Complex Lending and Broking — Identifying, developing, presenting and implementing complex broking options Assessment
Task 1 — Complex collateral (specialised security)
Task 1: Question 1
(a) Explain what the risks are for a lender with taking rural land as security. Provide one (1) example.
(b) Explain what the risks are for the client with purchasing rural land. Provide one (1) example.
(50 words)
Task 1: Question 2
(a) Some properties are heritage listed. Explain what this means.
(b) Explain one (1) risk for the purchaser with buying a heritage listed property.
(c) Explain one (1) risk for the lender with taking a heritage listed property as security.
(100 words)
Task 1: Question 3
Describe the purpose of an Environmental Site Assessment (ESA) and explain the main steps involved in producing an ESA.
(80 words)
Task 1: Question 4
(a) Explain how an Indigenous Land Use Agreement (ILUA) might assist with the acquisition of land subject to native title.
(b) What is one (1) limitation of an Indigenous Land Use Agreement?
(50 words)
Task 1: Question 5
When borrowing against specialised security, there are often impacts such as additional loan approval processes that are required. Describe two (2) additional processes that may impact a loan application when borrowing against specialised security.
(100 words)
Task 2 — Complex loan structures
Task 2: Question 1
(a) List three (3) types of loan transactions that may be considered to be complex loans.
(b) Provide two (2) examples of how a client’s application with special financial circumstances (such as offering a specialised property as security or requiring a complex loan structure) might be impacted.
For example, additional requirements made by the lender.
Task 2: Question 2
Explain how lending limits may be impacted for loans secured by rural property.
(100 words)
Task 2: Question 3
(a) Provide one (1) example of when a client may require a bridging loan.
(b) List and explain two (2) risks for the client when obtaining a bridging loan.
(75 words)
Task 2: Question 4
(a) Provide one (1) example of when a client may require an equity release product (e.g. reverse mortgage).
(b) What three (3) factors are taken into consideration when determining how much the client can access with this type of lending?
(75 words)
Task 2: Question 5
List the supporting documentation you would request from a business client that you would need to forward to the lender along with loan application. (List a minimum of four (4))
(20 words)
Task 2: Question 6
(a) As a broker you can assist the client and the lender with the loan implementation process. List a minimum of seven (7) steps that you (as the broker) can take to assist with the loan submission, from collection of supporting documentation through to the collection of fees and settlement or loan draw down.
(b) What steps can you take to ensure the privacy of your client’s information when sending and storing their supporting documents and loan application details?
(100 words)
Task 2: Question 7
The implementation process can take time, organisation and require follow up. This part of the process is vital for cementing the relationship with both the client and lender.
What time management tools and techniques can you use to support the implementation process to ensure it runs smoothly and is completed on time for your client and the lender? (Provide at least two (2))
(20 words)
Assessor feedback for Section 4: Task 2 — Complex loan structures:
To pass this subject, you will need to be assessed as DEMONSTRATED for either your first submission or your resubmission.
Task 3 — Legislation and codes of practice
Task 3: Question 1
(a) Identify the Legislation that amends the National Credit Code, which provides negative equity protection for reverse mortgage borrowers.
(b) Explain what protection is provided to those consumers.
Task 3: Question 2
Briefly describe what a finance and mortgage broker’s obligations are under best interests duty.
Task 3: Question 3
Write an email to a client outlining the complaints resolution process in accordance with the Australian Financial Complaints Authority (AFCA). (Ensure that you outline what AFCA encourages clients to do before making a complaint to them.)
Section 5: Ethical decision-making frameworks and principles
Before you begin this Topic, you will be required to read the case study which is located in the subject room.
Task 1 – Frame the ethical question applicable to the situation
Task 1: Question 1
Investigate whether the assumptions and client advice provided by the broker in “Scenario A”, align with industry practice.
(50 words)
Task 1: Question 2
Identify the two (2) ethical principles that arise in each of the three (3) scenarios from the case study and list them in the table below.
Task 1: Question 3
The lender in Scenario A became aware of the broker’s instructions to the clients and advised the broker that his actions were not acceptable.
In their defence, the broker stated that they had, ‘heard that this was the right thing to do at a professional development day that I attended in the past’ and that ‘I confirmed this by asking other brokers who agreed with my actions’.
Identify at least two biases that are revealed in the statements made by the broker and explain how they might impact the broker’s understanding of the situation.
(50 words)
Task 1: Question 4
Explain what regulatory requirements may be breached if the situation in ‘Scenario B’ was not addressed?
(20 words)
Task 1: Question 5
Many organisations have a vision and/or mission statement and a set of values that are visible on their website to the public and their clients.
The ethical situation that arises in ‘Scenario B’ has the potential to be in conflict a lender’s purpose and values.
Identify two (2) examples where the situation in ‘Scenario B’ could be in conflict with an organisation’s strategy, purpose and/or values.
(20 words)
Task 1: Question 6
Scenario B resulted in the clients lodging a complaint with the Australian Financial Complaints Authority, (AFCA), against both the lender and the broker.
Evaluate the possible impact on the lenders’ reputation if the action of cancelling the loan became known in the public domain. Explain how the organisation at fault could be impacted.
(50 words)
Task 2 – Determine ethical response to the situation
Task 2: Question 1
‘Scenario A’ resulted in the client’s defaulting on their home loan 12 months after settlement as it took them several months to find new employment. Each party to the transaction claimed that they received poor advice from the broker.
Identify the key stakeholders (parties) and analyse what is at stake for each of them.
Task 2: Question 2
You have been asked to determine an ethical response to ‘Scenario B’. You are required to analyse the situation using the ‘RADAR’ ethical decision-making framework. Your response must include commentary on each aspect of this framework as follows:-
Recognising the event
Assessing the situation
Deciding what to do
Agreeing the way forward
Reporting
(150 words)
Task 2: Question 3
The broker in ‘Scenario A’ was interviewed about his actions and made the following comments:
“Most of my business is settled with this particular lender and the loans manager is a personal friend of mine. There is nothing unusual about the way I handled this situation. I’m not that comfortable dealing with clients this way, but it’s the way brokers operate. I know this is true because my mentor didn’t see anything wrong by not notifying the lender”.
Identify the situational and/or psychological barriers that may have impeded the broker’s response to this ethical situation by listing a minimum of two (2) examples of conflict of interest and at least two (2) examples of where the broker’s views were biased.
(50 words)
Task 2: Question 4
You have been asked to determine an ethical response to ‘Scenario A’ having now heard what the broker has had to say about his actions at question 2.3 above. Name at least two (2) people or organisations you might seek guidance from as you would consider them to be ethical advisers.
(10 words)
Task 2: Question 5
Describe the strategies andprocesses you would formulate for responding to the situational and psychological barriers you identified in Question 2.3 above.
(80 words)
Task 3 – Develop implementation plan and carry out ethical response to the situation
As the compliance manager for the lender, you have been asked to implement an ethical response to Scenario B in order to set out what conduct is expected across the broker network.
Important:
Although you will need to consider the ethical situation described in Scenario B, the focus of your response to the following questions needs to be on developing a plan to implement changes within the lender organisation and the broker network. You are required to develop an implementation plan, as follows:
Task 3: Question 1
Identify:
(a) what data needs to be gathered.
(b) which parties you will need to communicate with
(c) the sequence of the steps that you will take to complete these tasks.
(75 words)
Task 3: Question 3
As stakeholders may be impacted by an ethical response, it is important to manage stakeholder risks and concerns that might arise during this process.
(a) Identify the four (4) steps in the stakeholder risk management process and outline the key objectives of each step in the table below.
(b) Describe the communication strategies that you would use to ensure that the risks are mitigaged and that your stakeholder’s concerns are acknowledged.
(50 words)
Task 3: Question 4
(a) Under what circumstances would you seek support from a trusted colleague in order to effectively carry out the ethical response? Provide three (3) examples in the table below.
(b) Under what circumstances would you act independently in order to effectively carry out the ethical response? Provide a minimum of three (3) in the table below.
(20 words)
Task 4 – Evaluate the outcomes of the ethical response
Case Study:
One of Peta’s most important customers called yesterday seeking an explanation for the delay in receiving a valuation report for a loan application he had lodged last week. Peta had asked a colleague Alex to order a valuation (normally completed within five days), but it had not arrived.
When Peta asked Alex whether the valuation instructions had been issued, Alex said, “I sent them by email to the valuer a week ago”. Later, as Peta passed Alex’s desk and “woke” the laptop from the screensaver, Peta could clearly see that the email was sent just two days ago. This was typical of the poor customer service provided by the organisation due to ongoing problems with staff levels and it is not the first time Alex had been dishonest in order to cover up mistakes.
However, Peta knew that Alex’s job was at risk and decided the right thing to do was to protect her colleague by calling the client back with the news that the valuer had received the instructions but had not yet completed the valuation report. As Peta talked with the client, she learned that the delay of the valuation had resulted in the loss of the client’s opportunity to purchase the property.
Peta later heard from the manager that the client had complained and decided to not use the mortgage broking services provided by the organisation in future. Peta listened carefully when her manager later expressed his confusion on how this client’s attitude towards him had been hostile. Peta, knowing that both Alex and her own jobs were now at risk, said nothing in response.
Task 4: Question 1
(a) Identify a minimum of three (3) ethical situations/actions described in the case study.
(b) Evaluate whether the issues were resolved and if other courses of action should have been taken.
(50 words)
Task 4: Question 2
Determine the consequences for Peta and the other affected parties from the actions she took.
(30 words)
Task 4: Question 3
Analyse what the outcomes of Peta’s actions reveal about her own and the organisation’s values.
(25 words)
Task 4: Question 4
Identify improved approaches for responding to future ethical situations that might arise from the circumstances described in the case study.
(25 words)
