FNSFMB501 Settle Applications & Loan Arrangements Assessment 1

Finance and Mortgage
Broking

TABLE OF CONTENTS
ACTIVITY 1....................................................................................................................................3
Explain why this is a potential financial risk for all involved.....................................................3
ACTIVITY 2....................................................................................................................................3
Describe some ways in which potential borrowers fail to provide correct pre-settlement
evidence.......................................................................................................................................3
required by mortgage lenders......................................................................................................3
ACTIVITY 3....................................................................................................................................4
What is the primary benefit of Lenders Mortgage Insurance (LMI) to a home loan applicant? 4
ACTIVITY 4....................................................................................................................................4
Explain some of the benefits and drawbacks of a family guarantee...........................................4
ACTIVITY 5....................................................................................................................................4
Explain the role of a conveyancer for a property vendor............................................................4
ACTIVITY 6....................................................................................................................................5
Identify some common issues that can cause property settlement delays and ‘crashes’............5
ACTIVITY 7....................................................................................................................................5
What are the risks of reverse mortgages which make them subject to this form of legislation? 5
ACTIVITY 8....................................................................................................................................5
Explain the rights of a mortgagee and mortgagor when a property is mortgaged under the
Torrens title regime.....................................................................................................................5
ACTIVITY 9....................................................................................................................................6
Identify some of the deposits and payments of a real estate agents trust account......................6
REFERENCES................................................................................................................................7

ACTIVITY 1
Some overseas borrowers are being offered the opportunity to obtain a second mortgage
and purchase an Australian property, without necessarily having a deposit. For example, the
second largest insurance company in China offers loans to Chinese investors for Australian
residential property. The Chinese borrowers use the second mortgage as a deposit for an off the
plan apartment, with the expectation that a senior loan will later be obtained from an Australian
bank to pay the final 70% when the apartment is completed.
Explain why this is a potential financial risk for all involved.
(Explain different pre-settlement conditions required by lenders, including gaining consent of
prior mortgagee, if second mortgage security is being taken).
Answer:
Pre-settlement conditions required by lenders include final inspection of h home in week
lending up to settlement day. The other details that are verified includes personal security
number, employment & income, account balances, debt payments etc. In case of getting consent
of the prior mortgage for having second mortgage security as proper protection and surety of
payment of the loan taken can be done (Andersen and et.al., 2021). The main reason behind the
risk involved in the shown case is that proving loan from Australian bank to Chinese investor is
that no security of repayment, etc in addition to this, the other potential threats are funding,
interest, clearing, level of compliance with country investment regulation, etc can not be assured
so involves risk.
ACTIVITY 2
Describe some ways in which potential borrowers fail to provide correct pre-settlement evidence
required by mortgage lenders.
(Describe different pre-settlement evidence required by lenders).
Answer:
The pre- settlement risk includes inspection regarding who, when, what, why, etc so that
final inspection of new home in week lending up can be done. It is done to check that the h
property is in the same condition as referred at the time of exchanging contract (Mizrach and
Neely, , 2020). There are several reasons for which borrowers fail to get the per-settlement
evidence required by mortgage lenders includes ineffective credit score, debt to income ratio,
ineffective down payment, work history, value & condition of home, etc .