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Understanding C2P Loans

Building Your Dream Home: Understanding the Basics

Of C2P Loans

Instructional Design Project Report

Diane M. Chubb

EDIT 6170 - Instructional Design

The University of Georgia

Dr. Lloyd Rieber

Spring 2005
EXECUTIVE SUMMARY

The subject for this Instructional Design course project is an online course for construction to permanent loans (C2P). The potential learners are individuals seeking funding to finance home construction projects. The instructional problem is consumer-oriented resources for C2P loans does not adequately describe loan features, interest rate policies and payments procedures that would assist potential loan customers in evaluating if this particular loan product would meet their financial needs for home construction. Based on an analysis of the instructional goal, the course consists of three units with terminal objectives that are both intellectual and verbal. The project consisted of the development, testing and evaluation of one unit from the course. Five individuals representing the target learner audience participated in the evaluation of the unit prototype and a qualitative study was conducted for the formative evaluation. Recommendations for revisions primarily focused on visual design of the course and navigational aspects.

NEEDS ANALYSIS

System of Interest

A Construction to Permanent (C2P) loan is one of several types of residential construction loan products. These type loans can be used to finance the construction of a new home or to renovate an existing home and represents approximately 5% of all construction loan sales. Construction loans are available through local and regional banks as oppose to mortgage companies because banks are usually more familiar with assessing the local real estate market. Most consumers who elect to obtain a traditional construction loan incur two closing costs: one for the construction loan and the other after the home has been built and the owner refinances the construction loan into a new mortgage. C2P loans allows the consumer to combine the balance on all outstanding mortgage with the cost of construction into one loan package thus incurring only one closing cost. This can result in significant savings for the consumer considering closing costs typically represent 3%-%5 of the total loan amount. However, there are certain restrictions and procedures that are applicable to C2P loans and like all major financial decisions, consumers should understand the cost and benefits associated with C2P loans in order to determine if this particular loan product will meet their financial needs.

Description of Instructional Need

Dick, Carey and Carey (2005) describe the identification of the instructional goal as the most “critical event in the instructional design process” (p.15). Thus accurately defining the instructional goal is therefore pivotal to developing to planning an educational program that addresses an instructional need.

Information regarding construction loan products, including C2P loans is typically provided by the banks mortgage loan officer. Officers meet with customers to explain the various home construction financing options and products available through the bank and assist customers with the application process. Mortgage loan officers are very similar to inside sales positions in that they earn a commission on each loan that is closed. Thus there is a direct correlation between mortgage sales volume and the amount of commission a loan officer can earn within a given period. This situation encourages loan officers to prioritize their time and efforts on closing mortgage loans and reduces the amount of time needed to fully explain the features and procedures associated with C2P loans. Additionally, consumer literature on C2P loans and online information only provides general information and is not written in a language or use terms that most consumers understand.

Data Collection Methodology

I conducted a survey of two mortgage loan officers and one C2P loan administrator as part of the needs assessment process. These individuals agreed to complete a brief questionnaire (Appendix A) regarding potential construction loan customers, C2P loan volume at their particular bank and their experiences in providing loan services to potential customers. The results of the survey indicated that C2P loans represent less than 10% of all construction loans at this particular bank and all respondents wanted to increase the ratio of C2P loans to overall construction loans because C2P loans generated a larger volume of interest revenue due to the longer terms of commitment. However, mortgage loan officers indicated they often did not have sufficient time to explain to customers all of the details associated with a C2P loan and often referred interested customers to their website or printed materials for more information. The loan administrator is responsible for processing the loan disbursements and closing documents and it was her experience that customers did not fully comprehend this aspect of the loan process. Based on my own personal experience information of C2P loans provided to consumers does not explain in sufficient detail, the loan process and policies that would facilitate informed decision-making by the consumer.

Problem Statement

Based on the issues identified through the needs assessment, the following problem statement was developed: Consumer-oriented resources for C2P loans does not adequately describe loan features, interest rate policies and payments procedures that would assist potential loan customers in evaluating if this particular loan product would meet their financial needs for home construction. This statement is a reflection of the fact that not only is there generally a lack of descriptive information available on C2P loans, but the simple provision of factual information without the opportunity for consumers to apply and understand the various concepts associated with C2P loans does not facilitate the evaluation of this product as a potential option for construction financing. Therefore, the problem represents an opportunity for instructional intervention.

Instructional Goal

The following instructional goal was identified for the course: Prospective loan customers will be able to assess the relative advantages and disadvantages of C2P loan products by comparing the features and requirements of a C2P loan with other construction loan products offered by lending institutions. This course terminal objective goes beyond the basic understanding of C2P loans but require learners to demonstrate their understanding by comparing the various features of a CP2 loan with other construction loan products.

Learner Analysis

In my survey of bank officials, I asked them to describe the socio-economical status and interest of typical C2P loan customers that would serve as the learners for this course. While specific demographical data could not be provided in order to protect client confidentiality, personnel were able to describe the general social and democratic characteristics of C2P loan customers that would represent the target audience (learners) for this course. Typically, C2P customers are high school graduates between the ages of 35-45. They either own their own homes or have recently purchased property to build a new home therefore it may be assumed that learners possess a basic understanding of common loan terminology and procedures. Customers are primarily employed in regional or local public sector jobs such as county and municipal positions therefore one could make some assumptions about the income level. They are usually married with children and have some degree of computer literacy depending on the age. Younger customers are typically more computer literate than older customers. The racial and gender composition of the audience is primarily white males, but there is a growing number of applicants from the Hispanic population. It should be noted that these characteristics are based on the customers that frequent the bank used in this particular course project and may not reflect C2P customers for financial institutions located in other geographical areas.

It would have been helpful if I was able to interview several C2P loan customers, but bank policies prohibit the release of customer information for confidentiality purposes. However, based on my own personal experience, I would assume that C2P loan customers would be motivated to learn and understand the concepts applicable to C2P loans, if the content was written at a level that they could understand and engage in activities that would allow them to apply the concepts to their particular situation.

MACRO INSTRUCTIONAL DESIGN

Overview

Three major components of the instructional goal was developed using the process of goal analysis and the identification of subordinate skills. The instructional goal for the course represents an intellectual skill in the domain of learning. Dick, et al (2005) indicate that goals classified “as an intellectual skills will require learners to learn concepts, follow rules, and solve problems in performing the goal” (p. 51). Based on this analysis, the three instructional goals served as the units for the course with corresponding objectives.

Objectives and Instructional Curriculum Map

Objective #1 is a verbal information objective because learners will be asked to identify certain features associated with C2P loans that are different from other construction loan products. Objective #2 is a problem-solving objective as learners will need to understand how to calculate monthly interest payments in order to perform the instructional goal. Objective #3 is a verbal information objective required to perform the instructional goal.

The three components of the instructional goal for the C2P course are listed below. The learner entry behaviors are the ability to add, multiply and subtract and basic Internet skills. Attachment #1 is an illustration of the initial course Instructional Curriculum Map (ICM):
Goal 1: Construction to Permanent (C2P) Loan Basics
Objective: The SWBAT identify features associated with a C2P loan.
Goal 2: Interest Payments
Objective: Given a hypothetical loan amount, interest rate and term, the SWBAT
construct a schedule of monthly loan payments.
Goal 3: Consumer Resources
Objective: The SWBAT identify at least one resource for information on C2P loans.

MICRO INSTRUCTIONAL DESIGN

Overview

Unit #2, Interests Payments was selected as the unit for development in this course project. This unit includes two lessons, pre-instructional, follow-up activities and strategies for learner participation. I served as both subject matter expert and instructional designer for the unit. The first draft of the content was reviewed by a bank loan officer and the loan administrator for accuracy, sequence and organization of the content. Several corrections were made in the content and recommendations for including additional concepts were considered. Attachment #2 is an illustration of the ICM for Unit #2.

Instructional Objectives For Unit #2

Terminal Objective: Given a hypothetical interest rate, loan amount and term, the student will be able to calculate a schedule of monthly interest payments on a C2P loan”.

Lesson #1

Title - Loan Draw Process

Instructional Objectives:
a. Given a list of definitions, the student will be able to identify the terms associated with a C2P loan draw by matching the correct definition to the term.
b. Given a list of loan disbursement requirements, the student will be able to identify at least two conditions that must be met before a draw can be disbursed again a C2P loan.
Lesson #2 - Monthly Interest Payments

Instructional Objectives:

a. Given a list of factors that may influence the interest rate on a C2P loan, the student will be able to select at least two factors which determines the interest rate for a particular individual.

b. Given a list of definitions and terms, the student will be able to match the correct definition for rate cap and rate lock.

c. Given the formula for calculating the monthly payments on a C2P loan, the student will be able to calculate two consecutive monthly payments.

Instructional Strategies and Planning Sheet

At the beginning of each lesson in Unit #2, learners are instructed to view a Powerpoint presentation which outlines the objectives for the lesson and various definitions. This pre-instructional activity prepares the learner for instruction and attempts to motivate them by appealing to their interest in the content. Initially, I planned to incorporate audio with the Powerpoint presentation using Impatica, however, I later decided not to include the audio slides due to learner preference. Concepts are presented through lecture materials with examples used as appropriate. Following the examples, the learner is directed to complete a case study entitled “Check Your Knowledge” which presents a scenario based on the lesson. Learners are asked to respond to three multiple choice question based on the scenario events. Immediate feedback is provided to the student when the answer is selected. This pattern is repeated for the next lesson in the unit. The unit concludes with a multiple choice quiz consisting of eight questions based on all of the concepts covered in the unit. Appendix B is a copy of the lesson plan for Unit #2.

WebCT Vista was selected as the delivery medium for the course. Based on feedback from bank loan officers, lending institutions would likely refer potential C2P loan customers to take the online course to assist them in understanding C2P loans. Learners would be able to access the course on their own time without having to travel to a particular site or location to participate in the course.

FORMATIVE EVALUATION

I conducted a One-to-One Learner review for the formative evaluation of the course. Five individuals who were representative of the learner population were asked to evaluate the prototype of the course. The evaluation was performed in a room with computer and Internet access. The designer provided login access for all participants and briefly demonstrated how to access the course in WebCT. Instructions were also given on navigating through the course interface in WebCT. At the beginning of the evaluation, participants were informed of the purpose of the course and the evaluation. A questionnaire was used to assess learner reaction to the course. Learners were asked to rate seven areas of the course using a likert scale from 1 to 5 with 1 being the lowest rating and 5 being the highest rating (Appendix C). Results from the unit assessment were used to determine if the learners mastered the unit terminal objective.

Results of Preliminary Field Test

The following graph illustrates the results of the learner evaluation using the course prototype. The results indicate the majority of the learners felt the lesson organization, definitions, sequence and case studies were helpful in understanding and applying the concepts. However, navigating through the course site was problematic for some of the learners. I also noticed several participants had difficulty discerning the navigation of the site and asked for assistance during the test phase. Three of the five participants also indicated the course site needed more visual appeal to break up the textual material. Results from the unit assessment were extremely positive with four out of the five participants scoring 100% on the final quiz.