FNSFMB501 - Settle Applications & Loan Arrangements Assessment 1

This document provides an assessment of FNSFMB501 - Settle Applications & Loan Arrangements. It includes activities related to potential risks, pre-settlement evidence, lender's mortgage insurance, family guarantee, role of conveyancer, property settlement delays, reverse mortgages, rights of mortgagee and mortgagor, and real estate agent trust account deposits.

FNSFMB501 - Settle
Applications & Loan
Arrangements
Assessment 1

Table of Contents
ASSESSMENT 1.............................................................................................................................1
ACTIVITY1.....................................................................................................................................1
Explanation of why it is potential risk for all involved...............................................................1
ACTIVITY2.....................................................................................................................................1
Describing some ways wherein potential borrowers fail for providing correct pre settlement
evidence that are required by mortgage lenders..........................................................................1
ACTIVITY 3....................................................................................................................................2
What is primary benefit of Lenders Mortgage Insurance to home loan applicant.......................2
ACTIVITY 4....................................................................................................................................2
Explanation of certain benefits along with drawbacks of a family guarantee.............................2
ACTIVITY 5....................................................................................................................................3
Explanation of role of conveyancer for property vendor.............................................................3
ACTIVITY 6....................................................................................................................................3
Identification of some common issues which could cause property settlement delays along
with crashes..................................................................................................................................3
ACTIVITY 7....................................................................................................................................4
Reverse mortgages now fall under the National Credit Act, which includes a statutory
‘negative equity protection’ on all new reverse mortgage contracts (introduced September
2012). What are the risks of reverse mortgages which make them subject to this form of
legislation.....................................................................................................................................4
ACTIVITY 8....................................................................................................................................4
Explanation of rights of a mortgagee and mortgagor when property is mortgaged under
Torrens title regimes....................................................................................................................4
ACTIVITY 9....................................................................................................................................5
Identification of some of deposits along with payments of real estate agents trust account.......5

ASSESSMENT 1
ACTIVITY1
Explanation of why it is potential risk for all involved
The provided scenario is potential financial risk for all people involved as there are certain pre
settlement conditions that are necessary to be carried by lenders which are part of Australian
residential property. One of pre settlement condition that is needed by lender is to gain consent
of prior mortgagee. In context to the case, collecting consent from all the Chinese borrowers for
Australian property is important at the time when second mortgage security is taken. At same
time, another pre settlement condition is to check documents properly in order to ensure that all
are correctly executed, witnessed together with dated prior sending them to approving personnel
as it have high chances of causing reputation risk for all people involved in the mortgage. Other
conditions includes confirming amount needed for discharging other debts, ensuring contracts
for sale and provision of evidence of insurance.
ACTIVITY2
Describing some ways wherein potential borrowers fail for providing correct pre settlement
evidence that are required by mortgage lenders
Pre settlement evidence are physical proof that are used to complete all activities or formalities
in settlement procedures of mortgage. In context to mortgage lender, pre settlement evidence
that is required includes the following:
Loan terms: It is said to terms and conditions that are required to lend a property to others.
Mortgage lenders require loan terms in physical form that involves information about amount to
be landed or borrowed, collateral, penalties for default, interest charged and late fees.
Proof of insurance: It is a kind of documentation which is required by mortgage lender to
prove that the person have valid insurance of property with an insurance organisation. One of
most common proof of insurance is paper card that is provided by insurance entity listing policy
information as well as effective dates.
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ACTIVITY 3
What is primary benefit of Lenders Mortgage Insurance to home loan applicant
The key benefit of Lender Mortgage Insurance to applicant for home loan is that it allow
applicant to successfully apply for mortgage from any financial institution even when they have
not been able to save up wide deposit. With lender mortgage insurance, home loan applicant are
able to repay other debts as is protect the applicant through paying money in order to settle
various debts. Another benefit of lenders mortgage insurance is that it acts as provision of proof
of insurance for the borrower that safeguard lender from losses against any uncertainty.
ACTIVITY 4
Explanation of certain benefits along with drawbacks of a family guarantee
Family guarantee refers to a guarantee that permits family for assisting children in purchase of
any type of property without actually providing cash loan. Benefit related to family guarantee is
that it allows borrowers in purchasing residential property without requirement to save for
larger deposit. Another benefit associated to family guarantee is that it mitigate lender's
mortgage insurance when there deposit fails to meet 20% or above threshold.
Limitation of family guarantee is that it creates shortfall which is not eliminated by sale of
home loan applicant. Moreover, when wider number of family guarantees are taken then an
individual cannot use interest only repayment schedule.
There are certain number of documentation which are needed by lender. Some are as follows:
Credit check authority signed: It is a document which lender needs for assessing the credit.
Guarantees: It acts as additional protection in a loan which makes a loan more attractive for
potential lender.
Loan contract: It refers to a document which includes formal agreement among two parties in
which one is lender and another one is borrower. It engrosses specification of amount of loan,
repayment plan, charged interest and payment dates.
Periodical payment authority: The document permits an individual for authorising Bank to
make payments for fixed amount at regular intervals on behalf of lender.
Signed application form: It is a form which is complete for application of loan by a lender.
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ACTIVITY 5
Explanation of role of conveyancer for property vendor
Conveyancer is an individual that undertakes necessary practice in buying along with selling
any property. In property vendor, key role played by conveyancer are as follows:
 To ensure that client meets all types of legal obligations along with protect rights of
clients in entire transaction.
 At same time, conveyancer also have role of undertaking good portion of legislative
practices required to assist vendors for making right decision along with navigating
process successfully.
 Conveyancer have another role of arranging final details of settlement. With property
vendor, conveyancer coordinates ideal time for purchaser and seller.
ACTIVITY 6
Identification of some common issues which could cause property settlement delays along with
crashes
One of issue which could cause property settlement delays as well as crashes is Bank
compilation. Usually buyers require to take out mortgage for property buying and sellers are
required to discharge previous mortgage in which settlement could not occur till financial
institution is ready. In this, complications from side of bank is key cause for delayed settlement
of property. Another issue that have chances of causing property settlement is final inspection
problem that is terms as buyer's last chance for bringing complexities with property that leads
to create disputes. Such type of discoveries have more chance to cause delays in settling
property. Late documentation also results in property settlement as documents including
Transfer of Land plays key role in transactions of property, so when these are not returned
promptly then this creates crashes in property settlement.
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ACTIVITY 7
Reverse mortgages now fall under the National Credit Act, which includes a statutory ‘negative
equity protection’ on all new reverse mortgage contracts (introduced September 2012).
What are the risks of reverse mortgages which make them subject to this form of
legislation
Reverse mortgage is termed as mortgage loan that is secured by residential property which
enables borrower for the purpose of accessing unencumbered property value. One of risk related
with reverse mortgage is Current industry codes of practice that is characterised as a
fundamental enforceable measure along with rule which aim to regulate industry code. It set out
framework for compliance through provisions including relevant guidelines, risk management
strategies, particular measures for compliance and complaint handling schemes. At same time
legislations and statutory requirement is another risk of reverse mortgage that is featured as rule
which is issued by a regulatory body that is appointed by central or state government. It
comprises of credit legislation, National Credit Code along with privacy legislation.
ACTIVITY 8
Explanation of rights of a mortgagee and mortgagor when property is mortgaged under Torrens
title regimes
In registration of security documentation, mortgagee and mortgagor have certain rights. The
term security documentation is termed to a Security Agreement, Mortgage and other security or
pledge agreement that is delivered as per applicable law for granting perfected security interest
in property as collateral for secured obligation. In context to mortgagee, their rights at the time
when property is mortgage include right to foreclosure, right to sue for mortgage money, right
to sale without intervention of court, right to accession of mortgaged property and right of
possession. At same time, key rights associated with mortgagor are right of redemption,
inspection along with production of documents, additions to property and transfer to third party.
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ACTIVITY 9
Identification of some of deposits along with payments of real estate agents trust account
Key deposits and payments in context to real estate trust account includes sales of businesses,
options to buy buildings along with accompanying chattels, sales of land and building
comprising off the plan sales, etc. In relevance to opening an account for disbursement of funds,
stages includes segregation of duties for good internal control, reviewing authorised signors,
considering use of dual signatures as further control of disbursement of funds, emphasising
towards wire transfers and reconciling bank accounts promptly.
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