Task 18 — Assessing the clients’ situation

Based on the information gathered in the initial client meeting with Philip and Jennifer Brown (see Case Study 1) and any other online tools used, you now need to assess the clients’ loan application, paying particular attention that you have met regulations, legislative requirements, followed industry codes of practice, and met lender credit policy.

Provide data to support your comments and conclusions. 

Note: You will need to use this assessment of the clients’ needs to complete Part 2 of your Oral Assignment.

Task 18: Question 1

Assume you have conducted your initial face-to-face meeting and have provided and sought the necessary information from your clients. Explain a minimum of three (3) regulatory and legislative requirements that you have met so far in dealing with this application. Include the documents you would have provided to the client in the initial meeting.

Note: You are not charging a fee for service to your client.

Task 18: Question 2

As part of assessing the clients’ situation, a broker is required to determine the approximate cost of LMI. 

(a) Will Jennifer and Philip be required to pay LMI and why or why not?

(b) If so, what would the premium be? 

(c) What two (2) options are available to borrowers to pay the LMI fee?

Hint/Tip:

The calculators are located in the Toolbox. Also, for the purposes of this assignment, you may use the LMI premium excluding stamp duty.

Task 18: Question 3

In the previous question you used the Genworth LMI calculator to work out the LMI premium for Philip and Jennifer Brown. There are other helpful tools located on the Genworth site that can assist you with the preparation of a loan application.

On the Genworth website, under ‘Tools’, select the appropriate calculators to complete the following:

(a) What is Philip and Jennifer’s maximum loan amount according to Genworth serviceability calculation?

(b) What is their combined total gross and net incomes?

(c) What is the proposed monthly loan repayment, based on the actual interest rate? (Tip: capitalise the LMI cost onto the loan amount.)

Task 18: Question 4

Based on what they have disclosed to you, does the client have the capacity to meet the deposit and total cash contribution required for the property purchase? Explain why or why not.

Task 18: Question 5

What is the security offered for this loan? Is it an appropriate type of security? 

If so, explain why or why not. (30 words)

Student response to Task 18: Question 5

Prior to submitting the application, you are required to obtain a valuation on the property.

For the purposes of the assignment, the broker is to arrange the valuation of the security prior to submitting the loan application.

(a) Complete the template below and prepare a letter to instruct the valuer to conduct a valuation for Philip and Jennifer Brown.

(b) One completed and submitted, how and where would you file this for future reference? 

(Consider correct document policies and procedures including legislation and security.)

Task 18: Question 7

After considering the client's financial position, what loan amount would you recommend, and why?

Task 18: Question 8

What is the likelihood that the clients will be able to meet all of their financial obligations once the loan is in place? (30 words)

Task 18: Question 9

Under Responsible lending requirements, brokers also need to consider foreseeable changes in a client’s financial position. What issues may impact the clients’ ability to meet their financial obligations, including any possible risks, now or in the future?

Task 18: Question 10

Most lenders stress test home loan repayments by adding a 3.0% buffer to the interest rate to make sure the borrower can afford the repayments over the medium term. If interest rates increased by 3.0%, what would Philip and Jennifer’s loan repayments be, and do you think they would be able to cope with the extra repayment amount? (50 words)

Task 18: Question 11

(a) Identify appropriate product options you can present to the clients that may remove this interest rate risk? 

(b) What advantage would this type of product provide for the customer?