Law of Financial Institutions and Securities

QUESTION3

John Ho applied for and was granted a housing loan of $350,000 from his bank, CitizenBank Ltd, on security of the residential investment property that he purchased with thesefunds.

Required:

(a) Prior to finalisation of the loan, the bank had informed John that it wouldbe necessary to undertake a credit check on him. Identify the type ofinformationthattherelevantreportmightcontain.(3marks)

(b) Explain whether the bank was required to make any type of financialdisclosure toJohnpriorto issuing theloan.(3marks)

(c) Explain the nature and effect of the security the bank has taken fromJohn,and what remedies it could pursue against him in the event hedefaulted ontheloan. (4marks)

(d) Assumeforthispart onlythat John'ssisterhadguaranteedhisloanwiththe bank, having entered into a 'guarantee and indemnity' with it. Explainthe nature and effect of this contract, and in the event of John's default,herlegalright againstthebankifshesatisfiesJohn'sdebt.(5marks)