Final answer:
Vulnerability in finance and mortgage broking services can be defined by factors like financial stress leading to undesirable loan terms, the impacts of subprime loans, and practice of securitizing loans without proper borrower vetting. Notorious NINJA loans illustrate extreme cases of financial vulnerability, which during the 2008-2009 Great Recession, highlighted the risks and consequences to individuals and the broader economy.
Step-by-step explanation:
According to ASIC, there are several situations which could define 'vulnerability' in a person that might affect the finance and mortgage broking services. Vulnerability can arise when a person experiences a decrease in their ability to engage in transactions with convenience and safety, which can be caused by various factors such as financial stress, making them susceptible to onerous loan terms.
When financial capital markets are under stress, banks may become more hesitant to make loans, or may engage in practices like offering subprime loans to maintain loan volume. Subprime loans have characteristics that increase vulnerability, such as little scrutiny of the borrower's ability to pay, leading to a high-risk of default. Loan securitization can contribute to this by reducing the incentive for banks to vet borrowers thoroughly since the loan will be sold off.
The infamous NINJA loans, which stand for No Income, No Job, or Assets, are an extreme example of lending practices that target vulnerable individuals, often leading to defaults that have broader economic impacts, as evidenced by the 2008-2009 Great Recession. Vulnerable individuals are therefore at risk of being offered financial products unsuitable for their situation, which can exacerbate their vulnerability and lead to significant financial hardship.