FNSFMB501: Settle Applications and Loan Arrangements Analysis

This report provides a detailed overview of the processes involved in settling applications and loan arrangements within the finance and mortgage broking industry, focusing on the FNSFMB501 module. It begins by outlining pre-settlement requirements, including conditions and evidence needed by lenders, such as credit checks, loan contracts, and mortgage documents. The report then delves into relevant codes of practice, legislation, and statutory requirements, including the National Credit Code, privacy legislation, the Fair Work Act, and employment contracts. It further examines policies and procedures for opening accounts for fund disbursement, including direct payments, reimbursements, and special accounts, as well as the role of third-party reports. The main body also covers the resettlement conditions, communication with involved parties, document checking, loan contract verification, and the roles of various parties in the settlement process. The report includes a research task and concludes with a summary of key findings, emphasizing the importance of adherence to regulations and efficient settlement procedures in the finance industry.

FNSFMB501 SETTLE
APPLICATIONS AND
LOAN ARRANGEMENTS
IN THE FINANCE AND
MORTGAGE BROKING
INDUSTRY
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TABLE OF CONTENT
Introduction......................................................................................................................................4
Main body........................................................................................................................................4
1. Pre-Settlement Requirements..................................................................................................4
2. Codes of Practice, Legislation and Statutory Requirements...................................................5
3. Policies and Procedures for Opening an Account for Funds to be Disbursed.........................6
Third party report activity................................................................................................................7
1 Relevant legislation..................................................................................................................7
2. Resettlement conditions of the finance approval.....................................................................7
3. Communication with the other parties who have involved in settlement process...................8
4 checking of necessary documents.............................................................................................8
5 checking of loan contract..........................................................................................................8
6. Instructions to party who is acting for the lender....................................................................9
7. Register and stamp of the security...........................................................................................9
8. Arrange for the drawdown of funds by the client....................................................................9
9. Requirement of the loan approval and instructions from the client.......................................10
10 Advise the client for the disbursement of fund.....................................................................10
11 Pre- settlement condition required by the lender..................................................................10
12 pre settlement evidence required by the lender....................................................................10
13 Documentation required by the lender.................................................................................11
14 Roles of various parties involved in the settlement process.................................................11
15 settlement issues...................................................................................................................11
16 process of registering the security documentation................................................................11
Research task and written..............................................................................................................12
Conclusion.....................................................................................................................................14
REFERENCE................................................................................................................................15
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Introduction
Loan plays vital role in growing the business. Finance industry provide loan to the business
so that they can grow and flourish. Mortgage option is also having with the business. This report
will discuss pre settlement requirements which include evidence required by lender. Legislation,
statutory requirement and process of opening account for fund disbursement will also analysed.
Further report will prepare settlements. This report will also discuss questions which are related
with pre settlement, security process, and settlement and documentation management.
Main body
1. Pre-Settlement Requirements
A. Pre-settlement conditions required by lenders:
There is various conditions which lenders are required which includes taking consent for prior
mortgage if the mortgage security being adopted (Amal and Kartika, 2021). There are several
documents which is required by the lenders like credit check, signed application form, loan
contract, guarantees etc.
B. Pre-settlement evidence required by lenders:
Loan settlement cannot be preceded until all the documents which is received is correctly filled
and signed. Following are the evidence which should be taken.
Loan contract:
This contract consists of the details of the loan agreement which should be read carefully and
make sure that all the things are approved by the lending experts which further includes
borrowers name, mortgagor name, amount which have been approved, loan terms, repayment
amounts, fees, security conditions etc.
Mortgage document:
Legal document which is lodged with territory for registration the mortgage.
Repayment form:
Form is filled for setting direct debt for repaying the loan.
Certificate of witness form:
This document is signed by the witness, so it is required by the mortgagor for signing the
documents in witness presence.
Borrower certificate:
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Depending on the nature of loan two documents will be given and only one document needs to
be completed. Complete filling the document will make sure that the documentation is
understood and that is why it is signed.
Pre filled discharge form:
This form will discharge from the current lender so that better deal can be taken.
C. pre-settlement undertakings required by lenders:
Sale and settlement of other property:
Lenders require the property papers which the borrower is having so that the lender can grant
loan to them. As if borrower does not the capacity to give the papers to the lenders then it is
likely that borrower will not get loan.
Repayment of other debts:
Lender also have interest how many debts the borrower is actual having. If the borrower is
having multiple debts then how he can pay the loan which he is taken from the lender. Before
granting loan to the borrower lender make sure and check that borrower have the capacity to
repay the loan or not. As it is normally seen that borrowers take loan from various lenders and at
the time of paying the instalments they declare themselves bankrupt as the borrower does not
have the capacity to repay the instalments to so many lenders (Opoku and et.al., 2019). So that is
why in advance only lenders check that the borrower is having other debts which he has to repay
or not.
Providence of insurance:
This is the important thing which lender must check before granting the loan. If the borrower has
taken insurance on the property which he has kept as the security to the lender then he must
disclose to the lenders about the insurance if the borrower has taken on that property. It is
necessary that the lender must have got idea that the property which he is having as the security
is insured or not.
2. Codes of Practice, Legislation and Statutory Requirements
Induction package for the new employees:
National credit code:
This code is applied to the credit contracts where the charge is taken as the credit is provided
(Keene, 2017). Whether the debtor can be the employee also. Credit can be given whole or the
some part. Credit can be given for various uses which includes domestic use, personal or
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household use, to purchase the property for the investment or to renovate the property. This
credit code is not applicable to the loans which are low cost, insurance premiums, staff loans,
short term credit etc.
Privacy legislation:
Privacy is the right of the employees. Workers private information should been protected by the
organisation and it should have not been shared with anyone without their permission. As if the
private information of the employees will get leaked then they can stuck into trouble and they
can also get blackmailed.
Fair work act:
This act is the federal legislation that controls the workplace relations and employment in
Australia. This act is again followed by several federal and territory laws like health and safety,
workplace surveillance, anti discrimination, long service leave etc. Health and safety is the basic
right of every employee. Organisation should take care that the workplace where the employees
are working is safe. In the organisation there must be no discrimination on the basis of age,
gender, colour, religion etc. In the eyes of company every employee should be equal and they
should be given increment on the basis of their performance and not through contacts.
Employment contract:
This must be given to every employee who newly joins the company. In this contract employee
joining date, salary amount and the benefits which he or she is getting is mentioned. This
contract also includes company’s terms and conditions which is signed by the employee before
joining.
3. Policies and Procedures for Opening an Account for Funds to be Disbursed
Direct payments:
Under this process on the borrower’s request, designated beneficiary is paid. Disbursements are
made for the expenditures to the supplier directly, along with it contractor and consultant are also
included. Documents which are required for this payment are copy of contracts (Fischman and
et.al., 2018). Copy of bill, copy of advance payment bond by bank, receipt etc.
Reimbursement:
When the borrower gets reimbursement for all the expenditures which have been undertaken by
the borrowers. As to get the reimbursement borrowers have to fill the allocation with the drawal
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and the summary sheets. Document required for reimbursement are confirmed purchase orders,
copy of invoice, receipt, evidence of payments etc.
Special account:
In this method advance disbursement is made from the loan account for the special account
which is approved. The special account is used by the borrower for financing the expenditures.
For the initial disbursement, separate requirements are needed to the subsequent replenishments.
The account is opened by the borrower with any financial institutions. By using this account
payment can be done by the borrower to the suppliers or other expenses.
Special commitment:
Under the project to finance the imported goods, the contract which is made with the supplier
make compulsory for the borrower to open letter of credit. Without any special security, special
commitment is provided to the commercial bank (Sanderson, Wiseman and Poncini, 2018). The
terms of commitment is the funds are deposited in the loan account so that disbursement can be
made to the commercial banks. To the supplier country, payments are generated against letter of
credit.
Third party report activity
1 Relevant legislation
Organisational procedure and relevant legislation are necessary to follow within the organisation.
As policies and procedures are very important part of any organisation and it is a road map for
day to day activity and operations of the organisation (Bomer and et.al2021). Organisation has to
follow compliances and laws and regulations and provide guidance for the process of decision
making. Organisation must prepare policies manually so that it becomes more accessible for the
employees because they will know what are the basic plans and policies in specially the
regulations of the organisation. Another step is to meet the division leaders so that they can
ensure the policies and procedures are being followed by the employees and all the policies are
feasible. The main responsibility is to ensure that all the employees have understood the policies
and there is no misunderstanding present among employees.
2. Resettlement conditions of the finance approval
At the intermediate level proof of identification is necessary details of income and expenses is
also necessary to collect and along with this all the necessary information which are elected to
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asset and liability of a client is also necessary to collect so that no discrepancies and fraud take
place. Along with this if client holds any another property then the copy of all the necessary
document is important to collect (Panta, 2018). Before making any loan Agreement name of the
borrower name annual percentage rate loan length terms of loan repayment amount face special
condition security address everything has to be mentioned and collected.
3. Communication with the other parties who have involved in settlement process
Pre-settlement risk is always involved in the loan Agreement by one party fails to meet all the
applications and repay the loan as per the Contract. So pre settlement helps in mitigating the risk
of failure and chances of default. So it is beneficial to communicate with other parties also have
involved in the settlement process so that the risk of failure and counterparty can get decreased.
It is very necessary to confirm their understanding about the resettlement conditions so that
documentation can become easy and the risk can be mitigated. This will help in making various
settlements in the future with the client as well.
4 checking of necessary documents
This process is very necessary before providing any kind of loan to the counterparty. It is
necessary that all the documents such as identification of the client amount of loan repayment
date etc. Show the person of financial institution is providing loan they must check that all the
documents are executed and signed by the client apart from this it should be witnessed by
somebody else so that the risk of counterparty decreased (Dinha, 2020). Apart from this financial
institution may take some Collateral from the client so that they can recover the loan amount if
the client fails to repay the loan along with the interest. Apart from this it is very important for
the person of national institution which providing loan that all the documents which has been
submitted by the client must be updated and correct. So that before sending them for approving
everything should be matched and collected.
5 checking of loan contract
Checking of any loan contract depends on 5 C’s of credit. Such as character, capacity, capital,
collateral and conditions. Checking of all these conditions and necessary for taking any security.
The five C’s of credit is being used by lender to know the creditworthiness of borrower. The first
sea represent character which states about the past credit history of the potential that in past did
the borrower make any fraud with any other financial institution or lender. The second c States
about the capacity of the borrower that will the borrower pay the loan amount back or not and the
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third C speaks about capital basically the loan amount. Forth C refers to collateral which is
being given by the borrower. The fifth C stars about the conditions why the borrower is taking
loan and how much the need amount.
6. Instructions to party who is acting for the lender
Landor has to follow various instructions that have to check and confirm that all the present
element conditions of the loan and Finance approval will be done with the clients. It is the
responsibility of lender that they must communicate with all the parties which have involved in
the settlement process and confirm that all the documentations and settlement has been issued by
the client (Riley, 2020). Checking of loan contract and various conditions which is related to the
position of security is also being done by the lender. Apart from this all the information which is
related to taxation should be acquired by the lender apart from this whatever terminology and
language which is being used by the lender should be communicated to the potential borrower.
7. Register and stamp of the security
Lender requires stamp of the security which has been submitted by the potential borrower in the
form of collateral. Whatever security has been given by the borrower must be mentioned in the
documents and should be registered under the personal property security register act and should
get online registration so that it can be known by the lender that all the documents which has
been submitted by the borrower are correct and eligible. After checking all the documents lender
can give loan to the borrower. In case if the documents are not submitted by the borrower then it
can be seen that there is a chance of default and borrower may not repay all the applications and
loan amount to the lender. So registration of all the documents and checking of stamp duty is
very necessary for the point of view of lender.
8. Arrange for the drawdown of funds by the client
Drawdown of funds is related with the various assumptions of the fund in the form of bank loan
and money which is being deposited by any individual to their account. So drawdown letters to
the amount which is being borrowed by the borrower for a particular occasion. And throw down
that refers to the date on which the loan has been given to the client (Weber. and et.al2017). So
the overall drawdown of funds can only be possible when the client submitted all the necessary
documents to the lender and provide all the relevant collector so after collecting all these details
lenderdrawdown the funds. Along with this product basically the step in which all the loan
amount is being passed to the borrower.
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9. Requirement of the loan approval and instructions from the client
Approval of loan depends on various requirements and also instructions from the client then only
lender can approve the loan. If the client approves the loan then the amount of loan get funded
within the 5 business days so that I do not have to face any issues. Approval of loan totally
depends on the documentation if the documents are submitted by the client is correct updated
then loan can be granted within a few days of the request. Client can take the loan amount by
online lenders it will take less than 5 working days but if client goes for bank loan then it will
take 1 to 7 working days apart from this credit union will also take 1 to 7 business days.
10 Advise the client for the disbursement of fund
The meaning of disbursement is the money. The term disbursement describes the money which
is being paid to the borrower in the form of loan amount. Disbursement status about the actual
delivery of money and found from the lender to the borrower. Disbursement can be take place in
the form of electronic funds and automatic disbursement. Disbursement can become easy when
the client provides all the relevant details and also provides all the corresponding to the lender
such as their bank account how much money they want to disburse account they will receive the
money of this information has to be transferred to the lender. Getting all this information
disbursement can be come easy and borrower will get loan quickly.
11 Pre- settlement condition required by the lender
Before giving loan to the potential buyer various pre-settlement conditions are being required by
the lender in the form of documentation and identification so that land that can know the
previous history of the borrower and after that they may take decision whether they want to lend
the money or not. Repayment form has to be signed by the borrower which is also a proof
collected by the Lender (Boy, 2018). Witness is also essential for the passing of loan so the
witness should be above 18 years and signed all the documents which are being given by the
borrower. So in case if the borrower fails to make the payment then witness has to give loan
amount to the lender.
12 pre settlement evidence required by the lender
Pre settlement evidence and inspection is being done by the lender before a week from the actual
settlement. The main objective of collecting resettlement evidence is to ensure that all the special
conditions should be made and the property which has been given by the borrower in the form of
collector must be at the same state or place which has been mentioned in the documents. Pre
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settlement inspection and evidence can be done by the seller and some of the agent of lender. In
the pre settlement inspection lender checks that any damage happen or not to the property which
has been assigned by the borrower in the form of collateral. All the documents and property
should be clean and updated so that all the special conditions can meet.
13 Documentation required by the lender
There are few necessary documents which has been selected by the lender such as guarantees
application form which is been signed by the moreover apart from this the periodical payment
authority so that the borrower can repay the loan amount in the agreed time period. Apart from
this proof of age of the moreover is also necessary along with this proof of Residence and all the
income documents have been collected by the lender so that chances of default and counterparty
risk can be mitigated. Income document is necessary so that lender can know how much income
is being earned by the borrower and does the borrower repay the amount or not.
14 Roles of various parties involved in the settlement process
Various parties have to involve in the settlement process so that the process can become easier
for the borrower and for the lender as well. There are various agents arranging bank and security
agents have been involved in the process of providing loan and they make all the Syndicate
arrangement so the disbursement can take place easily (Segovia, 2019). Their main role is to
ensure that all the rules regulation and Standards of loan should be fulfilled and all the
documents submitted by the borrower must be updated so that the risk can get mitigated.
15 settlement issues
Settlement issues are quite common in the disbursement of loan because the loan payment can be
given only when the credit score of the borrower is good. So the credit score of the borrower can
be a settlement issue because lender will not pass the loan to such borrowers who have very low
credit score it means they have made any default in the past. Committed and uncommitted loan
Agreement can be a settlement issue apart from this repayment of the loan on the given time
duration can be a settlement issue.
16 process of registering the security documentation
Registration process States about the submission of other manufacturers and the detailed data
information to the registrar so that the passage of loan can become easy (Lukić, 2017). Registrar
has to check the documents and all the data which is being submitted to them so that no
discrepancies can be found and the entire process of loan become easy and quick. Once the
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approval can be given by Registrar then the disbursement can take place between borrower and
lender.
Research task and written
Essential to confirm all the pre-settlement conditions of finance approval with clients
It is necessary so that in order to safeguard from the pre settlement risks. This risk means
when one of the party will fail to fulfil the obligations in the contract. It will be beneficial if in
starting only all conditions are decided so that confusion cannot be created.
Parties involved in settlement process
Clearing corporation: they have the responsibility regarding post trade activities like risk
management, clearing the trades execution by stock exchange.
Custodian: they are considered as the clearing member and not the trading one. As they make
settlement for trade on trading members behalf.
Clearing banks: they are connection between clearing members and corporation affecting funds
settlements. Clearing member must have clearing account.
Types of documentation
Credit check authority signed: this document is required by lenders in order to evaluate the
credit.
Guarantee: lenders are required property which can be the guarantee against the loan (Kim and
et.al., 2017).
Loan contract: it is loan document which consists of all the terms and conditions which are there
in loan.
Periodical payment authority: it is the agreement between the client and NAB concerning about
the account timely.
Signed application form: by signing on the application form one agrees the terms and conditions
which is written in the form.
Things that need to check about documents before they are sent to the approval
Originality, it should be checked properly that the document is original or not. Validity
date of the document should have also been checked. Signature, it should been carefully checked
that all the documents are properly signed or not. Photos, documents should contain necessary
photos if required.
Conditions relating to the security
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