FNS40815 Case Study Solutions on Certificate IV in Finance and Mortgage Broking

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Assignment Detail:-

Case Study (1)  – “John and Mary Smith”

Situation:

John and Mary are looking to refinance their existing loans with Westpac and

ANZ.

In addition, they would like to clear their Westpac Mastercard and Myer card and cancel both cards.

 

Notes:

1. John and Mary would like the a facility where they can make extra repayments and have redraw available
2. They don’t care which Credit Provider is selected.
3. John and Mary are concerned with interest rate rises in the future.
4. They only want one deb

 

Position:

Westpac Home Loan                        $165,000         Property Value           $320,000

ANZ Loan (Car)                      $  25,000 (Repayment – $550.00 per month) Credit Cards:

1. 1. Westpac Mastercard $ 5,000 (Limit)            Balance                       $  2,400
2. 2. Myer card $ 3,000 (Limit)            Balance                       $      500

 

Income:

John                 $55,000 (Gross PA)

 

Mary                $27,000 (Gross PA)

 

Exercise:

(a) What type of loan structure would you suggest?

(b) Explain your suggestion

 

Case Study (2)  – “Jack and Jill Rogers”

Situation:

Jack & Jill want to use their existing home to help them into an investment property. They have found a house they are keen to make an offer on and the price is $300,000. (Agents in the area tell them they could expect between $300 and $350 per week in rental on the property)

 

Notes:

1. Jack and Jill want to be able to borrow for this venture.
2. Their existing home is valued at $450,000.
3. Their current debt on the home is $180,000

 

Other Debts:

Credit Card:      $10,000 Limit             Balance $8,400

Store Card:       $5,000 Limit               Balance $4,000

Personal Loan                                    Balance $12,600

 

Income:

Jack                 $43,000 (Gross PA)

Jill                    $47,500 (Gross PA)

 

Exercise:

 

(a) What options / type of loan might you suggest?

(b) Explain your suggestion

 

Case Study (3) – “Peter and Sally White”

Peter and sally are first home buyers and they are looking to determine exactly how much they can borrow.

 

Notes:

1. 1. They are eligible for the FHOG.
2. 2. They want a loan which is simple and can allow extra paymen
3. 3. They have no dependan

 

Position:

Savings:                                  $26,000

Family (cash gift)                   $15,000 (Non – Repayable)

 

Car Loan (CBA @ $300 per month)	Owing $	10,500
Credit Cards:
1. Westpac Mastercard          $10,000 (Limit)2. CBA Visa                            $  5,000 (Limit)	BalanceBalance		$ 1,100$ Nil

 

Income:
PeterSally	$48,560 (Gross PA)$42,540 (Gross PA)	Tax – $10,646Tax – $  9,260
Exercise:

 

(a) What type of loan structure would you suggest?

(b) Explain your suggestion

 

Case Study (4)  – “AAA Lawnmowing”

Situation:

Notes:

1. The following figures have been taken from the P&L statements for the busine (years 2005 / 2006)
2. The downturn in year 2006 can’t be explained by customers – “Business was just slower this year” was the comment from Bob the business proprietor.
3. They are looking to refinance and are making initial enquiries only at this stage.

 

Position:

2005  Gross Sales $185,000

2006  Gross Sales $130,060

 

	2005	2006
NPBT	$36,450	$24,400
Salary	$25,000	$15,000
Interest	$22,000	$21,400
Depreciation	$ 4,500	$ 4,500
Superannuation	$ 3,000	$ 4,000

(Above Super Guarantee)

 

Exercise:

(a) What income figures would you use for capacity?

(b) Explain your reasoning

 

Exercise (1) Legislation – Part A

1. Explain the requirement for professional indemnity insurance.

2. There is a standard formula used to determine a comparison rate. What are the 5 items taken into consideration to undertake this rate calculation?

3. What are three of the “key aspects” for consideration under the National

Credit Code? (formerly the Uniform Consumer Credit Code)

4. What are the 2 main sections of the “Privacy Act”?

5. The “Australian Transactions Reports and Analysis Centre was established for what purpose”?

6. According to the NCCP. under what circumstances would a loan be “unsuitable” for a client?

7. Describe the objectives of the “Code of Banking Practice”

8. Why was the “Credit and Investments Ombudsman” established?

9. What is the role of the “The Financial Rights Legal Centre”?

10. Explain the role of the “MFAA”.

11. Broadly, what is the role of “ASIC” in relation to financial services?

12. Under the “MFAA Code of Practice”, name 5 of a mortgage broker’s responsibilities to their client?

13. Explain the need for “File Notes” on a client’s loan application.

14. What are 3 activities in the finance/mortgage broking industry, that could be considered potential hazards under WH&S Legislation.

15. What is the purpose of a “Preliminary Assessment” for a client looking for financial assistance?

16. Are mortgage brokers required to hold an “AFSL” licence – why/why not?

 

Exercise (2) Legislation – Part B

1. Your clients John and Mary Smith complain to you that when you wrote their loan 6 months earlier, you did not explain that they had the option to take a fixed interest rate on their facility. Your file notes however indicate that these options were discussed and that both applicants have signed a finance broker contract which confirms this.

What action would you now take?

2. Explain how you would set up operational procedures to monitor and effect changes to legislation, regulations and policies which have an impact on the finance/mortgage industry.

3. Your new clients Paul and Mary Brown ask you what qualifications you have as a mortgage broker and how you go about researching loan products that meet their need

How would you respond?

4. What should you include when setting up an internal monitoring program ensuring up to date knowledge of compliance and regulations?

How should any changes be communicated throughout your organisation?

 

Exercise (3) – “Glossary”

Situation: What do these terms represent?

1. Clear Title

2. R2M

3. Comparison rate

4. Negative Gearing

5. Creditor

6. FOS

7. Amortisation

8. OSR or SRO

9. Predominant Purpose

10. Progress Payment

11. AAPR

12. Bridging Finance

13. Capacity

14. Business Declaration Purpose

15. Serviceability or Capacity

16. Tenants in Common

17. LOC

18. RM

19. ASIC

20. Portability

21. Default

22. Caveat

23. Base Rate

24. Break Cost

25. Securitisation

 

Exercise (4) – Loan Types

1. Explain the difference between a “Regulated” and “Unregulated” Loan

2. What is a “Non-Conforming” loan?

3. What are the advantages of a “Fixed Rate” loan?

4. What are the advantages of a “Line of Credit” loan?

5. What is an “Offset” loan?

6. What is a Deposit Bond?

7. What is the maximum borrowing on an “Overseas Resident” loan?

8. What are the disadvantages of a “Introductory Rate” loan?

9. When do “Break Costs” apply to a Fixed rate loan?

10. What is a “Redraw” facility?

 

Exercise (5)  – “LVR’s”

Situation: Calculate LVR’s for the following:

1. Loan Proposed $235,000 / Property Value $356,000

2. Loan Proposed $459,000 / Property Value $655,000

3. Loan Proposed $250,000 / Property Value $200,000

4. Loan Refinance – $10,000 Credit Cards, existing home loan $234,890 and personal loan $7,530 / Property Value $464,000

5. Loan Proposed $565,000 / Property Values $430,000 & $380,000

 

 

Exercise (6) – Lending

1. Explain how lenders generally define “stability” for a PAYG employee

2. What is the minimum age for a borrower?

3. Explain the “NSI or NSR” model of serviceability

4. When can Overtime be considered in serviceability?

5. What does a Credit Provider consider when looking at “acceptable security”?

6. What is an “LVR” and why is it considered?

7. What is ‘LMI” and under what circumstances is it required?

8. Describe an example of a “Risk or Mitigant” from a Credit Providers perspective

9. What are the “steps” in undertaking a client needs analysis?

10. What items are considered for a Client’s “Funds Position”?

11. What are the two main types of companies?

12. Can the business “John’s Plumbing Services” be a borrower to a loan? Why/Why Not?

13. What is a “Family Trust”?

14. What “addbacks” are generally allowed for the self-employed borrower?

15. What are the “broad principles” of the First Home Owners Grant?

 

Exercise (7) – “LMI”

Situation: Calculate LMI Premiums using the Westpac Rate Card (Located in the Appendix – Section 24)

1. LVR 95% – P&I Loan / Loan Amount $240,000

2. LVR 82% – P&I Loan / Loan Amount $400,000

3. LVR 87% – Interest Only (10 Years) / Loan Amount $385,000

4. LVR 79% – Lo Doc / Loan Amount $540,000

 

Exercise (8) – Process Loan Application

“Jack and Jill Rogers”

Situation:

Jack & Jill want to use their existing home to help them into an investment property. They have found a house they are keen to make an offer on and the price is $300,000. (Agents in the area tell them they could expect between $300 and $350 per week in rental on the property)

 

Notes:

1. 1. Jack and Jill want to be able to borrow for this venture.
2. 2. Their existing home is valued at $450,000.
3. 3. Their current debt on the home is $180,000

 

Other Debts:

Credit Card:      $10,000 Limit             Balance $8,400

Store Card:       $5,000 Limit               Balance $4,000

Personal Loan                                    Balance $12,600

 

Income:

Jack                 $43,000 (Gross PA)

Jill                    $47,500 (Gross PA)

 

Exercise – Complete loan documentation (Select Lender – Your Choice) Minimum Documents Required (Fully Completed)

1. Loan Application Form
2. Loan Serviceability Calculation

 

Balance Sheet – Jack & Jill Rogers

Assets                        Value               Liabilities                   Value

Existing Property	450,000	ANZ	180,000
Motor Vehicle	35,000	ANZ     (550PM)	12,600
Motor Vehicle	28,000
House Contents	60,000
Bank Account	36,500
Deposit (paid)	15,000
Investments	25,000
		Credit Card (Limit $10k) Myer Card	8,4004,000
		(Limit $5K)

 

Total                           $649,500                                             $205,000

Surplus                      $444,500

Fact Sheet – Jack & Jill Rogers

Full Names: (a) Jack Rogers

(b) Jill Rogers

(Married – No Dependents) DOB: 25/8/74 and 12/7/73

Drivers Licence: (a) BCS345465443 / (b) ASD5436778435

Address:  23 Camden Place The Gap Qld 4061 (Time there – 5 years) Employment:      (a) Painter – HBS Painting Services (Time there – 4 years)

(b) Insurance Advisor – AMP (Time there – 3.5 Years) Income:         (a) $43,000 Gross PA

(b) $47,500 Gross PA

Contact: Home: 07 33oo9898 / Work: (b) 07 32459876 (a)  Mob 0419456432

Solicitor: Solicitors R Us

Jenny Cream – 07 34567865

This Proposal: Purchasing Investment Property at 25 Blue Street, Bardon Qld 4064

Area – 600 square metres

Timber house

Buying in In both Names – as Joint Tenants

Property will be Investment

Price: $300,000

Wish  to  Borrow:  100%  (Using  own  home  as  additional security)

Lender Choice: Select your own preference

 

Exercise (9) – Written Assignment

 

(Manage Self in The Mortgage Broking Industry)

Describe the processes you either have in place (or intend to put into practice) which demonstrates your ability to:

(1)  Develop and work a “Sales Plan”

(2) Set and manage work goals and daily activities

(3) Effectively manage time including paperwork and reports

(4) Monitor work progress

(5) Manage stress and ethical behaviour (Best Practice Standards)

This assignment relates to how you manage the overall operation of your business and can include your own personal management and/or management of a team under your supervision and control.

 

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