Richard and Pauline Jackson - Philip and Jennifer Brown Case Study - Responsible Lending Obligations - Finance Assignment Help

Assignment Task:

Section 1:    
Case study 1 — Philip and Jennifer Brown
Background
Philip and Jennifer Brown are a young couple about to buy their first home. They have been married for five years and during that time have rented an apartment while saving for their own home. 
Following a personal referral from Glenn Brown, Philip’s brother you have already had the first meeting with Philip and Jennifer to discuss their objectives and needs. They admitted they have little time to do much research of lenders, have limited knowledge of the loan products available and have approached you to guide them through the process as they are confused.
During (and subsequent) to your first meeting, Philip and Jennifer have provided the basic information documents — pay slips, tax returns, bank statements, property details for review/verification. You have now undertaken your preliminary assessment and need to discuss and present to them the proposal covering the options and your recommendations. It is important to get the proposal moving quickly, as the agent has indicated other parties are interested in the property.
They have been looking at properties for the past three months and have found a 10-year-old established apartment that has really caught their eye, although they have some concern over the kitchen which requires some minor renovations.
They have not paid a deposit at this stage, but the Real Estate Agent has provided some guidance on additional fees and charges.
Following is a summary of the details of the property they wish to purchase, the couple’s financial and employment details, and the loan features they require.

Task 1 — Key terms, gathering and documenting client information
1. Complete the ‘Key terms’ (located at the end of the written assignment in Appendix 1).
2.Using the information provided in Case study 1, complete the ‘Client information collection tool’ (located at the end of the written assignment in Appendix 2).
3. You will also need to complete the Genworth Serviceability Calculator to assess the security, debt service and borrowing capacity for Jennifer and Phillip Brown. To do this, follow these steps:
(a)Use the details in Case study 1.
(b)Read the Genworth Calculator Supplementary Material Guide available in the Kaplearn CIVMBv5 subject room.
(c)Process the loan application using the Genworth Serviceability Calculator accessible 
(d)Once you have processed it, download a copy of the PDF and save it to your desktop. 

2. 
(a)Most lenders stress-test loan repayments by adding an additional 2–3% on to the loan repayments to make sure a borrower can afford the repayments. If interest rates moved 3% higher, what would Philip and Jennifer’s loan repayments be and do you think they would be able to cope with the extra repayments? 
(b)Identify appropriate product options you can present to the clients that may remove this interest rate risk? 

Task 3 — Borrowing options
(a)Although Philip and Jennifer are looking to borrow at approximately 90% LVR, what other options could you present that would avoid the cost of LMI? (100 words)

Task 4 — Reasonable inquiries
(a)In the course of gathering information about the couple, you are required under the National Consumer Credit Protection Act 2009 to make all ‘reasonable’ inquiries to determine a borrower’s objectives, requirements, and financial situation.
(b)Identify at least six (6) ‘reasonable’ inquiries that you would make with the clients in the case study and explain why these inquiries are important in terms of NCCP compliance.

Task 5 — First Home Owners Grant and homebuyer assistance schemes
(a)Describe the First Home Owner’s Grant or home buyer assistance scheme benefits and stamp duty concessions that are available in your State or Territory, who would be eligible and what would be their benefit? Are Philip and Jennifer eligible for any assistance?

Task 6 — Professional network and loan settlement process
(a)Name three (3) parties, who are not directly involved in the processing of a loan and what their role is. Explain how you would communicate with them in an efficient and effective manner so that they understand pre-settlement conditions and their involvement required.
(b)Explain how you would develop and maintain relevant networks with professionals such as those you detailed above or other professionals to ensure you are up to date with the products or services they provide.
(c)You want to ensure that Philip and Jennifer have all the key insurance protections in place in case something unfortunate was to happen to one of them. What process would you follow during your discussion with the clients to ensure you have a good assessment of their needs? 
(d)Briefly explain why it is important for the broker to remain informed of developments in the lending process despite not being actively involved at every stage. 
Application form and related documents have now been signed and forwarded to the Lender for approval. Philip and Jennifer have agreed that you will keep their Solicitor informed of progress if/when the loan is approved. 
(e)Refer to the ‘Example of an Organisation’s Policies and Procedures’ document in the toolbox and explain what the service standards and timelines are up to and including the issue of offer letter and mortgage documents.
(f)Clients have now called to execute loan offer and mortgage documents and are nervous that their Solicitor is very busy and difficult to contact. They want to know who will be responsible for what tasks from this point in the lead up to settlement and immediately the following settlement. 
Explain to Philip and Jennifer who is responsible for completion of what tasks once the loan documents have been returned to the lender and in the lead up to settlement and once settlement occurs. Focus on the lending organization and the client’s solicitor/conveyancer roles in this part of the lending process. 

Task 7 — Interest rates
1.Conduct your own research and answer the following:
(a)What is the role of the RBA with respect to the movements of interest rates? 
(b)Why is it important to have these controls and how do they impact mortgage loans in Australia?
(c)Are banks obliged to follow the RBA cash rate? Explain the reason for your answer. 
2. Philip and Jennifer from Case study 1, have called to discuss whether they should fix the interest rate on their loan after having received several conflicting viewpoints from family and friends.
(a)Explain the process you would use to research and identify the various product options available to meet the needs of Philip and Jennifer.
(b)Explain to Philip and Jennifer two (2) advantages and two (2) disadvantages of fixing a loan over different fixed rate terms. 

3. What other option/s can you suggest if they remain uncertain about whether to fix the rate on their loan? 

Section 2:Case study 2 — Richard and Pauline Jackson
Background
Richard and Pauline Jackson have a small mowing and gardening business in which they have been working for the last eight years. As it is only the two of them in the business they operate as a partnership.
They have approached you to help restructure their finance, as they are finding the management of their debts a struggle following the loss of one of their major commercial property contracts.
After further questioning, you realize that the situation is more serious than they originally explained; they had missed payments on their mortgage, only pay the minimum on their credit card of 3% each month and the work ute they have on lease is expiring. They have a $15,000 residual payment due and do not have the funds available.
They lost the major contract 12 months ago and fell behind on the mortgage payments soon after. They spoke to their lender (First and Last Bank) and a ‘hardship application’ was approved. The missed payments were corrected by extending the term of their loan. Nothing adverse was recorded on their credit file but they are still struggling with all the monthly commitments.

Task 8 — Establishing the level of financial knowledge
1. What communication skills would you use to establish rapport and build a relationship with clients? 
2. Refer to the ‘Example of an organisation’s policies and procedures’ document found in the toolbox and outline what service standards you should meet to provide a high level of service to clients. Include timelines for returning client inquiries etc. in your response. 
3.List two (2) questions that you would use to effectively communicate with the clients to confirm Richard and Pauline’s understanding and knowledge about credit and finance.
List a further two (2) questions that you would ask to identify or confirm their current financial position, including establishing their requirements and objectives with the refinance?
Advise where you would record the client’s responses. 

Task 9 — Responsible lending obligations
The National Consumer Credit Protection Act 2009 imposes ‘responsible lending’ obligations on brokers that must be satisfied by all people arranging loan applications. The primary objective under responsible lending guidelines is that the credit facility offered to the borrower is ‘not unsuitable’ for the borrower, meets their requirements and objectives and will not create a substantial hardship.
1. Refer to ‘What is substantial hardship?’ available in the toolbox. In your own words, how would you define ‘substantial hardship’ (detailed information on this subject is found at RG 209 issued by ASIC)? 
2. What are the benefits of debt consolidation for Richard and Pauline?
3. Richard and Pauline have decided to consolidate their debts into their home loan with two splits, one for the existing home loan and a second split for all other debts. They will not be including the landscaping supplies business expense as they pay this in full each month and will clear the outstanding $500 from the business account. 
In the template below provide a new liabilities summary once Richard and Pauline have completed the debt consolidation including their new monthly repayments.
4. What savings will Richard and Pauline obtain in monthly repayments?
Task 10 — Self-employed special considerations
1. As Richard and Pauline are self-employed, what documents will you need to obtain to verify and assess their income?
2.If a Low-doc application is an option for the customer, name three (3) extra documents you will need to obtain and assess. Explain how each of these documents will establish their income.
3. Explain how applying for a Low-doc loan could lead the mortgage broker to be accused under NCCP of recommending an ‘unsuitable’ product. 
Task 11 — Advising on strategies
Following the presentation of your proposal, Richard and Pauline say that they would like your advice on strategies that could help them to repay their home loan as quickly as possible.
•List at least three (3) strategies or methods that will help them achieve their aim. 
•Explain how each strategy will result in a home loan being repaid more quickly.
Task 12 — Impact of credit history
Richard tells you that his former wife failed to properly meet their unsecured personal loan debt obligations before they separated. Although he eventually repaid the debt, he is afraid that this incident may count against him when he applies for a loan. There are a few things Richard can do as he is concerned about his credit rating. What information would you provide in the following situations?
1. Provide Richard with the details of two (2) major credit reporting agencies and explain what information may be recorded on his credit file. Information can be sourced from the websites of credit reporting agencies
2. Richard has decided he would like to obtain a copy of his credit report from either Equifax or million Data Registries (formerly Dun & Bradstreet). Explain what options are available for the chosen provider, how long it takes to obtain a copy and the associated costs. 
3. If there are errors on file, what are the options for Richard to follow in order to have these errors rectified? To assist you with answering this question,
4. What obligation does the Privacy Act impose on the Lender to supply the client, in terms of certain information, if they decline an application due to the content of the credit agency file?
5. What alternate options can you suggest to Richard and Pauline in the event that the loan was rejected by the lender you initially proposed due to a credit report? 
Task 13 — Dispute resolution
1. Due to delays in loan processing, Richard has lodged a complaint with you about the time it’s taking to get an approval on the loan. Although you’ve explained that this is because of delays with the lender's processing system due to staff shortages, you’re concerned the matter may escalate beyond your control. 
(a)You are now required to record Richard’s feedback by completing the Customer Complaint Report 
(b)Provide a response to Richard explaining the process going forward and what actions you will take regarding his complaint.
(c)Refer to the ‘Example of an Organisations Policies and Procedures’ document in the toolbox. Produce a short report which identifies and recommends ways that you may be able to improve these Policies and Procedures, to keep clients like Richard up to date on the progress of the loan application.
2. As a broker, it is important to understand the role of the Financial Ombudsman. Explain the function and role of the Australian Financial Complaints Authority (AFCA) in the External Dispute Resolution (EDR) process and the options available to the claimant once a determination is made.
3. What could be the maximum financial compensation limit amount payable to a consumer borrower through AFCA for a claim for a direct financial loss?

Task 14 — Effective access to files
The loan application is finally approved. Loan offers have been produced by the lender, as have numerous documents that the client needs to access and review. The lender has requested these documents be forwarded as soon as they are available. Richard and Pauline are away at the moment and their email provider has a size limit on the data that can be sent via email. Name a service provider that could assist in solving this problem and explain how the service could assist with solving this problem.

Section 3:    
Case study 3 — Mary Jane Smith
Task 15 — Prepare and check a loan application
Mary Jane Smith: Client Background
Mary Jane Smith is a young professional, excelling in her career within the IT industry. She has saved hard and is ready to purchase a property of her own.
Her objective is to pay the loan down quickly and then use the equity in the property to purchase another. She would like to build a small property portfolio over the next eight to 12 years. 
You have met with her a few times and exchanged several emails and telephone calls. She has complimented you on a few occasions for the service and guidance you have provided so far. 
Mary has been cautious in finding and then negotiating the purchase of this property. It is now time to get an application to a lender. You have gathered appropriate documents and completed all necessary checks. Everything is looking positive to proceed. 
1.Using the details in the Example Fact Find for Mary Jane Smith in the Toolbox, prepare a loan application by completing Appendix 3 in this written assignment. 
3. Before submitting Mary’s loan application, you must check her details thoroughly to ensure accuracy. Using the following two items available in the toolbox, check that the personal details and current employment details section of Mary’s Fact Find document and loan application are accurate and identify three (3) errors.
4.Refer to the ‘Example of an Organisations Policies and Procedures’ document in the toolbox and provide at least two (2) examples in each question of how Mary’s loan application complies with each of the below:
(a)The organizational credit policy.
(b)Legislative requirements (particularly NCCP).
(c)Industry Code of Practice.

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