Onpl your credit union mary smith main styour town

CUC-210 Consumer & Residential Mortgage Lending Cohort Assignment 1 (due after module 5)

As a lender, it’s important for you to be able to complete a loan application based on the information provided. Part of this process includes reviewing an application for completeness prior to making a decision or submitting the application for review by your manager or supervisor.

The attached loan application has several pieces of key information missing that could stand in the way of making an informed loan decision. Based on the information given in the case study, in point form, list all of the information you can identify that is missing or incorrect on the application.

Four of the “C’s” that would be important to analyzing this application are Capital, Conditions, Character and Capacity.

Choose any two of the four “C’s” referenced above. For each “C” you choose, write a single paragraph of 200 words or less that highlights the strengths and weaknesses of the application or the borrower’s situation and the factors that contributed to your analysis. Provide your assessment of whether this aspect of the application is weak or strong.

List five specific credit policies in point form at Your Credit Union that you would have to know and understand, and work within when making a decision or recommendation on this application.

Note - an example of a policy that would apply for this question is the maximum amortization for an unsecured loan of this size.

Include all your figures and calculations for review.

Total available marks for this question is Five

It’s very important to remember however, that any final decision will be heavily influenced by your calculations in Question Four (above) because incorrect debt service and/or net worth calculations may influence a lender to make a decision or recommendation based on misleading information. Obtaining full marks for this question will depend on also correctly calculating the key ratios above.

Total available marks for this question is Five

Note: number six isn’t a question and doesn’t require you to answer or address any issues. It’s a reminder that you will be marked on the criteria of Layout and Structure.

Total available marks for this section is Five

Scenario
Bob and Mary Smith have been members of Your Credit Union (YCU) for the past five years. Bob’s actual full name is Robert George Smith and Mary’s full name is Susan Mary Smith but Bob prefers to use his nickname and Mary has always preferred her middle name rather than her actual given name.

Bob and Mary have been married for five years. It’s Bob’s second marriage and Mary’s first and they have two children of their own, ages four and six. Bob also has a 16 year old daughter from his first marriage. Bob’s daughter lives with her mother but stays with Bob and Mary every second week-end and Bob pays $500/month child support per a formal court ordered separation agreement plus he voluntarily helps pay for extra’s like school field trips and school supplies and new clothes for his daughter each fall. Since his divorce Bob has never missed a child support payment and his relationship with his ex-wife, while strained at times, is amicable where his daughter is concerned. Per their separation agreement Bob pays no spousal support.

Bob and Mary purchased their home four years ago with a 5% down payment and a CMHC insured mortgage for the remainder. They purchased the property at the height of the real estate market but since then real estate prices have declined in their local market due to a down turn in the economy and they now owe more than the house could reasonably sell for. They look at this philosophically though, since they have to live somewhere and they love the home. They have never been late on a mortgage payment and there’s now one year left on the five-year term they chose when they purchased the home.

CUC-210 Consumer & Residential Mortgage Lending Cohort
Assignment 1 & 2
Instructions – Questions – Case Studies
2014-2015
P4 of 10

Application
Bob and Mary have approached you to apply for an unsecured loan of $8,000 to pay off their existing credit card accounts. They are paying an average interest rate of 19.0% on these two accounts and believe it makes far more sense to convert this money to a personal loan with one monthly payment at a much better interest rate.

Assumptions
Credit Report
Bob and Mary’s credit reports are fully satisfactory. Bob’s Beacon Score is 710 and Mary’s is 714.

Credit Cards
The credit card balances and payments are accurate and were taken from Bob and Mary’s most recent credit card statements

CUC-210 Consumer & Residential Mortgage Lending Cohort
Assignment 1 & 2
Instructions – Questions – Case Studies
2014-2015
P5 of 10

Submit your answers in a single Word document using single spacing and a font no smaller than Arial 11. As well as the specific marks assigned to each of the questions you will also be marked on your overall attention to detail, spelling, grammar and layout.

7.Loan Application

2A. Credit Analysis

The primary role of a lending officer is to analyze the credit requests of borrowing members with a view to making informed credit decisions. An important part of this process is using the “C’s of Credit” as a tool to look at the relative strengths or weaknesses of a borrower’s position, situation or circumstance.

CUC-210 Consumer & Residential Mortgage Lending Cohort
Assignment 1 & 2
Instructions – Questions – Case Studies
2014-2015
P6 of 10

2B. Credit Analysis

An example of the type of thing you’re looking for would be the date the report was completed. IE: your credit union may have a policy around how old of a report you can accept.

Total available marks for this question is Five 3.Calculations

4.Credit Decision

The final step in any credit application is making an informed decision and lending officers have one of three choices: approve, decline, or defer the request.

CUC-210 Consumer & Residential Mortgage Lending Cohort
Assignment 1 & 2
Instructions – Questions – Case Studies
2014-2015
P7 of 10

5.Layout and Structure

CUC-210 Consumer & Residential Mortgage Lending Cohort
Assignment 1 & 2
Instructions – Questions – Case Studies
2014-2015
P8 of 10

He’s been employed by the City of Your Town for four years and is now a Senior Accountant earning an annual salary of $69,600.

The City of Your Town is also supporting John’s ongoing education. He’s currently in the second year of a five-year CA program and when he graduates in three years he’ll be a Chartered Accountant. The City pays for all of John’s tuition and books but there’s a formal agreement in place that stipulates John must continue to work for the city for five years after he completes the course or pay back the money contributed by the city on a pro-rata basis. As well, if he drops out of the program for any reason he must immediately repay all of the funds the City of Your Town has contributed up to that point.

CUC-210 Consumer & Residential Mortgage Lending Cohort
Assignment 1 & 2
Instructions – Questions – Case Studies
2014-2015
P9 of 10

Application

At the time of the application John signed a debit to his account for $375 to pay for the appraisal. There are no other fees at this time.

The credit card payments reflected on John’s application are taken directly from his most recent statements.

Case Study Application

Application No. 123456
Account No. 654321
Lender Name Sally Roberts
Date September 25, 2012

N/A

Status Permanent Full Time
Length of Time 12 Years overall
5 Years in current position
Current Income $4,325 monthly - paid on 1st & 15th
$875 average monthly commission paid

CUIC 201 Cohort – Assignment One 2

Page 3 of 3

If this loan is approved, I authorize the manager or his nominee to fill in the dates on the Promissory Note and Assignment of Wages.

You may use this Personal Information as follows:
(i) to give it to credit reporting agencies and other financial institutions and, with my consent, to other parties; (ii) to determine my financial situation;
(iii) to determine my suitability for initial and/or continued membership in the credit union;
(iv)
to provide me with the services I request from you; (v) to give it to anyone who works with or for you, but only as needed for providing the services I request from you and (vi) to disclose my personal information where necessary to protect your interests and mine

In this Agreement/Application, your reference to "Networking Affiliates", and specifically, the Co-operative Financial Services Group, includes any company or business with which you have a business relationship and which is engaged in the business of providing anyone or more of the following services to the public in Canada; loans and other financial services, credit, charge and payment card services; insurance services. I consent to, and accept this Agreement/Application as prior written notice to me of your intention to obtain a credit report or other Personal Information about me from time to time.

September 25, 2012
Date

Sally Roberts
Witness to signature

Case Study Application

Application No. 123456
Member No. 654321
Lender Name Mary Smith
Date September 26, 2012

Your Town, MB V0E 1G6

Case Study Application

Application No. 123456 Account No. 654321

Page 3 of 3

If this loan is approved, I authorize the manager or his nominee to fill in the dates on the Promissory Note and Assignment of Wages.

You may use this Personal Information as follows:
(i) to give it to credit reporting agencies and other financial institutions and, with my consent, to other parties; (ii) to determine my financial situation;
(iii) to determine my suitability for initial and/or continued membership in the credit union;
(iv)
to provide me with the services I request from you; (v) to give it to anyone who works with or for you, but only as needed for providing the services I request from you and (vi) to disclose my personal information where necessary to protect your interests and mine

In this Agreement/Application, your reference to "Networking Affiliates", and specifically, the Co-operative Financial Services Group, includes any company or business with which you have a business relationship and which is engaged in the business of providing anyone or more of the following services to the public in Canada; loans and other financial services, credit, charge and payment card services; insurance services. I consent to, and accept this Agreement/Application as prior written notice to me of your intention to obtain a credit report or other Personal Information about me from time to time.

001

To Estimate Market Value for Mortgage Purposes
Your Credit Union
X
X

X
X
Your Town

X

The subject property is situated on the east side of Favorite Village, just south of County Road #8 in Your Town. It is a Rural/Residential area build-up with a mixture of detached single family homes and vacant agricultural farmland. Subject site backs onto the “Willows” nursing home, no serious negative affect on marketability is noted.

Basement is improved with a recreation room, four bedrooms, utility room and 3pc bath.

Ceiling height approximately 7’6”.

X 70,000

X

221,100

287,633

312,500 270,000 264,900

Good Similar Similar Similar

2221 sq.ft. 2237 sq.ft. 2135 sq.ft. 5,500 2000+/- sq.ft. 14,500

8 3 3.5 7 3 3 8 4 3.5 7 3 2

All comparable sales are brick ranch style single family homes with full basement situated in Lakeshore Township. Adjustments

were required for lot size, building size, age/condition, lower level development, and extras. The comparable data used in this report was

Final estimate of value is $261,500. The Cost Approach was carried out as a check only. The Direct

Comparison Approach is the best indicator of value as it shows the actions of market participants. As such, it has been given the most weight.

Concession 11 Part Lot 14 12R-00123 Part 2

Sept 28, 2012

X

In regard to the subject property, this involved the following steps:
• Property was inspected and photographed as of the effective date of the appraisal.

• Regional, Town and Township data was based on information available in the office of ABC & Associates. • The appropriate documents were reviewed including current zoning and official plan documents. Discussions have been held with the local and/or regional officials, where necessary, in order to assist in the
determination of the Highest and Best Use of the property.