Consumer Property Financing
Security

In accordance with the Facility (home financing) Agreement and as stated in your Letter of Offer (LO), you are required to take specific Takaful policies for the purpose of fulfilling your financial obligations towards MBSB Bank and to help you cover damages affecting the concerned property. These policies are:

1. Mortgage Reducing Term Takaful (MRTT) is to cover the outstanding balance of your financing amount (profit + principal + charges and legal fees) in the unfortunate event of death or permanent disability of the covered member(s). MRTT coverage has to meet the following minimum requirements:

   • For financing amount below RM250K: 100% coverage for full financing tenure;
   • For financing amount RM250K to RM500K: 70% coverage for a minimum of 10 years; and
   • For financing amount above RM500K: 50% coverage for a minimum of 5 years.

   Thus, coverage of a Financing Amount of RM 600,000 = 600,000 x 70% = RM 420,000.

   It should be noted that the above coverage figures consist of different tiers lasting for different periods.

   MRTT is a single payment contribution. The basic amount of your MRTT contribution will be included in your loan from MBSB Bank, if the Takaful provider approves your application. In the case of rejecting your Takaful application, MBSB Bank reserves the right to withdraw the whole facility.

   Family Takaful may substitute MRTT, with the same conditions and schedule. However, it will be your responsibility to settle the contribution payments of the said Takaful throughout the financing term.




2. Fire Takaful is also required to cover property damages caused by fire during the financing term.

For the above required policies, you shall assign MBSB Bank as the Sole Beneficiary of these policies. This is to establish the rights of MBSB Bank to the proceeds payable under these policies. In addition, you will also commit to the following:

• To make the payments of these policies regularly and on time;
• Not to cancel any of these policies without the prior written consent of MBSB Bank;
• Not to do any act, whether by omission or commission, that render any of the policies void or voidable; and
• To lodge the concerned policy certificates in MBSB Bank.

In the case that damage is inflicted on the property, where the compensation received under the respective Takaful policy does not fully cover the damage fix, it is your responsibility to bear the difference between the actual fix cost and the received compensation.

In the event of default, MBSB Bank may terminate any of the Takaful plans, and subsequently claim the surrender value of the respective policy.

On a case-by-case basis, MBSB Bank may require you to have a guarantor. This usually happens when your credit score is not up to the level needed for granting you the loan. A guarantor commits to make the payments you are in default of, and hence boosts your chance of getting the loan.

In simple terms, the financial obligations of the customer get transferred to the guarantor, when the former defaults, or more accurately when the bank is unable to collect the due payments from the customer.

The extent of the liabilities of a guarantor is detailed in the contract of guarantee, signed by the guarantor with the bank. Accordingly, it is quite important for the prospective guarantor to carefully read and understand this document, and to seek legal advice if needed.

When the financial obligations of the customer change, so do those of the guarantor. Accordingly, if the customer seeks an increment to the financed amount, an additional guarantee, signified by another guarantee contract, has to be accepted and signed by the guarantor respectively.

The guarantor becomes liable for making the payments skipped by the customer when the bank issues the guarantor a letter of demand to this effect. The guarantor should be aware that the bank can demand both the customer and the guarantor at the same time, and upon skipping a single payment. Alternatively, the bank is under no obligation to seek the payment from the customer and then from the guarantor in a sequential manner.

The most obvious risk is for the guarantor to default as the customer did. This could lead to the following:

• When the guarantor defaults, or does not make the payment on behalf of the customer for whatever reason, his credit will be degraded, which may adversely impact his/her ability to secure a loan in the future.
• If the guarantor passes away, his liabilities do not. They will move to his heirs. In other words, the heirs of the deceased guarantor will continue to play his role.

Sadly yes. If the debt is equal to or more than RM50,000 as defined in the Amendment of 2017 made to Section 5 of the Bankruptcy Act 1967, the bank can take bankruptcy action against the guarantor to recover the debt. However, the bank can commence such action only after proving that it has exhausted all avenues to recover debts owed to him by the customer.

The final say to accept and to release the guarantor resides with the bank.

• Even though many people can be guarantors, the bank may want to see strong relationship with the customer, such as being a parent or a spouse.
• Unless the loan is paid in full, banks do not usually allow the release as it does not serve their interests.

• Sign a letter of indemnity with the customer, which will enable you to sue him/her for the money paid on his behalf. Nonetheless, it should be considered that the customer already failed to pay the bank. You may have the same experience with him.
• Knowing that there is not much to be done to get out of a guarantee if the bank does not agree (which is the norm), you should make sure that you understand the extent of your liabilities and that you can make the payments when demanded.

• “Guarantors,” by Bank Negara Malaysia, viewed at bankinginfo.com, on Mar. 28, 2020.
• “The Risk of being a Guarantor,” by LoanStreet, viewed at loanstreet.com, on Mar. 28, 2020.