Topic 3-4: Monitor The Lending Process

The Lending Process
Topic 3-4: Monitor the lending process

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Certificate IV in Finance and Mortgage Broking
Contents
Overview ........................................................................................................ 3-4.2
Part 1: Follow up on lender’s receipt of application ......................................... 3-4.4
1 Follow up information ......................................................................... 3-4.5
2 Using checklists ................................................................................... 3-4.6
Part 2: The valuation process .......................................................................... 3-4.7
3 Collateral ............................................................................................. 3-4.7
4 The valuation — a matter of worth ...................................................... 3-4.8
Part 3: Follow up credit decision ................................................................... 3-4.13
5 The escalation ................................................................................... 3-4.13
Part 4: Understanding post-approval lender documents ................................ 3-4.15
6 The loan offer .................................................................................... 3-4.15
Part 5: Fulfilling pre-settlement conditions.................................................... 3-4.24
7 Establishing the loan and disbursing funds ......................................... 3-4.24
8 Settlement — an overview................................................................. 3-4.25
Part 6: Stamping and registering securities .................................................... 3-4.30
Suggested answers........................................................................................ 3-4.31 3-4
© Kaplan Education Pty Ltd 3-4.1

Overview
Once the finance application has been sent to the chosen lender, the mortgage broker’s
role is to monitor its progress through the credit decision process. The broker should
ensure this information is conveyed to the borrower and any of the borrower’s
professional advisers the broker is authorised to deal with directly. This would usually be
the borrower’s solicitor or conveyancer, and could also include their accountant and
financial adviser.
Quality customer service is about building relationships. It has been said that what
customers really want is a good business relationship, or at least all the attributes of a
good relationship. These include:
• reliability
• responsiveness
• quality of service and product
• positive, friendly working relationships
• credibility
• achievement.
By far the best way to deliver good customer service when dealing with a customer who
is seeking help with a finance application is to maintain communication with the
relevant parties. This includes:
• maintaining clear and open communication with the lender and the customer
throughout the loan preparation and presentation process
• gathering additional information requested by the lender to support the loan
application in an efficient and timely manner
• giving the customer clear, comprehensive and accurate information about how to
proceed as soon as the loan is approved.
Table 1 Lending stages, activities and participants

Stage Activities Participants
Pre-credit • collect data borrower and broker/lender
• analyse data
• identify solution
• submit application
Credit • receive application lender
• verify data
• assess application against lending guidelines
• make loan decision
Post-credit • determine suitable security lender
• obtain valuation
• negotiate suitable security and conditions
• prepare and send letter of offer
(terms and conditions)
Pre-settlement • sign letter of offer and lender’s security documents borrower and
• organise settlement solicitor/conveyancer
Settlement • return all documents to lender for settlement lender, borrower,
action solicitor/conveyancer
• attend settlement
Post-settlement • stamp mortgage documents lender, solicitor/conveyancer
• register mortgage
3-4.2 CIVMB_LP_T3-4_v3
The remainder of this topic focuses on the following stages of the loan and
lending process:
• credit
• post-credit.
Figure 1 Significant stages in the credit approval process
Formal approval –
lender matches the
Conditional approval
file with the valuation
Lender receives the (normally conditional Lender receives the
(or other missing
application on a satisfactory valuation
information) and
application)
moves the file status
to formally approved
Topic learning outcomes

On completing this topic, students should be able to:
• monitor the application as it is processed by the lender
• communicate clearly all requests and updates from the lender
• advise the client of the lender’s decision and action required
• guide clients regarding receipt, execution and return of their loan and
mortgage documents
• assist with the fulfilment of any pre-settlement conditions
• liaise with all relevant parties to ensure settlement is booked
• communicate clearly and accurately with clients regarding settlement progress
• explain the security stamping and registering process to clients.
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Part 1: Follow up on lender’s receipt of

application
Although most lenders accept — and indeed expect — online lodgment of applications
for finance, they use many different ways to communicate decisions and updates to
mortgage brokers.
Some of the ways that lenders communicate information include:
• Phone call — this is still the preferred option for many lenders. Although it adds a
level of customer service with a ‘human touch’, it is not the most efficient option
because it assumes someone from the broker’s side of the transaction will be
available to take the call. Returning calls to a lender can be frustrating. A broker may
have to navigate the many layers large institutions use to screen and direct incoming
calls. If there are dedicated staff to deal with the transaction, then this is less of a
problem. But the mortgage broker processes their own loan applications, then their
availability determines the efficient and accurate transmission of information. This is
difficult when the mortgage broker wants to take a day off work, have a holiday over
a weekend or take extended leave.
• Fax — still a popular means of communication with most lenders. It assumes that
someone is monitoring the fax machine (or computer’s fax inbox), so reliability and
timeliness may suffer.
• Email — perhaps surprisingly, this is not yet the preferred means of communication,
although this is changing. Most mortgage brokers and their staff receive email on
handheld devices, so they can act on communication much sooner than with
traditional means. Email also allows for the efficient transmission of accurate
information, eliminating some of the errors that can occur with verbal
communication.
• Websites — some lenders use their websites very efficiently and they can be an
excellent way of communicating. However, it only takes one incident of incorrect or
insufficient information for a mortgage broker’s trust of this type of communication
to be broken. Its popularity varies, depending on each lender’s commitment to it as a
means of communication.
The solution to the problems in the above examples is to make sure the broker
understands the preferred communication channel of the lender, broker and customer,
and uses it. The broker’s relatively flexible systems can be adapted to cope with and
compensate for the much larger lending institution’s less flexible systems.
1 Follow up information
When information that a lender deems to be essential is not provided, the loan
application on behalf of a client will be delayed and often given low priority.
Not supplying a signed Privacy Act form or crucial supporting income information are
examples of missing information that can slow an application.
Where a lender’s enquiries have revealed something that requires further clarification,
such as a recent credit enquiry, the potential delay is shorter.
Some applications, particularly business loan applications, may have another layer of
complexity in the application process because, after initial analysis, further information
may be required. This may mean returning to the customer to obtain the information.
While this may delay the application process, it is important that the lender has all the
information required for a complete and accurate loan application.
Common examples of requests for further information
• Requests for more recent pay slips — lenders will want to see the two or three most
recent pay slips. Often customers have not kept them, or they may not have them as
many employers require their staff to log on to a database to access their
employment information. It is easy to say, ‘Surely they’ll accept one that’s a couple of
months old?’ In general, lenders will not, and this will delay the process every time.
• Requests for more recent bank statements — possibly the most common request,
this generally occurs when a client provides their latest mortgage statement or
savings statement, which may have been issued in June or December of the previous
year. If, for example, it is October and the client provides a statement to June of that
year, the lender will want evidence that the loan has been kept up to date since June,
or that the savings account has not had any suspicious transactions since June.
• Clarification of customer’s credit activity — commonly triggered by the lender
conducting a credit inquiry with an organisation such as Veda. These enquiries can
range from clarification of a credit card enquiry from five months previously, to a
‘please explain’ if a client has defaulted on a payment.
The advent of ‘positive credit reporting’ whereby lenders update a customer’s credit
file after they have taken out a facility may reduce delays in the process caused by
these types of enquiries.
• Loan structure — not clearly communicating with the lender about the type of
product the client is seeking, the type of interest rate, whether an offset account is
needed, and any number of similar issues are an unnecessary cause of delay. If the
mortgage broker has submitted the application correctly, this should not occur.
• Delays in obtaining a valuation — this can be caused for any number of reasons,
from a tenant of the proposed security property not granting access, to a valuer not
being able to get to a remote area. There may be little a broker can do to assist,
besides conveying the information to the client and their professionals.
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2 Using checklists
Mortgage brokers will most likely work with a checklist or similar tool to ensure that
they have all the information required by the lender.
Those assessing the completeness of information supplied by a customer need to follow
their organisation’s guidelines and checklists accompanying the loan application.
They must be aware that the lender receiving the loan application will probably have
their own checklist.
For example, one lender may accept a group certificate as evidence of a customer’s
previous year’s income, while another may insist on a tax assessment notice. In practice,
it is therefore better to ask the customer upfront for both documents in anticipation of a
lender asking for either.
2.1 Ensuring the client is informed

Improved communication skills and ensuring the client is informed at all times are the
best way to add value to a client’s loan application process.
• A property purchase — when a customer is purchasing a property, urgency in the
loan application process is paramount. In NSW, for example, once agreement has
been reached between a vendor and a purchaser on a purchase price, the clock starts
ticking. The first milestone is the exchange of contracts, whereby the purchaser pays
a generally non-refundable 10% of the purchase price. The second milestone is
settlement, which will be dealt with in the next section.
• A mortgage refinance — a refinance, where the customer is moving their mortgage
from one provider to another, does not have the same timing pressures as a
purchase. However, the customer will still be emotionally engaged in the process as
they have committed to a decision on the mortgage broker’s advice. Any delay or
change of plan can cause the customer to begin doubting their decision to move as
they start to compare their old lender with the new one.
One of the best things a broker can do is to experience the process from a
customer’s point of view. The most common reason for complaints in this situation are
not knowing:
• the process
• where the application is in this process
• the next step in the process.
A broker is involved with the mortgage application process every day, but a customer
may have last been involved five or 10 years ago, or never. It is an unfamiliar
environment for most people, which is one of the reasons they are engaging the services
of a broker in the first place.
Although there may be certain expectations on the timing of an exchange of contracts,
in practice most participants in the process are fully aware that one industry’s
expectations — such as the real estate industry’s expectation that exchange of contracts
will be five days after agreement on price — does not necessarily align with another
participant’s expectations (for example, the lender may work to a 10-day time frame).
In this example, is it easier to push the bank to shorten their time frames, or the real
estate agent to extend theirs? In practice, it is nearly always easiest to have the agent
work on moving theirs, rather than getting a large and sometimes bureaucratic
institution such as a bank to change theirs.
Part 2: The valuation process

Certain factors, such as the use of low-doc loans, loans for the purchase of
investment or rural properties, and loans to self-employed people, mean the credit
provider will lend a lesser proportion of the cost. This results in a lower maximum LVR,
for example 70%.
Once the valuation parameters have been established, the maximum loan amount can
be seen as an extended function of the debt-servicing capacity outcomes, and the
customer’s current financial position.
3 Collateral
Credit providers almost always require some form of collateral, or security. Whether the
security is sufficient to support the loan can be determined by obtaining a valuation of
the security offered.
In mortgage lending, the property being purchased will in most cases provide adequate
security for the loan. This is assuming the borrower provides sufficient equity to
establish an adequate LVR.
Additional loan protection may be available to a credit provider by way of lender’s
mortgage insurance. If mortgage insurance is required — some credit providers insist on
it for all mortgage loans — a one-off premium must be paid. This cost is often paid by
the borrower and is nearly always payable by the borrower where the LVR exceeds 80%
of the value of the property.
The premiums are based on a sliding scale that increases as the LVR increases and as the
loan amount increases through certain thresholds (normally $500,000 and $1,000,000).
The mortgage insurance acts to protect the mortgagee against the risk of loss if it is
necessary to sell the security property.
In some cases, even mortgage insurance will not provide the level of loan protection
required to meet lending conditions. In these cases, a loan might still be provided but
additional real estate or another form of security, either assets or guarantees,
might be needed.
When dealing with lending for purposes other than the purchase of real estate,
various forms of security may be acceptable, including:
• shares in public companies (only acceptable for margin-lending proposals)
• personal guarantee from a third party or director of a borrowing company
• general security agreement or chattel mortgage over assets other than real estate
(only acceptable for commercial lending proposals).
With the variety of loan products available, it is also possible to provide real estate
security for non-real estate purchases. An example of this is to borrow against the
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equity in a home to fund a share purchase, holiday, motor vehicle, boat or other
lifestyle purchase.

The actual process can be broken down into a few steps:

• Order the valuation — either the mortgage broker or the lender (depending on the
lender’s process), completes a standard order form for a valuation. This form
would detail:
– the address of the property on which the valuation is being requested
– the borrower’s name
– the borrower’s estimate of the value of the property (in the case of a refinance,
pre-auction approval request or equity access), or details of the actual purchase
price (if a purchase)
– a brief description of the property, including number of bedrooms, bathrooms,
car spaces etc.
• Follow up the valuation — normal waiting time for an update on the valuation
request would be 48 hours. If the mortgage broker does not have a valuation, or has
not made an updated arrangement for access, then the mortgage broker would
normally contact the lender or the valuer for an update on progress.
• Receipt and review of the valuation — once the valuation has been received,
the mortgage broker and the lender will look for the valuation given by the valuer,
and any adverse comments on ‘time on market’ before a sale would be expected,
environmental issues noted, zoning issues or other comments.
4 The valuation — a matter of worth

If a client offers property or other assets as security for a loan, the obvious question for
the lender is what is it worth?
The worth of anything is relative and depends on supply and demand. The price of
commodities, such as oil, fluctuates on a daily basis, depending on how much is available
and how many potential buyers there are.
Many people believe that the value of property can only increase. This may not be the
case. Residential property prices can fall, especially in the short term, because of factors
such as demographic changes, the overall economic environment and local employment
and economic circumstances. The value of other types of assets can also fluctuate,
depending on the market for that particular asset at a given point in time.
The value of non-residential property can be volatile due to factors such as demand for
particular types of property and the cyclical nature of some businesses and industries
that use non-residential property. If there is a downturn in the retail industry,
the demand for retail property will fall, which in turn will result in a fall in the values of
these properties.
Interest rates and the state of the economy also have an impact on the value of
residential and non-residential property, works of art, shares, and precious metals such
as gold — all of which may be offered as security under certain circumstances.
Determining the worth (particularly future worth) of an article or property can be very
difficult. The fact that a customer has agreed to purchase a property at a certain price
does not guarantee that a lender’s valuer will agree with this decision and amount.
4.1 Market value

When a valuation is made for mortgage lending purposes, the valuer will try to arrive at
an estimate of the market value on that day. The market value can be defined as the
price that an asset will bring in the open market under normal sale conditions.
It is important to remember that:
• a valuation is not a prediction of what the asset will be worth in the future; it is an
estimate of the property’s value on the day of the valuation
• a valuation may differ depending on the purpose of the valuation. For example, a real
property may be valued differently for mortgage purposes, sale purposes, deceased
estate purposes, stamp duty purposes and rental renegotiation.
The market value expressed in a valuation report is the subjective opinion of the valuer
based on the information available and the instructions provided by their client.
Because it is an opinion, valuations may differ between valuers, although two valuers
appraising the same property on the same day should arrive at a similar figure.
4.2 Comparable sales

In all cases, a valuer will be expected to provide a number of ‘comparable sales’.
This means the valuer supports the value they have placed on a property by providing
written details of other, similar properties that have sold in the vicinity of the property
actually being valued. As mentioned, this is a highly subjective process, as one valuer’s
research may be very different to another valuer’s.
If the valuer is using sales that have already occurred and settled to justify a valuation,
then by their very nature these sales would had to have occurred already. In a market
moving quickly both up and down, this can be a recipe for problems. For example, if a
market moves up by 10% in a year and a valuer is using a sale from six months ago to
justify their decision on a valuation, then even a variation of 5% on a $1,000,000
purchase can cause a $50,000 problem for all concerned.
Significant variations might occur with unique or unusual assets, which may not come on
the market very often. In these circumstances, there may be few, if any, comparable
sales on which to base a valuation.
The bank has a number of methods to assess the value of residential collateral.
A full valuation report from an external valuer is one method but it is not used on
every occasion.
Where a valuation is required, it must always be ordered by the bank from a valuer on
the bank’s panel of valuers and using the bank’s automated valuation ordering systems.
The lender is seeking to outsource its risk as much as possible — and for the sake of a
$125 valuation cost, they have secured the services of an industry professional and
obtained their opinion (and their possible liability for a grossly inaccurate report).
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Desktop valuations
Another way a lender can obtain an estimate of a property’s value is to conduct a
desktop valuation. This uses the many and varied industry analysis tools allowing the
lender to search complex databases to establish a price of a property based on the area,
the type of property and the proposed LVR. For example, if a customer was wishing to
purchase a townhouse 5 km from central Melbourne, the purchase price is $750,000,
the customers have been in the same employment for two years and they are seeking to
borrow 70% of the value of the property, then the combination of these facts may result
in the lender conducting a desktop valuation.
The benefit to all is not so much the saving of the cost of the valuation but the saving in
time. Desktop valuations invariably speed up the process and reduce the time it takes to
issue a formal decision.
Apply your knowledge 1: Desktop valuations

Using the example in the paragraph above on desktop valuations, think of
reasons why the lender may allow a desktop valuation rather than a full
valuation to be conducted.
1. Why would a lender consider conducting a desktop valuation on a
property in central Melbourne when they may not do so for a property
in rural Victoria?
2. Why would a lower valuation potentially result in a desktop valuation

being ordered?
Note: You can access ‘Suggested answers’ for this activity at the end of this topic.
3-4.10 CIVMB_LP_T3-4_v3
Apply your knowledge 2: Property valuation

Fred approaches a credit provider to borrow $50,000 to pay for his
daughter’s upcoming wedding. Fred is a widower and other than his car,
his only asset is the family home, which is clear of any debt. Fred offers to
mortgage the home as security for the loan.
Bank underwriting standards require a valuation less than three months old
to be held. Fred was thinking of selling the home after his wife died and has
a real estate valuation for $650,000, which is 12 months old.
1. Explain what steps would need to be taken to verify the market value of
the property.
2. Identify any factors that may have had an impact on this valuation.
Note: You can access ‘Suggested answers’ for this activity at the end of this topic.
Resource 1: Review the example bank valuation available in your

subject room
Read the referenced bank valuation in Topic 3-4 of your subject room and
list any questions or concerns you have.
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4.3 Reviewing risk and security

Risk assessment does not end once a transaction has been completed or a loan facility
has been drawn down. Regular monitoring of security must occur to ensure that the
lender is fully covered at all times. This could simply involve ensuring that adequate
insurance is maintained on residential property.
Where business loans are involved, covenants may stipulate the need to update the
valuation of security property, e.g. every three years, or to review company accounts
and financial reports regularly.
Most loan offer letters or loan agreements give the lender certain rights to
monitor security.
Business loan agreements often give the lender the right to amend any of the terms and
conditions of the loan facility based on results of reviews. Such a review might lead to a
change to the interest rate charged or required covenants, for example.
3-4.12 CIVMB_LP_T3-4_v3
Part 3: Follow up credit decision

Once a lender is satisfied they have all the information they need to make an informed
and risk-assessed decision, they are in a position to move the application to the end
of the credit process. This is known in the industry as formal approval or
unconditional approval.
What might seem to be a simple task of matching a loan’s conditional approval with a
valuation and ‘tick the box’, may, at the lender’s end, be simply part of a work flow.
As such the timing may be delayed. The question that must be asked as soon as the
receipt of a valuation has been confirmed or any extra information has been supplied is,
‘When can I expect a decision?’
Do not assume the lender is aware of or cares about the deadlines the broker is
working to.
When the formal approval is received, the information supplied by the bank must be
checked. Any error at this point will probably continue into the next steps. For example,
an error in the spelling of a customer’s name will probably appear on all future
documentation, from the letter of offer to the mortgage documents.
Check:
• is the loan amount correct?
• have the loan structure, interest rates, fees and charges been confirmed?
• has the customer’s name been correctly recorded?
• is the security address correct?
• are any special conditions correct, and will they affect the client’s decision to proceed
with an unconditional exchange of contracts?
Once this review has been completed, approval should be conveyed to the customer
and their other professionals as soon as possible.
5 The escalation
A common term to describe a lender’s actions to give a loan application priority over
others in the system is ‘the escalation’.
Once they have identified an unsatisfactory delay with the process with a lender,
the mortgage broker will often contact their business development manager (BDM) to
request a particular file be given priority. There must be a legitimate reason for this,
and it cannot be because the mortgage broker delayed submitting an application.
Some common reasons why a BDM may assist in escalating a file include:
• Proven poor service from the lender — this is where accurate records of
conversations such as dates, times and who was dealt with proves itself. Where a
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delay has been caused that may impact on the client purchasing a property, being
able to state that an application was lodged on a certain date but was not acted on
timeously would normally be a reason for an application to be escalated.
• Where a mortgage broker submits a reasonably large amount of work to a particular
lender and they have a client who is working to a time line which the lender simply
cannot meet in their normal processes, they may allow the BDM to escalate a file to
keep the relationship with the mortgage broker strong.

Completing the loan process and funds drawdown

Once a finance application has reached the final stage of the credit approval
process, the loan and mortgage documents will be issued by the lender or their
legal representative.
Although it has much of the timing pressure associated with a property purchase and to
some extent with mortgage refinancing, this final stage can do much to either cement
the relationship with the customer or damage it. This is because the broker has the least
control over the final stage of the finance application process, because the customer’s
solicitor or conveyancer and/or the lender deal with the legal documentation aspect of
the transaction.
It is therefore as important as ever to be diligent in ensuring all parties follow the
timetable, that the customer is properly informed about progress and what is to be
expected next.
Table 2 Lending stages, activities and participants

Stage Activities Participants
Pre-credit • collect data borrower, broker and lender
• analyse data
• identify solution
• submit application
Credit • receive application lender
• verify data
• assess application against lending guidelines
• make loan decision
Post-credit • determine suitable security lender
• obtain valuation
• negotiate suitable security and conditions
• prepare and send letter of offer
(terms and conditions)
Pre-settlement • sign letter of offer and lender’s borrower and solicitor/conveyancer
security documents
• organise settlement
Settlement • return all documents to lender for settlement lender, borrower and solicitor/
action conveyancer
• attend settlement
Post-settlement • stamp mortgage documents lender and solicitor/conveyancer
• register mortgage
The remainder of this topic focuses on the following stages of the loan and
lending process:
• pre-settlement
• settlement
• post-settlement.
3-4.14 CIVMB_LP_T3-4_v3
Part 4: Understanding post-approval lender

documents
6 The loan offer

Resource 2: Example letter of offer
Review the example letter of offer available in Topic 3-4 of your subject
room and refer to it as you read through the following sections.
Once an application has progressed through the verification, credit analysis and,
where necessary, valuation and negotiation stages, and approval has been granted,
a formal offer is made to the customer.
This offer is made in writing and copies are sent to all parties who have an interest in the
application and eventual loan, such as guarantors. The offer details the terms and
conditions under which the lender proposes to provide the funds.
The letter of offer, once accepted and signed by all parties, forms part of the security
and is the contract between the borrower and lender. Mortgages and other documents
give effect to the contract. However if any dispute arises, courts will view the letter of
offer as the agreement between the parties.
The terminology used to describe the letter of offer varies. Customers may know it as
one of the following:
• terms and conditions letter
• letter of loan offer
• credit facility letter
• credit contract.
In this subject, the letter of offer is referred to as the terms and conditions letter
(T&C letter).
The T&C letter must be prepared according to the customer organisation’s policies,
procedures and guidelines and according to the National Credit Code (NCC)
where applicable. Customer organisation’s policies and procedures will reflect the
requirements of the NCC.
The T&C letter

Although it is ultimately the client’s responsibility to ensure the information in the
T&C letter is accurate, it is the broker’s responsibility to make sure the lender has the
correct information and understands what this information means.
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6.1 Special needs of the borrower

As customers of a credit provider have varying circumstances, it is important to take into
account any special needs they may have related to age, cultural background,
comprehension, disability or language.
For example, a customer may have a difficulty reading and understanding English,
and may require a translator or interpreter. The customer must certify that the lending
documents have been explained clearly and they have a full and complete
understanding of them as explained and certified by a qualified interpreter.
This is a ‘special needs’ condition to be met, and should be detailed in the T&C letter.
Another example may be a legally blind customer, for whom special considerations
would also need to be applied.
After checking that the credit provider is correctly stated, the following are the key
details in the loan contract and documentation.
1. Borrower
It is essential the borrowers’ names are 100% correct. If the name(s), address(es) and
borrower(s) are not stated and spelled correctly, the contract may be legally void,
and at the very least may require that the document be reissued, which will delay
the process.
The name on the mortgage documents that the lender prepares has to match the
name on the transfer that the solicitor will lodge with the land titles office,
otherwise the mortgage contract is null and void.
2. Disclosure and offer lapse dates
The disclosure date on the mortgage contract is the date that the offer or mortgage
contract was issued to the customer as the borrower.
The offer lapse date is set by the bank or non-bank lender and states a time period in
which the offer must be signed and returned to them. If the contract is not agreed,
signed and returned by this date that particular offer of mortgage contract will
expire. This period can be between 14 and 40 days.
Sometimes the customer and the solicitor may require a longer period of time to
review the contract. The lender should be able to grant additional time or simply
reissue the contract.
3. Financial table
The financial table is a part of the contract and states all fiscal details including:
• fees and charges
• term of the loan
• whether repayments are principal and interest, interest only, variable or fixed.
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The lender can change any part of this financial table at any time with written notice
usually of around 30 days. Although each contract will differ from lender to lender,
the financial table should include the following:
• Initial checks
– Amount of credit — it is vital the customer confirms that this home loan
amount is the figure that they agreed on during talks with the broker or lender.
Customers may even wish to reconfirm the stated amount is enough to cover
the cost of buying the home and that customer can afford this amount.
– Annual percentage rate — states which product the customer has chosen and
the current interest rate of that product.
– Repayments — it is easy to assume all the details of the loan contract are
correct. When going over the contract, make sure you and the customer check
the repayments stated in the offer are correct.
• Fees and charges
Some costs will be associated with the mortgage and will be disclosed in the
contract under the ‘fees and charges’ section.
This section will initially seem quite ‘fee heavy’, although not all will be incurred.
The solicitor will be able to verify which of these fees are applicable to the
customer now and later in the term of the mortgage.
Some of these fees and charges include:
• bank fees (application fee, bank cheque fee, valuation fee,
loan maintenance fee)
• government charges (mortgage registration fees, mortgage stamp duty,
transfer duty, stamp duty, etc.)
• other fees and charges (any other unique fee that does not fall under bank
or government fees, such as a search service fee)
• bank discharge fees — only charged if the customer discharges the mortgage
before a term has expired. This may include bank and legal costs of preparing
the discharge and may begin at around $400, but will be ascertainable when
the discharge happens.
Note: Australian lenders are unable to charge exit fees on new home loans
from 1 July 2011. This does not apply to commercial loans, only to residential
investment loans. This does not exclude a lender from charging for their
reasonable legal fees and government charges associated with a change of
lender. The lack of lender exit fees and the abolition of mortgage stamp duty in
normal circumstances has meant that a loan feature known as portability
(being able to move a mortgage from one property to another) would now
rarely be needed.
• government discharge fees — payable to the bank or lender in reimbursement
of land titles office fees and charges if incurred by the lender.
There are also fees and charges that are listed as ‘may or will become payable’.
These are usually fees associated with lender transactions and statements.
4. Purpose of the loan
3-4
The purpose of the loan simply confirms why the mortgage is taken out. This may be
for an owner-occupied property, investment property or a personal investment.

5. Commission
This section of the contract stipulates whether the lender received the business
through a mortgage broker, and how much that broker may be paid in
commission. This disclosure will normally cover both the upfront payment
(the amount a mortgage broker receives for introducing the business to the
lender) and the ‘trailing income’ (the amount the lender pays to the mortgage
broker on an ongoing basis, in return for which the mortgage broker should
contact the customer at least annually to help them review the suitability of the
product and loan they have chosen).
An example of the commission/income a mortgage broker might earn from a
transaction is:
• upfront — 0.5% of the loan amount. From a $250,000 mortgage settlement,
this is $1,250 + GST
• recurring — 0.15% of the loan amount. From a $250,000 mortgage settlement,
this could equate to a payment of $31.25 per month + GST to the
mortgage broker.
6. Credit-related insurance financed by this product
If the customer has opted to pay for additional mortgage protection insurance,
it will be stated in this section. Mortgage protection insurance would cover the
mortgage repayments for a time if the customer could not work due to illness
or injury.
Note: This type of insurance cover is often confused with lender’s mortgage
insurance, the extra cost customers are required to pay if the LVR exceeds 80% of
the value of the security property.
7. Security
It is important to confirm that the security is stated correctly. The security is the
property the customer has offered as security for the loan being requested.
8. Disbursement instructions
The disbursement instructions on the loan contract will outline who is to be paid
what and when.
9. Conditions precedent
Outlines any outstanding elements that need to be paid before confirmation of
the home loan goes ahead. This might include:
• guarantees to provide a certain document, such as a certificate of title in the
case of a customer offering a they already own outright as security
• building and pest inspection report.
10. Special conditions
This section of the contract discloses particular clauses relevant to the mortgage.
They will be referenced to points within the standard terms and conditions
booklet given to customers with the contract.
• The first home owners grant
This is a document that allows qualified first home buyers to access grants and
stamp duty discounts to assist them buying their first home. Although not
strictly a task for which the mortgage broker is responsible, it is common for
the mortgage broker to assist the customer in completing the form and
ensuring it is either lodged with the lender or with the customer’s solicitor or
conveyancer.
3-4.18 CIVMB_LP_T3-4_v3
• Signing the contract

If broker and customer are happy with the detail in the contract, it is ready for
signature in the section below the special conditions. By signing the contract
and returning it to the lender, the customer is officially and legally accepting
the terms and conditions of that offer.
Although it is the customer’s responsibility to ensure they fully understand
what they are signing, the prudent mortgage broker makes sure the customer
has read the terms and conditions booklet and is aware of their commitment
to the home loan.
Effect of the National Credit Code on preparing the T&C letter

The National Credit Code (NCC) places obligations on lenders concerning, for example,
the content and format of the T&C letter, the wording that must appear on the front of
the document and the font size to be used in the document.
Most lenders use templates that comply with NCC requirements. It is recommended
that customer review the requirements of the NCC with regard to the T&C letter.
This will provide customer with additional background information and may help them
to identify instances of non-compliance.
Who is the borrower?

This may seem like a simple question, but too often correspondence is addressed to the
wrong person or company. Any doubt about the identity of the borrower can cause a
delay in the enforcement of the security.
In some cases, failure to clearly identify the borrower has led to lenders being unable to
take possession of or sell assets due to their inability to legally prove the owner’s
identity. For this reason, use of the full name of all parties is essential.
Another issue is that people sometimes change their names, particularly first names,
without taking the correct legal steps. Complying with identification checks will help
ensure that correct names are shown.
If the borrower is a company within a group of corporations, be sure to address
correspondence to the correct entity.
If the borrower is a trustee, ensure this is made clear in the documentation. If customers
are unsure of the capacity in which the person is acting, clarify this before proceeding.
It is advisable to make full use of the verification stage of the process to ensure that all
borrower details are correct and the credit provider database details are accurate and
reflect the same details as the borrower’s.
Sometimes the name that appears on one verification document is different from the
other verification document. For example, where an individual has obtained a drivers
licence using their preferred name, such as a middle name or an Anglicised name, it may
3-4
be different to that on their passport. Further investigations will need to be made and
statutory declarations will need to be provided by the applicant.
It is important that a name is registered on title is consistent with the person’s legal
name. Should an inconsistency be identified, the customer would need to amend the
title to be consistent with their legal name.
With identity fraud being a new, major problem for lenders, appropriate verification
systems in most lending organisations are now in place.

Is this an offer?
If an application is still in the negotiation phase, an outline of the proposal may be sent
to the customer. However, care should be taken with the use of terms such as ‘offer’ or
‘offer letter’. Using words that could mislead the customer may leave them with an
unacceptable offer that is binding on both parties.
It is common practice to issue indicative offers or ‘approval in principle’ letters.
These are often used for personal customers intending to purchase at auction, or issued
to companies that are tendering their lending requirements to several organisations.
These letters may be construed as a formal approval letter. To avoid confusion, include a
statement that clearly says the approval is indicative only.
Note: The use of an indicative approval to purchase a property at auction poses a
higher risk to the customer. At auction, a purchaser is obliged to place a deposit
(generally 10%) when the hammer comes down and proceed to exchange contracts.
Risks could include purchasing a property above the intended price; having the property
not valued at the purchase price; the lender not accepting that particular property after
receipt of the valuer’s report; not meeting other qualification requirements when
seeking a ‘formal approval’; or the terms of the formal offer not being acceptable to the
purchaser. This could mean the purchaser losing their deposit and accruing other costs
in the event they fail to settle on the purchase.
Is the information accurate and clear?

Word processors and computers enable a pro forma document to be used for the
preparation of T&C letters, ensuring a degree of uniformity. However, users must be
careful not to make contradictory statements or omit essential items.
If the loan is regulated under the NCC, any amendments to the basic T&C document
must be made in accordance with organisational policy or have legal sign-off before
being sent to the customer. Usually any major changes would require the issue of a new
T&C letter.
At the time the T&C document is formulated, some details may not be known.
The broker should then include as much relevant information as possible to avoid
misunderstandings.
Finally, always read and check all correspondence carefully before despatching the T&C
letter to the customer, and ensure the document is free from jargon.
Default events
Default is defined as a failure to meet an obligation. T&C letters should clearly specify
what constitutes a default. This should include standard and non-standard events.
Standard default events may include:
• failure to pay the loan or an instalment on time
• failure to observe or perform any undertakings, obligations or agreements
• false, misleading or untrue representations.
3-4.20 CIVMB_LP_T3-4_v3
Non-standard default events are those determined for a particular loan that is unique to
that transaction. For example:
• failure to produce balance sheets for review
• appointment of a new or additional trustee
• failure to provide survey or architect reports to validate construction progress
• failure to maintain a property in good order or have it adequately insured.
Security details
Where security is provided, the T&C document should include:
• full details of the security offered
• full address and details of security property
• full name of the mortgagor.
The security
There should be a full description of the security. Requirements of property offered as
security are discussed in the following section.
Where non-property security is offered, this should be fully and accurately identified.
Property
The description provided of the property offered as security should be carefully
reviewed and checked. This is particularly relevant if, for example, the mortgagor has
several properties, such as 10 units in a block of 20.
A car space or garage associated with a security property may be on a separate title to
the main property. This information should be included in the property description to
ensure that there is no doubt about the intent of the contract.
It is advisable to cross-check property details included in the T&C document against the
valuer’s property description.
Appropriate documentation should be in place to ensure that the mortgagee takes the
complete security. The credit provider may inadvertently ask for or take security over a
property with significantly less value than intended or than necessary to meet their
lending guidelines.
Mortgagor
The mortgagor is the party granting the mortgage over security property; that is,
the owner of the property. The mortgagor and the debtor are frequently but not always
the same person. In some cases, it is a requirement that a limited guarantee from a
person other than the borrower is also supported by a mortgage.
3-4
Ensure that correspondence to the borrower and mortgagor are correctly named and
addressed, whether or not they are the same.
Accurate identification of the mortgagor may only be obtained from searches. A search
should be conducted if there is any uncertainty. Discovery of a previously unknown third
party may, and probably will, impact on the transaction and may lead to reassessment
and restructuring of the loan package.

Gaining the customer’s acceptance

All T&C letters should include provision for the customer to acknowledge acceptance
of the loan terms and conditions. Where there is more than one debtor, each party
must sign the agreement. Some organisations require a further acknowledgement by
sureties (third parties) for the purpose of ensuring full disclosure before accepting
the application.
For companies, the document must be signed in accordance with the company’s
constitution. In most situations, this requires two signatures, from either two directors
or a director and a secretary. It is now possible to have single-director companies,
in which case only one signature is required.
Some larger corporations have registered power of attorney provisions under which
prescribed officers are able to sign. A declaration and a copy of the power of attorney
must accompany the acknowledgement in these cases.
Individuals may also act under a registered power of attorney. In these cases, it is
essential to receive a certified copy of the document to ensure the person with the
power of attorney has the legal capacity to act on behalf of the customer. Prudent credit
providers also require a statutory declaration from the person with the power of
attorney stating that to their knowledge, at the time of signing the documentation on
behalf of the customer the powers granted have not been revoked. Where the
documentation is part of a transaction under the Conveyancing Act 1919 (NSW),
the power of attorney must have been registered.
Some T&C letters have a section where borrowers provide information such as the name
of their solicitor or conveyancer, details of fund disbursements and a nominated account
for fees to be charged.
When a signed T&C document is received, check it carefully to ensure:
• all required parties have signed the acknowledgement
• the signatures are genuine and in accordance with authorities held
• any deletions where the customer must select an option have been initialled by
all parties
• there are no alterations or amendments
• details for payment of fees and charges have been completed, including the
provision of account numbers or the provision of cheques
• disbursement or settlement instructions have been provided.
Witnessing
The credit provider’ mortgagor and witness acknowledgement form is completed by an
independent witness to confirm the identity of the mortgagors. The witness who
completes and signs this form must be the same person who witnesses the signing of
the credit provider’s mortgage document.
The loan and mortgage documents sent from the lender outline who an
‘acceptable witness’ is. Sometimes this must be a solicitor, a justice of the peace or
someone of equivalent community standing and qualification.
3-4.22 CIVMB_LP_T3-4_v3
Amendments to T&C letters and subsequent letters

When the T&C letters are acknowledged and returned by borrowers, check them for
any amendments. Even if the changes have been made by mutual agreement,
they should be issued in writing. If an amendment is unacceptable and the facility is
provided without question, the lender will generally be deemed to have agreed to the
changes and will be bound by them.
After a T&C letter has been issued by a credit provider, it may become necessary to
provide a new letter, additional information or an alteration to a particular point.
Reference to the original document should be made with a clear statement specifying
if the correspondence is in addition to, or a replacement of, the original. In addition,
it should be made clear which terms and conditions have been reviewed and what
items, if any, from the previous document are still applicable.
Disbursement of funds
The disbursement of funds is generally straightforward. Once all documentation has
been successfully executed, the lender hands over the loan funds to the borrower or,
more often in the case of property purchase and on instructions from the borrower or
their solicitor, makes out a cheque payable to the vendor of the property.
3-4

Part 5: Fulfilling pre-settlement conditions

• Building insurance requirements — all lenders will require a customer to obtain a
satisfactory comprehensive insurance policy on the property being offered as
security. This is because the value of the security being taken is dependent on the
existence of the security. This part of the process often stalls and delays a settlement.
• The lender’s letter of offer will normally stipulate an amount for which the insurance
must be put in place. This is often the amount the lender is extending to the
customer. The lender’s name must appear on the insurance document.
• All of this information, including the address, customer’s name, lender’s name,
insured amount, can be found on the certificate of currency. This document is
required before a property purchase is settled. Most major insurers understand the
need for this document and will facilitate its creation.
• Independent legal advice — a common request where one partner in a couple is
helping the other to purchase an asset or borrow money. They are in effect putting
their security up for the other partner’s use and so lenders require a solicitor who is
independent to this transaction to confirm in writing that they have explained the
risks and dangers.
This requirement has been in place for many years, particularly as a result of some
high-profile cases in the 1990s where adult children had convinced their often elderly
and/or non-English speaking parents to sign loan documents allowing the children to
use the parents’ house as security to borrow money. When the adult child failed to
repay the loan and the bank moved to seize the security, the parents claimed they
had not understood what they were signing.
7 Establishing the loan and disbursing funds

Once the customer has formally agreed to the loan offer set out in the T&C letter by
returning a signed copy of the document, preparation and checking of other loan
documentation is required before funds are made available.
The type and extent of documentation required and the exact process that occurs to
settle the loan application and disburse funds will vary depending on factors such as the
type of loan, the particular borrower, the involvement of third parties such as
guarantors, and the lender’s procedures.
All documentation associated with the loan must be thoroughly checked to ensure it
is correct and has been correctly executed in accordance with the lender organisation’s
guidelines.
3-4.24 CIVMB_LP_T3-4_v3
8 Settlement — an overview
The term ‘settlement’ is sometimes used to refer to the drawing of the loan once all
conditions have been fulfilled. Other terms used to refer to the drawing of the loan are
‘loan funding’, ‘loan advance’, ‘loan drawdown’ or ‘loan disbursement’. However, when
used in relation to a new loan, the term ‘settlement’ more often refers to the finalising
of a property purchase transaction. In this section we will use the term ‘settlement’ to
refer to this part of the transaction.
Settlement occurs when the purchaser pays the full purchase price (or the balance
owing for the goods or property they are purchasing) to the vendor. Once this is done,
the purchaser takes possession of the goods or property.
When settlement involves movable personal property (chattels), this is usually a
straightforward process. The funds are paid to the vendor, either directly by the
purchaser, or through a lender or their representative. Transfer documentation is
completed and the purchaser takes physical possession of the property.
In most cases involving chattels, whether borrowed funds are involved or not,
the settlement can usually be carried out by the vendor and the purchaser or
their representatives.
8.1 Settlement of real property

Although there are some similarities, settlement on the purchase of real property is
more complex and involves other parties. Following is a summary of the pre-settlement
stage, which is important in the settlement process.
Pre-settlement
Most purchasers of real property do not sign a binding contract to purchase the property
until they have secured any funds they need to borrow for the purchase. Once the lender
has assessed the application, presented the loan offer and obtained the borrower’s
formal agreement, the purchaser is then usually in a position to sign a binding contract.
Note however that:
• it is possible for a purchaser to sign a contract that is subject to finance being obtained
• most contracts for the purchase of residential property contain a cooling-off period
under state legislation. In most states this is five working days, during which the
purchaser can withdraw from the contract without penalty. The cooling-off period
can be waived if the purchaser agrees, and is not applicable to purchases at auction
or for non-residential property.
Requisitions on title
While the contract signed by the purchaser must have a full title search attached,
3-4
the period between the signing of the contract and settlement — usually between
four and eight weeks — is the opportunity for the purchaser, or more likely their
solicitor or conveyancer, to ask the vendor questions about the property. If questions
are not asked, then the purchaser is considered to be satisfied with the title.
The questions asked are usually standard and a pro forma document is often used.

Transfer documentation
The relevant state department of lands must be informed of the change of registered
owner of the property. The notification process involves lodging a transfer of land
document with the department.
The preparation and lodgement of the document is the responsibility of the purchaser
and this is ultimately executed by their solicitor or conveyancer. It must be lodged as
soon as possible after settlement. The purchaser must pay other applicable costs such
as stamp duty. Stamp duty is usually shown on the front of the document and is paid
immediately before settlement.
The transfer document identifies the owners of the property, as well as whether
ownership will be joint ownership (joint tenancy) or shared ownership (tenants in
common). These different types of ownership have different legal implications.
Statement of adjustment
In preparation for settlement, the final purchase price of the property is adjusted to
allow for expenses that:
• have already been paid by the current owner and for which credit must be allowed
• are owing and payable by the new owner after settlement.
Items usually included in the statement of adjustment include council rates,
body corporate payments and water rates.
A simple calculation, based on the pro rata daily rate for the payment, is usually made
and applied as either a credit or debit to the final price.
Once calculated, a statement of adjustment is issued to the vendor who must approve
the amounts. Until the adjustments are made and accepted, cheques cannot be written
and settlement cannot take place.
3-4.26 CIVMB_LP_T3-4_v3
Example: Settlement statement

Reference: Smith to Vorjek
Property: 19 Light Street, Blansksville
Contract date: 14 March 2010
Settlement date: 20 April 2010
Purchase
Purchase price: $420,000.00
Less:
Deposit ($42,000.00)
Subtotal $378,000.00
Adjustments
Plus Council rates $950.50
Purchaser allows 251 days $653.63
Water rates $754.78
Purchaser allows 64 days $132.34
Less Vendor allows discharge of mortgage fee ($100.00)
Amount due on settlement $378,685.97
Disbursements
State Bank $78,453.24
FK & GH Smith $300,232.73
Amount due on settlement $378,685.97

Note: The above statement is provided for illustration purposes only. Settlement statements will vary
due to the individual situation and the state or territory in which the transaction occurs.
Settlement occurs when the purchaser pays the balance of the purchase price plus or
minus adjustments to the vendor and takes possession of the title documents.
Representatives of the purchaser, vendor and lenders (incoming and outgoing) are
usually present at settlement. It is at this time that moneys are exchanged in return for
the necessary title documents. These documents will differ depending on the title
particulars of the property.
Where an existing mortgage is to be discharged, a representative of the mortgagee will
also be present to collect moneys owing and to hand over relevant documents.
Settlement normally takes place at the vendor’s nominated location or at a location
nominated by the vendor’s lender if there is an outgoing mortgagee (this is discharging a
mortgage over the property that the purchaser is buying).
3-4
If there is a discharge of mortgage to collect at settlement, the incoming mortgagee

(the purchaser’s lender) needs to ensure it is capable of being registered at the state
land titles office.
The transfer of title document must also be examined by all parties to ensure that it
accurately reflects the transaction. For example, the purchaser or their representative
must ensure they are named correctly.

The purchaser or their solicitor or conveyancer must provide an authority for any agent
involved in the transaction to release deposit money to the vendor.
Before the settlement is finalised, all parties must be completely satisfied that all
documentation is complete and properly executed. Once settlement has been
completed, it is usually too late to correct any errors or omissions.
It is not unusual for property settlements to be held up or postponed due to failure to
properly execute a document.
When all parties are satisfied with the documentation and all moneys have been
exchanged, the purchaser, their agent or, more typically, the incoming lender takes
the title document, transfer, discharge documents and mortgage to the land titles office
for registration.
Post-settlement
After settlement the purchaser or their solicitor or conveyancer, must:
• pay stamp duty to the relevant state government department or authority, if it has
not already been paid
• lodge documents regarding the change of ownership with the relevant state
government department or authority if no incoming mortgagee is involved
• notify other parties, such as bodies corporate, owners’ corporations and utilities
providers of the change of ownership.
The lender’s role in the settlement process

The role and responsibilities of the lender in any settlement process will vary depending
on a number of factors including:
• the type of transaction involved
• the type of loan involved
• the documentation required
• whether security is involved.
Table 3 summarises the primary phases of settlement and activities that lenders
commonly undertake at each phase, depending on the loan and particular
circumstances.
The order and type of activities will vary due to a number of factors, including those
mentioned above.
3-4.28 CIVMB_LP_T3-4_v3
Table 3 Primary phases of loan settlement and related activities

Phase Activities
Preparation for Instructions for settlement are received from relevant parties, such as
settlement borrowers, solicitors and conveyancers, and reviewed.
All documents associated with the loan are thoroughly checked to ensure that
the information contained is correct and that the documents have been
correctly executed.
Conditions attached to the loan approval are checked to ensure they have
been met. Supporting documentation such as contracts and insurance policies
are provided and checked, as necessary.
Accounts are opened and periodic payment authorities are obtained for the
payment of loan funds and acceptance of loan repayments, as necessary.
Mortgage insurance is finalised, as required.
The description of the mortgagor is checked against the transfer of title to
ensure accuracy.
Registration of security The loan approval is checked for the conditions relating to the taking
of security.
Appropriate staff are instructed to attend the settlement.
The securities are registered and stamped in accordance with organisational
policy and guidelines and legislation.
All actions taken with regard to the security are confirmed and checked for
completeness and accuracy.
Disbursement of funds Authority to draw down funds is received from approving personnel such as
the relationship manager, credit manager or loans officer.
Funds are distributed in accordance with the loan requirements and
organisational policy and procedures.
Customer correspondence is initiated to advise of loan fund disbursements,
commencement of loan repayments and other matters.
3-4

Part 6: Stamping and registering securities

Although it would be extremely rare for a mortgage broker to have any involvement
with the actual settlement or registration of documents, the following is a brief outline
of what occurs after the loan settles.
A land title is an official record of who owns a piece of land. As this is a state-based
record rather than a federal matter, each state in Australia has its own systems and
processes to administer them.
The land titles office in each state maintains a secure and guaranteed system of land
ownership for property purchasers. Their purpose is to define the legal ownership and
boundaries of public and private land parcels in each state, and to record changes in
ownership and boundaries as they occur.
The land titles office website in each state are as follows:
• ACT, viewed 13 March 2017, <https://www.accesscanberra.act.gov.au>
• NSW, viewed 13 March 2017, <http://www.lpi.nsw.gov.au>
• Victoria, viewed 13 March 2017,
<http://www.dtpli.vic.gov.au/property-and-land-titles/land-titles>
• Queensland, viewed 13 March 2017,
<https://www.dnrm.qld.gov.au/land/titles-valuations>
• Northern Territory, viewed 13 March 2017,
<http://www.nt.gov.au/justice/bdm/land_title_office>
• Western Australia, viewed 13 March 2017, <https://www.landgate.wa.gov.au>
• South Australia, viewed 13 March 2017, <http://www.landservices.sa.gov.au>.
3-4.30 CIVMB_LP_T3-4_v3
Suggested answers
Apply your knowledge 1: Desktop valuations

1. Melbourne, or for that matter most city locations, offers more depth in the sales
market; there are always more purchasers and sellers in a city market than there
are in a rural market. In rural and more remote locations a property may be on the
market for years before a buyer is found.
In addition, the diversity of rural properties in terms of land size, type and size of
buildings, dams, etc., make finding obvious comparisons difficult. A property 5 km
from the city centre is more limited as to number of bedrooms, land size, etc.
2. Lenders are always seeking to limit their risk on a particular transaction, and are
constantly balancing this risk against the cost of potentially reducing it.
The proposed LVR is commonly used to determine this. A loan request at 95% of the
proposed purchase is more of a risk to the lender than one at 70% because if the
housing market drops by 10% the customer’s (and lender’s) equity in a particular
transaction is potentially eliminated where a client has purchased at 95%.
Apply your knowledge 2: Property valuation

1. It is unlikely a bank would accept a valuation from a source other than one of their
accredited valuers, so a new valuation would be ordered in this situation. The steps
would be:
• order the valuation
• follow up the valuation
• receive and review the valuation.
2. Timing — has the valuer been able to get the valuation done in the time required?
Valuation itself — has the valuer used comparable sales that support the value
estimate or actual purchase price of the borrower?
Suitable security — is the property a fair security for the bank to accept?
Considering the very low LVR of under 10%, most lenders would be lenient on the
actual valuation commentary if it was tending to be adverse.
3-4

Topic 3-4: Monitor The Lending Process

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Topic 3-4: Monitor The Lending Process

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The Lending Process

Topic 3-4: Monitor the lending process

Certificate IV in Finance and Mortgage Broking

Part 1: Follow up on lender’s receipt of application ......................................... 3-4.4

1 Follow up information ......................................................................... 3-4.5

2 Using checklists ................................................................................... 3-4.6

Part 2: The valuation process .......................................................................... 3-4.7

3 Collateral ............................................................................................. 3-4.7

4 The valuation — a matter of worth ...................................................... 3-4.8

Part 3: Follow up credit decision ................................................................... 3-4.13

5 The escalation ................................................................................... 3-4.13

Part 4: Understanding post-approval lender documents ................................ 3-4.15

6 The loan offer .................................................................................... 3-4.15

Part 5: Fulfilling pre-settlement conditions.................................................... 3-4.24

7 Establishing the loan and disbursing funds ......................................... 3-4.24

8 Settlement — an overview................................................................. 3-4.25

Part 6: Stamping and registering securities .................................................... 3-4.30

Suggested answers........................................................................................ 3-4.31 3-4

© Kaplan Education Pty Ltd 3-4.1

Table 1 Lending stages, activities and participants

Figure 1 Significant stages in the credit approval process

Topic learning outcomes

© Kaplan Education Pty Ltd 3-4.3

Part 1: Follow up on lender’s receipt of

© Kaplan Education Pty Ltd 3-4.5

2.1 Ensuring the client is informed

Part 2: The valuation process

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The actual process can be broken down into a few steps:

4 The valuation — a matter of worth

4.1 Market value

4.2 Comparable sales

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Apply your knowledge 1: Desktop valuations

2. Why would a lower valuation potentially result in a desktop valuation

Apply your knowledge 2: Property valuation

Resource 1: Review the example bank valuation available in your

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4.3 Reviewing risk and security

Part 3: Follow up credit decision

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Completing the loan process and funds drawdown

Table 2 Lending stages, activities and participants

Part 4: Understanding post-approval lender

6 The loan offer

The T&C letter

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6.1 Special needs of the borrower

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• Signing the contract

Effect of the National Credit Code on preparing the T&C letter

Who is the borrower?

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Is the information accurate and clear?

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Gaining the customer’s acceptance

Amendments to T&C letters and subsequent letters

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Part 5: Fulfilling pre-settlement conditions

7 Establishing the loan and disbursing funds

8.1 Settlement of real property

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Example: Settlement statement