FNSFMB501: Analysis of Settlement Applications and Loan Arrangements

This finance assignment, addressing the FNSFMB501 module, delves into the intricacies of settlement applications and loan arrangements. It examines the potential financial risks for overseas buyers, particularly concerning second mortgages and the forfeiture of deposits. The assignment explores the consequences of incorrect pre-settlement evidence, the benefits of Lenders Mortgage Insurance (LMI) for home loan applicants, and the advantages and drawbacks of family guarantees. It outlines the crucial roles of a conveyancer in property transactions, including document verification and form completion. The assignment also covers potential bank complications, final inspection issues, and the implications of a property selling for less than the loan value, along with the rights of mortgagors and mortgagees. Finally, it describes the deposits and payments associated with a real estate agent's trust account. The document draws upon the Diploma of Finance and Mortgage Broking Management (2019) and The mortgage broking process (2020) for reference.

FNSFMB501 SETTLE
APPLICATIONS AND
LOAN ARRANGEMENTS

ACTIVITY: 1
There is a potential financial risk first for the buyers in overseas as there is a need to obtain
second mortgage to finance the deposit made for the purchase price of Australian property. But
due to non-approval of the remaining 70% financing of the purchase price, these overseas buyers
are at risk of losing their deposits in full (Diploma of Finance and Mortgage Broking
Management. 2019). Due to no availability of finance, the deposited amount gets forfeited one
the settlement date become due. Also, in Australia, one cannot move out from the contact if it is
unconditional to do so, and this condition leads to not only losing of deposits but demands for
potential court actions for the recovery of the loss suffered by the vendor for the sale of the
property. And the buyers needs to make dual payment one for loss and the other for second
mortgage.
ACTIVITY: 2
Events that leads to incorrect provision of pre-settlement evidence by the borrowers are:
 Returning unsigned document of land transfer.
 Witness of transfer of land document is a non-independent person.
 No provision of application form with sign and stamp duty.
 No appropriate provision of identity proof for qualifying as a 100 points for ID.
 Unsigned loan contract.
 No provision of income evidence
ACTIVITY: 3
The primary benefits of LMI to the home loan applicants are:
 Ability to obtain loan at a deposit of less than 20%.
 Helps in entering into real estate market with a comparatively less savings for small
deposit.
 Assists in getting out of the rental market by investing into a property and thus equity can
be grown.
ACTIVITY: 4
Benefits of family guarantee are as follows:
 Ability to obtain loan at a deposit of less than 20%.
 Avoidance of additional cost incurred for LMI.
 Helps in obtaining loan at a lower interest rates as there is a lower risk associated with a
family guarantor.
 Easier approval of loan by the lender in the presence of family guarantor.
Drawbacks of family guarantee are:
 In the event of default on repayment, the family member guaranteed the loan has been
called upon for making the payment to the lenders (The mortgage broking process.
2020).

 Only immediate family members such as grandparents, parents and siblings can become a
guarantor.
ACTIVITY: 5
The role of a conveyancer are as follows:
 Undertake to check documents related to proper such as title of property, etc.
 Completing documentation with government.
 Ensure completion of necessary forms with the vendor for the settlement.
 Ensure completion of the special conditions of the contract pre-settlement.
ACTIVITY: 6
Bank complications
Final inspection problems
Delayed documentation
ACTIVITY: 7
When the house under the contract sell for less than the loan value then there is no additional
liability of borrowers towards the lender for the rest of the value. Until and unless the loan is
repaid, the interest on the borrowed amount compounded continuously.
ACTIVITY: 8
Rights of mortgagor are:
 Right to recover property.
 Right of possession.
 Right to earn rents and profits of the possessed property.
Rights of the mortgagee are:
 Right to sue on the basis of covenants in the mortgage contract.
 Right to become owner of the property on mortgagor’s default.
ACTIVITY: 9
Real estate agents trust account have the following deposits and payments:
Deposits:
Sales deposit
Rent and fees received for advertising the property.
Payments:
Maintenance charges for property
Proceeds to vendors

REFERENCES
Diploma of Finance and Mortgage Broking Management. 2019. [Online] Available through <
https://www.myskills.gov.au/courses/details?Code=FNS50315>
The mortgage broking process. 2020. [Online] Available through <
https://choicecapital.com.au/blog/32/the-mortgage-broking-process>