any aggregator company or ASIC official. Whilst documents required under NCC such as a fact find/client needs review, preliminary assessment and credit proposal will highlight requirements and recommendations they may cover all conversations/ time lines between the broker and client.
7. Preliminary Assessment Based upon your enquiries as to the financial situation, requirements and objectives of your client you are required to conduct a preliminary assessment to determine whether the proposed credit contract/lease is ‘not unsuitable’ for the client. This must be done prior to suggesting the client applies for, or providing assistance applying for a particular credit contract.
8. Credit Quote and Credit Proposal Documents These forms may be incorporate into the one document.
The Credit Quote outlines the maximum fees and charges payable to the credit representative and licensee for credit assistance. Must be provided before credit assistance is provided.
The Credit Proposal document outlines the fees, charges and commissions relating to the particular credit contract or consumer lease and to whom/by whom they are payable.
9. Statement of Credit/Mortgage Advice
This is the document the client signs giving the Authorised Credit Adviser authority to act on the client’s behalf and also give privacy consent for the personal details to be passed onto the lending institution. It also advises the amount of commission a broker will receive as well as the costs involved in taking out the loan. A copy of this appointment must be given to the client and a copy kept on your file. This document may be a combination of industry known documents as stated above and not required if you have completed credit proposal and credit quote
10. Evidence of income Lenders require documentary evidence of income to support a loan application. Verifying employment may be in the form of two or three consecutively dated payslips plus a PAYG summary that indicates regular overtime or allowances/commissions. A letter or employment contract from the employer will also suffice in the absence of payslips. Other income will require documentary evidence as determined by the lender.
11. Self-employed/ Commercial clients A copy of the last two years individual’s and company tax returns/financial statements along with a serviceability assessment for self-employed individual/partner.
12. Signed statement of assets & liabilities (SOP) This information allows lenders to readily ascertain the financial standing of the applicants.
13. Cash flow forecast When you are arranging funding for the larger type loans, whether it is for plant and equipment or say, a commercial factory unit a Cash Flow Forecast is essential as it will assist the lender in appreciating where the business is headed. But remember it will have no bearing on the lender’s decision-making as it will look only at anecdotal evidence.
14. Serviceability When submitting an application you are to include a Serviceability Assessment sheet which shows the lender you have ensured the clients can afford the loan. You will find these assessment tools form part of the lenders’ online broker toolkit and are relatively simple to use.
When you undertake your accreditation training each lender will provide the facility or you will have access to all the tools through your aggregator.
15. Copy of the Offer and Acceptance (WA) or Contract of Sale Lenders need a copy of the completed O&A or COS to verify the purpose of the loan and for the ordering of valuations, if required. You will be advised of their requirements when you complete the accreditation courses. It is also worth noting that some lenders will only carry out a kerb-side valuation when the LVR is 80% or less.
16. First Home Owners Grant application Whilst the Federal Government provides the funding for these concessions each State and Territory Government administers the schemes. Therefore so your clients can get the maximum benefits available, your task is to research this area of funding thoroughly by visiting the Office of Revenue in the jurisdiction in which you operate.
These forms are to be completed to accompany your case study files.
17. First Home Buyers Stamp Duty Concession application As explained above there are variances in what concessions are available. However notwithstanding the fact that in some areas solicitors/conveyancers or settlement agents handle this aspect of the transaction, we at AAMC believe it is up to the Broker to ensure that there is a smooth settlement transition. This will happen if the Broker provides the clients with the necessary paperwork, has it completed correctly and keeps it on file for presentation to the correct parties when settlement is due to take place.
18. Fully completed loan application Let us first accept that all lenders require the same information, however with the layout of their application forms it just appears in different places. You are not only expected to provide the clients’ full personal details, but you are obliged to be honest and frank about the information you are submitting. As a Broker you are also obliged to inform either the lender or the client of any information of which you become aware that may have a material effect on the transaction. If you do not follow this principle you could well become the subject of legal action from either party.
The application forms are quite simple to complete provided, however, you have gathered all the information to make it a simple task.
There is one area on confusion and that is the completion of the “Declaration of Purpose”. By completing this incorrectly you may jeopardise your clients’ rights under the National Consumer Credit Protection CT 2009.
19. Notes to Lender/ Lenders when assessing a loan rely heavily on information provided. They do not have the privilege of sitting down and interviewing the clients. As you have already learnt, Brokers must provide as much information as possible when submitting a loan application, of any nature, to ensure a fair and reasonable decision can be made by the lender.
Therefore it is in everybody’s interests to highlight valid points in a Cover Sheet. Shown below this table are two options that tell a tale. Please do not just copy these examples and submit – use your initiative and present a cover sheet along similar lines as we have demonstrated.
There will be many and varied reasons why you think an application should be approved so let the lender share your reasons. Don’t make them second guess.
If you follow this path, it will stand you in good stead with the lenders and exhibit a standard of professionalism that unfortunately not enough Brokers take seriously. Half measures or the attitude “Close enough is good enough” does not wash in today’s competitive economic climate. Lenders that receive half-baked applications will put them to one side and get on with the fully detailed ones to acknowledge the correct presentation.
20. Lenders/Broker document checklist All lenders have a checklist to ensure you have submitted the application correctly with all the supporting documentary evidence. Please ensure this is completed.
21. Anti Money Laundering/ Counter Terrorism Financing Due to criminal activities and money laundering you have to provide the necessary identifying documents to support the application. Where you are dealing with a client’s existing lender, note on your cover sheet that you haven’t supplied the information because client is known to the lender.
Some lenders carry out their own verification through their branch network.
22. Business Registration/ Constitution and/or Trust Deed Business registration legitimises the authenticity of the applicant.
The Constitution and/or Trust Deed reflect the authority of those able to act for and on behalf of the company.
NOTES TO LENDER TEMPLATE
This form is for guidance only, you will need to create your own method.
YOUR LETTERHEAD
Loan application for XXXXXX & XXXXXXXX
Loan amount $00000000
Latest date for approval ………/………/…………
Please find loan attached application for the above clients.
OPTIONS
Reason for loan
They have just arrived in Australia
They have moved from interstate due to employment transfer
They shared first division in Saturday’s lotto
Mum & Dad gifted them $80000
They are upgrading
Refinancing to use equity for investment or renovations, holidays or for whatever
Divorce – marriage split
Downgrading- kids left home
Employment
Just received promotion
Changed jobs for more income and permanency
Stable employment
Interstate transfer
Income
Single income is supported by Serviceability Assessment
Joint
Permanent staff for long period and expecting promotion.
RECOMMENDATION
We recommend this application in view of the following:
Stable employment
Stable address
Sound financial position
Sound income
Nothing adverse known
Security is in new expanding area
We recommend this application in view of the following:
SIGNED…………………………………………………………… Date…………/…………/………………
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: 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:
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?
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