CEID-001 Assignment

Prepared For:           Kim Gallant

Course Title:            The life cycle of a Canadian Mortgage – A buyer’s perspective

Pre-requisites:          Many of the topics in this course require basic math skills. The completion of High School math or equivalent is strongly recommended.

Length of Course:      32 Hours

Course Designer:     Derek Matthewson

Date:                         December 10, 2003

Course Description

This course is designed to provide a comprehensive overview of the Canadian residential mortgage industry. The course is intended primarily for 1^st time Canadian homebuyers looking to purchase a property. The course will look at the various steps a homebuyer must complete in order to purchase a residential property in Canada. Students will learn to apply the skills learned in this course to their personal situation and assist them in the home buying process.

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Course Outcomes

Upon successful completion of this course the student will be able to:

Course Outcome 1: Examine the various steps needed to be completed when obtaining a residential mortgage in Canada. (Cognitive – Application)

Course Outcome 2: Analyze the various types of mortgages and payment options available. (Cognitive – Analysis)

Course Outcome 3: Demonstrate an understanding of how a mortgage application is underwritten (Cognitive – Analysis)

Course Outcome 4: Perform an initial review of their current personal situation. (Cognitive – Application)

Learning Objectives

Course Outcome 1: Examine the various steps needed to be completed when obtaining a mortgage in Canada. (Cognitive – Application)

1.      Identify the various parties that are needed during the home buying process, along with their roles and responsibilities (Cognitive - Knowledge).

2.      Compare the different options homebuyers have when searching for a home that meets their needs (Cognitive - Analysis).

3.      Describe how an offer is made on a property (offer to purchase, conditions, etc) (Cognitive - Comprehension).

4.      Explain the different options when seeking a mortgage provider (Cognitive - Comprehension).

5.      Describe the closing process (Cognitive - Comprehension).

6.      Design a personal action plan incorporating the steps (Cognitive - Synthesis)

Course Outcome 2: Analyze the various types of mortgages and payment options available (Cognitive – Analysis).

1.      Compare conventional and high-ratio mortgages (Cognitive – Analysis).

2.      Explain the concept of mortgage insurance and the different providers (Cognitive - Comprehension).

3.      Describe various mortgage-related products such as open, closed, VRM, etc. (Cognitive - Comprehension).

4.      Describe the advantages of various payment options (Cognitive - Comprehension).

5.      Choose which products and payment options are best for them (Affective – Valuing).

Course Outcome 3: Demonstrate an understanding of how a mortgage application is underwritten (Cognitive – Analysis)

1.      Describe how a lender determines a borrower’s credit worthiness (the C’s of credit) (Cognitive – Comprehension).

2.      Compare how different types of income are handled (Cognitive – Analysis).

3.      Describe what a credit report looks like and how a lender analyses it (Cognitive – Comprehension).

4.      Illustrate how debt ratios are calculated (Cognitive – Application).

Course Outcome 4: Perform an initial review of their current personal situation. (Cognitive – Application)

            1. Analyze their personal credit report (Cognitive – Analysis).

            2. Calculate debt ratios based on their personal situations (Cognitive – Application).

            3. Calculate loan-to-value using various scenarios (Cognitive – Application).

            4. Determine personal credit worthiness (Cognitive - Application)

Rationale
 

Course Outcomes and Learning Objectives: Overview

All Course Outcomes and Learning Objectives, with the exception of one being in the Affective domain, are within the Cognitive domain. The course focuses on a variety of skills that are very logical and systematic. The skills the students learn within outcomes 2 and 3 prepare them for the objectives found in outcome 4. Purchasing a home is a very emotional process and many people tend to purchase a property that is not within their means, this course attempts to take as much of the emotion (Affective domain) that goes along with buying a home and focuses on the areas that will not only assist the students in understanding how to purchase a home, but it also gives them a systematic look at their personal situation. The course applies the acquired skills to their own personal situation - students will learn what they can realistically expect when pursuing a mortgage.

No outcomes or objectives are within the psychomotor domain. While some objectives require the students to "do" something, the focus is on thinking and obtaining the necessary knowledge in order to undertake the complex process of purchasing a home.

The questionnaire was used because it's a good idea to "Collect as much information as possible about your audience before the beginning the planning of the instruction." (Cranton, Patricia). This needs assessment will allow the course to be better structured, focusing on the needs of the students.

Course Outcome 1: Examine the various steps needed to be completed when obtaining a mortgage in Canada. (Cognitive – Application)

        Students who enter this course will have extremely limited knowledge regarding mortgages and the home buying process. The first outcome will  give them a good foundation for the outcomes that appear later in the course. This first outcome will give the students the confidence needed when entering the housing market for the first time. 

1.      Identify the various parties that are needed during the home buying process, along with their roles and responsibilities (Cognitive - Knowledge).

• Students will be introduced to the different parties that are involved when obtaining a property.

2.      Compare the different options homebuyers have when searching for a home that meets their needs (Cognitive - Analysis).

• Students will learn about different options regarding the selection of a property. This includes search tools (MLS.ca, Real Estate Agents, etc), inspectors, appraisals, etc.

3.      Describe how an offer is made on a property (offer to purchase, conditions, etc) (Cognitive - Comprehension).

• Students will be given sample documents in order to better understand offers, conditions and other legal considerations when buying a home.  

4.      Explain the different options when seeking a mortgage provider (Cognitive - Comprehension).

• Students learn to identify the differences between lending institutions (when someone would apply at a bank vs. a credit union).

5.      Describe the closing process (Cognitive - Comprehension).

• Students will learn how a solicitor is instructed and the details surrounding the instructions document.

6.      Design a personal action plan incorporating the steps (Cognitive - Synthesis)

• Students will be required to design a personal action plan incorporating the various steps learned so far in the course. This plan will be modified and expanded throughout the course.

Course Outcome 2: Analyze the various types of mortgages and payment options available (Cognitive – Analysis).

1.      Compare conventional and high-ratio mortgages (Cognitive – Analysis).

• Students will be taught the difference between conventional and high ratio mortgages. They will also be taught the advantages of both, along with the financial implications of increasing one's downpayment.

2.      Explain the concept of mortgage insurance and the different providers (Cognitive - Comprehension).

• Most first time home buyers will be seeking high-ratio mortgages. Students will be taught what mortgage insurance is, the differences between the two providers (CMHC and GE), their fee structures, and what types of products they offer to consumers.

3.      Describe various mortgage-related products such as open, closed, VRM, etc. (Cognitive - Comprehension).

• Students will be exposed to the various products available to them when purchasing a home. They will learn the pros and cons of open, closed, fixed, variable and convertible mortgage products. Students will also be taught the advantages and disadvantages of short/long term mortgages (6 month vs. 7 year term).

4.      Describe the advantages of various payment options (Cognitive - Comprehension).

• Due to the many payments options available to consumers, it's important that the students are made aware of which options best suit their situation. In order to do this, they first must understand the different options that lenders may offer them. This includes interest only, accelerated payments, etc. As well as what to look for regarding extra payments structure the lender may offer them (i.e. '20 + 20').

5.      Choose which products and payment options are best for them (Affective – Valuing).

• Using the skills obtained thus far in the course, students will be asked to choose which kinds of products and payments best suit their needs. This is an important step in attempting to get students to narrow down the many mortgage options in order to better focus on their personal situation. At this stage, the student should be at a point where he/she "shows consistency and commitment to beliefs, values, and attitudes" (Cranton, Patricia).

Course Outcome 3: Demonstrate an understanding of how a mortgage application is underwritten (Cognitive – Analysis)

1.      Describe how a lender determines a borrower’s credit worthiness (the C’s of credit) (Cognitive – Comprehension).

• Students will be taught the areas that the lender focuses on when making credit decisions:

Character (integrity)

Capacity (sufficient cash flow to service the obligation)

Capital (net worth)

Collateral (assets to secure the debt)

Conditions (of the borrower and the overall economy)
 

2.      Compare how different types of income are handled (Cognitive – Analysis).

• Different students will have different income types, this outcome will give the students a good understanding of how the lender will treat their source(s) of income, such as the documentation they will need to supply, the percentage of various income types that the lender will include in their application, etc.

3.      Describe what a credit report looks like and how a lender analyses it (Cognitive – Comprehension).

• Students will be presented with sample credit bureaus (Equifax and Trans Union), they will be taught how to read the report and the areas that lenders focus on. Students will also be encouraged to obtain their personal credit report, which will be read in an upcoming class (outcome #4).

4.      Illustrate how debt ratios are calculated (Cognitive – Application).

• Students will be taught how to calculate debt servicing ratios used by underwriters. Using a scenario-based approach, students will be asked to calculate TDS and GDS ratios of fictitious applicants.

Course Outcome 4: Perform an initial review of their current personal situation. (Cognitive – Application)

            1. Analyze their personal credit report (Cognitive – Analysis).

• Using the skills learned in outcome #3, students will examine their personal credit bureau. They will examine 'problem areas' and how they can be addressed.

            2. Calculate debt ratios based on their personal situations (Cognitive – Application).

• Using the skills taught in outcome #3, students will determine their debt ratios based on their current financial situations. They will also be taught how to bring their ratios in line with what lenders traditionally consider acceptable (paying off credit cards, etc.)

            3. Calculate loan-to-value using various scenarios (Cognitive – Application).

• Students will calculate LTV on scenarios and be taught the impact of the results (MI premiums, rental properties, etc.)

            4. Determine personal credit worthiness (Cognitive - Application)

• Using the 5 C's of credit, students will determine how lenders will view them as applicants. This will give them a realistic outlook regarding which types of lenders they should pursue when applying for a mortgage, as well as amounts they can confidently apply for.

Performance Standards

Course Outcome 1: Examine the various steps needed to be completed when obtaining a residential mortgage in Canada. (Cognitive – Application)

Assignment 1: Students will be required to design a personal action plan regarding their unique situation. This assignment will get students thinking in terms of their own personal situation as opposed to simply learning terms and details regarding the mortgage industry. This initial assignment will be somewhat vague as their knowledge at this point will be limited, skills learned later in the course can be applied to this assignment in order to add greater detail. This assignment has a high weighting to emphasize its importance to students, without the basic knowledge obtained in this exercise, it will be difficult for students to follow the more detailed items outlined later in the course. This assignment also allows students to know that this course is not simply about theory; it actually will assist them in their ultimate goal of finding a home. This is important as "Adults who are motivated to seek out a learning experience do so primarily because they have a use for the knowledge or skill being sought." (Zemke, 1984)

* 30 Marks * 

Course Outcome 2: Analyze the various types of mortgages and payment options available. (Cognitive – Analysis)

 In Class Quiz 1: Students will be given a short 20 question quiz in class. Questions will test their knowledge regarding mortgage and payment options. The test will be multiple choice format and they will have 30 minutes to complete the test. Outcomes 2 and 3 both include a quiz in order to test students knowledge of various mortgage facts, this format was chosen because both outcomes focus on general mortgage facts, as opposed to how they relate to the student's personal circumstances. Take home assignments are used throughout this course when students must think about how the facts relate to their unique situations, which requires more time and perhaps discussion with others who will be involved in the home buying process (wife/husband, etc.). 

* 10 Marks *

Course Outcome 3: Demonstrate an understanding of how a mortgage application is underwritten (Cognitive – Analysis)

In Class Quiz 2: Students will be given an in class quiz asking them to list and describe the five C's of credit. They will have 20 minutes to complete the test. They can work in groups of two and should be able to identify and describe at least 4 of the 5 C's.

* 10 Marks * 

 

Assignment 2: Students will be given a take home assignment which will asses their understanding of various mortgage calculations. They will be asked to calculate GDS/TDS based on a credit application, along with a credit bureau with various liabilities. Students should be able to calculate a minimum of 80% of the scenarios with a correct response.

* 15 Marks *

Course Outcome 4: Perform an initial review of their current personal situation. (Cognitive – Application)

Assignment 3: Students will be asked to perform an initial review of their personal credit situation relating to the mortgage they will be perusing. This assignment will allow the students to utilize the skills learned in previous classes to determine their credit situation. Students will use their personal credit bureau that they obtained earlier in the course along with the calculations relating to LTV and ratios. This assignment will prepare students to seek a realistic property based on their circumstances; making it the most important exercise of the entire course (giving it the highest weighting).

* 35 Marks *

Topical Outline

 

Grading System

****Students have the option of being evaluated on a "Satisfactory/Unsatisfactory" basis****

TEXTS  AND OTHER INSTRUCTIONAL/LEARNING MATERIALS:

Recommended Reading:

Introduction to the Canadian Mortgage Industry: Canadian Institute of Mortgage Brokers and Lenders (CIMBL).

September 2002 Ontario Edition.

REFERENCES:

Planning Instruction for Adult Learners.
Cranton, Patricia
Wall and Thompson, Toronto.

30 Things We Know For Sure About Adult Learning
Ron and Susan Zemke
Innovation Abstracts Vol. VI, No 8, March 9, 1984