FNS40815 Certificate IV in FINANCE & MORTGAGE BROKING

FNSFMB403 Present broking options to client

Assessment 3

FNS40815_FNSFMB403 Assessment 3 V1.0 REAA Released January 2019

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Activity 1

What does the term ‘not unsuitable’ mean in the context of a financial product or service?

Activity 1 Answer
1. Make reasonable enquiries about the client's financial situation, their requirements and
their objectives

2. Make reasonable efforts to verify the client's financial situation

3. Making a preliminary assessment (done by the mortgage broker) or final assessment

(done by the lender) about whether the credit contract is "not unsuitable" for the client. The
mortgage broker and the lender must be able to provide the client with a written copy of the
preliminary assessment or final assessment upon request.

V1.0 REAA Released January 2019

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Activity 2

Explain the concept of 3 suitability pillars as they relate to mortgage broking.

Activity 2 Answer
A Mortgage Broker follows the 3 suitability pillars before they can arrive at the last pillar of
product suitability which are:
1. Cross Border
2. Client Suitability
3. Product Suitability

It is worth nothing that a mortgage broker does not just look for a product that matches the
client needs, as equally important is to find a lender that is willing to lend to the client. This is
because home loan requirements vary from lender to lender, and a mortgage broker can
best steer the client to the national or regional lenders that are most likely to accept the
application based on the client's financial and personal information. Once a mortgage broker
understands what the client needs and has verified the client's personal and financial
situation, the broker can proceed with presenting to the client the types of home loan
products available and which loans may be appropriate for the client.

V1.0 REAA Released January 2019

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Activity 3

What would a prospective client expect to find in a ‘credit guide”?

Activity 3 Answer
The credit provider or lender's contact details including name, address, email, phone
number, Australian credit license number and Australian credit representative number.
- Disclosure about the lender's or credit provider's obligation to not enter a consumer into an
unsuitable credit contract or lease and how the consumer can request a copy of the written
assessment.
- Disclosure about fees, charges and commission payable.
- Complaints procedure: internal complaints handling procedure and external dispute
resolution (EDR) scheme.

V1.0 REAA Released January 2019

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Activity 4

A responsible mortgage broker should organise and present all information that is clear and easy to
understand for the client.

What format might a broker’s presentation take?

Activity 4 Answer
A responsible mortgage broker should organise and present all information that is clear and
easy to understand for the client. A format for presenting information may include:
- In document format: electronic or printed copy.
- Presentation software: PowerPoint slides.
- Other presentation methods: videos, overheads.

A written report or proposal including:

- Credit guide: important information about products the mortgage broker/lender provides
which are regulated by the National Credit Code (" consumer lending products").
- Quote for providing credit assistance
- covering the following information about the broker service and other services the quote
covers, maximum amount that will be payable by the client in relation to the credit
assistance and other services, and whether the maximum amount or any other amount will
be payable by the client to the broker if a credit contract is not entered credit limit is not
increased.

V1.0 REAA Released January 2019

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Activity 5

What would a client expect to find in a home loan ‘key facts sheet’?

Activity 5 Answer
Home Loan Key Facts Sheet should show the total loan amount, the term of the loan, the
type of interest being charge (fixed or variable). It should also display the interest rate and
comparison rate. Also any estimate costs to be incurred with relation to any establishment
fees or ongoing fees. Instructions on how to pay the loan faster, and also indicators or links
as to where they can find further information about the product.

V1.0 REAA Released January 2019

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Activity 6

What criteria must be present for a broker to describe themselves as ‘independent’?

Activity 6 Answer
As commissions are vary from lender to lender, there are beliefs that some brokers may be
biased toward certain loan products offered by lenders paying higher commissions. This
gives rise to the terms "independent", "impartial" and "unbiased" mortgage brokers.

A mortgage broker who claims to be independent, impartial, or unbiased a mortgage broker:

- Must not receive commissions (unless rebated in full to their Clients)
- Must not receive any other gifts or benefits from a Lender that could be reasonably
expected to influence the Broker.
- Must operate free from direct or indirect restrictions on product selection
- Must operate without any conflicts of interest arising from their association or relationship
with Lenders.

V1.0 REAA Released January 2019

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Activity 7

Describe what a broker should do if a client expresses uncertainty about a financial product or
service.

4.1

Activity 7 Answer
It is not uncommon for a client to doubt a loan product as there are thousands in the market
and all have different features, fees and essentially pros and cons. The mortgage broker
needs to explain to the client in detail of what possible options are available based on the
client's circumstances and help clarify any questions or concerns the client might have.

V1.0 REAA Released January 2019

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Activity 8

Identify the main standards that a mortgage broker must demonstrate under the MFAA Code of
Practice.

Activity 8 Answer
The Mortgage and Finance Association of Australia's (MFAA) Code of Practice has
developed standards that require a mortgage broker to act with appropriate skills, care and
diligence and adhere to the reasonable instructions of customers. Deal with all persons with
whom they may come into contact in the course of their professional and commercial
activities in good faith. Not engage in any acts or omissions of a misleading or deceptive
nature. Not engage in unconscionable conduct. Fully disclose any actual, apparent or
potential conflict of interest of which a Member (the mortgage broker) is, or ought to be,
aware to the extent that such a conflict of interest may reasonably concern the customer.

V1.0 REAA Released January 2019

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