Finance and Mortgage Broking: Mortgages and Real Estate Trust Accounts

This assignment delves into various aspects of finance and mortgage broking. It addresses the potential financial risks associated with overseas borrowers obtaining second mortgages for Australian properties without a deposit, emphasizing the importance of pre-settlement conditions and lender consent. The document outlines ways potential borrowers may fail to provide correct pre-settlement evidence, the benefits of Lenders Mortgage Insurance (LMI), and the advantages and disadvantages of family guarantees. Furthermore, it explains the role of a conveyancer for a property vendor and identifies common issues causing property settlement delays. The assignment also discusses the risks of reverse mortgages and the rights of both mortgagee and mortgagor under the Torrens title regime, concluding with an overview of deposits and payments within a real estate agent's trust account. Desklib offers a wealth of similar resources, including solved assignments and past papers, to aid students in their studies.

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 .

ACTIVITY 3
What is the primary benefit of Lenders Mortgage Insurance (LMI) to a home loan applicant?
(Explain different pre-settlement undertakings by the borrower, required by lenders: sale and
settlement of other property; repayment of other debts; provision of evidence of insurance).
Answer:
The primary benefit from the Lenders Mortgage Insurance is allowing to successfully
applying for it from the bank even in the case of non possessing of larger deposit. It as well
protects bank from the loss of provided loan via lowering down risk of lending to borrowers
(Kuchler and Stroebel, 2021). Different per-settlement undertakings by the borrower include
paying off debt on time, paying interest accurately, ensuing ethical conducting, proving fair
documents, etc. In case of lender these mentioned requirements are needed to be fulfilled by
borrower.
ACTIVITY 4
Explain some of the benefits and drawbacks of a family guarantee.
(Explain different documentation required by lender: credit check authority signed; guarantees;
loan contract; periodical payment authority; signed application form).
Answer:
It has will provide the advantages such as having pay rent to longer duration, etc It can
allow to borrower to purchase home without requiring larger deposit, risk protection for lender,
accessing lowering interest rate, etc (Park, 2020). Drawbacks are that in case of insolvency or
deny of repaying by borrowing guarantee need to overcome obligation, risk of having own home
repossessed, etc. There are different kinds of risk required by creditor includes credit check
authority, periodical payment, etc so that surety of accurate conducting can be obtained.
ACTIVITY 5
Explain the role of a conveyancer for a property vendor.
(Explain the role of various parties involved in the settlement process).
Answer:
The role of conveyance is to conduct title searches drafting & exchanging accurate &
relevant contracts, acquiring deeds accomplishing legal procedure (Kim, Cho and Ryu, 2018).
There are various parties involves such is clearing corporation, members, depositors,

professionals, etc who have role of ensuring proper coordination and completion of settlement
process.
ACTIVITY 6
Identify some common issues that can cause property settlement delays and ‘crashes’.
(Describe settlement issues that can occur).
Answer:
The some common issues that can cause property settlement delays & crashes include
risk of delivering contract, bank mix ups, processing delays, difficulty selling, incorrect
documents, valuations, property concern, penalty interest, unavailability of deposits, etc (Muhia,
2018). These issues can occur in the settlement of property.
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?
(Describe key features of current industry codes of practice, legislation
Answer:
The risk that are involved in reserve mortgage such as availability of various hidden cost
such as fees, interest, etc that can eat up equity. Here the interest is higher than the home equity
line as well interest keep occurring which make them subject to this form of legislation
(Maharram, 2021). There are few guidelines which are imposed by particular legislation that all
the borrowers must at least 62 years old, minimum possessing of 50 % of equity, etc. there
should be proper protection of data shared by client, implementation of ethical activities, being
responsible for lending and comparing rates, etc.
ACTIVITY 8
Explain the rights of a mortgagee and mortgagor when a property is mortgaged under the
Torrens title regime.
(Outline the steps in the process of registering security documentation).
Answer:
The rights of mortgagor is transferring the property to the lender and give possession of
it. Mortgagee has the right to over the mortgaged property till the debt is paid back and recover
the outstanding money (Feather, 2018). The process of registering security documentation

includes start application, collateral, granter details, application review, payment, confirmation,
notify gran-tors, etc. are the steps which are required to be followed.
ACTIVITY 9
Identify some of the deposits and payments of a real estate agents trust account.
(Explain relevant policies and procedures in regard to opening an account for funds to be
disbursed).
Answer:
The deposits of the real estate agents trust account includes authorized deposits such as
bank, building society, credit unions, etc. Payments of this involves rental bonds, fees received in
advanced for advertising, etc (Cunningham, Gerardi and Shen, 202). The process where the
approved loan amount is transferred from the bank account is said disbursement. It includes
transferring int disbursement instrument, m liquidate payable generating payment, etc.

REFERENCES
Books and Journals
Andersen, S. and et.al., 2021. Responses to Eliminating Saving Commitments: Evidence from
Mortgage Run‐offs. Journal of Money, Credit and Banking.
Cunningham, C., Gerardi, K. and Shen, L., 2021. The double trigger for mortgage default:
Evidence from the fracking boom. Management Science. 67(6). pp.3943-3964.
Feather, C., 2018. Continuous Repayment Structures in Japanese Housing Finance for Elderly
People: Applications To Mitigate Counterparty Risk Through US Reverse Mortgage
Design. Cityscape. 20(2). pp.245-262.
Kim, H., Cho, H. and Ryu, D., 2018. Characteristics of mortgage terminations: An analysis of a
loan-level daMuhia, C. N., 2018taset. The Journal of Real Estate Finance and Economics.
57(4). pp.647-676.
Kuchler, T. and Stroebel, J., 2021. Social finance. Annual Review of Financial Economics. 13.
Maharram, M. A., 2021. COMPARATIVE ANALYSIS OF MORTGAGE LOAN IN
INTERNATIONAL BUSINESS. Economic and Social Development: Book of
Proceedings, pp.763-769.
Mizrach, B. and Neely, C. J., 2020. Fed Intervention in the To-Be-Announced Market for
Mortgage-Backed Securities. Federal Reserve Bank of St. Louis Economic Synopses.
(19).
Muhia, C. N., 2018. A Study of determinants of the level of mortgage financing in Kenya
(Doctoral dissertation, Strathmore University).
Park, K. A., 2020. Choice, capital, and competition: private mortgage insurance application and
availability. Housing Policy Debate. 30(2). pp.137-163.