Wednesday, October 13, 2010

No choice but take bank loans

What can I say? This one from real-life experience: "I feel your pain..."
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I REFER to reports that fewer households are defaulting on their HDB loan repayments and would like to applaud the Housing Board's efforts in helping Singaporeans resolve their HDB mortgage problems. The HDB has done a remarkable job in reducing the number of HDB loans in arrears from 33,670 in September 2008, to 26,000 in June 2010, even in the midst of Singapore's worst recession.

The HDB helped 2,000 home owners "right-size" their flats in order to clear their loan arrears and extended an extra loan to 2,700 between January 2008 and June this year to help them downgrade their flats, even though they had already enjoyed two concessionary loans.

However, I would like to know the statistics for HDB bank loans as well, as I understand that there are more than 100,000 outstanding HDB bank loans.

The data appears to suggest that more people are taking HDB bank loans, as the number of outstanding HDB loans has declined from 426,270 in September 2008 to 393,000 in June this year, despite an increase of 50,000 in the number of new and resale HDB flat sales each year on average.

More people may have no choice but to take bank loans because of present and past policies that makes them ineligible for HDB loans.

After the HDB changed its policy on the maximum loan tenure to one based on the average age of the owners instead of the youngest applicant, some many also have opted for bank loans in order to enjoy longer loan tenures and lower monthly repayments. Also, since bank loans interest rates have generally been lower than HDB's 2.6 per cent in recent years, in the first three years, some may also have opted for or switched to bank loans.

The latest policy change allows a second HDB loan for downgraders and those who are not buying a bigger sized flat, provided all the CPF plus accrued interest and half of the cash profits from their previous flat sale are utilised in purchasing the second flat. This may result in the second loan quantum is not sufficient, because the previous flat was sold many years ago with the CPF plus accrued interest already utilised or cash profits already spent. Flat buyers in this situation may also have no choice but to take HDB bank loans.

So, how many HDB bank loans are in arrears over three months and how many flats have been foreclosed since
banks were allowed to do HDB loans on Jan 1, 2003?

As for compulsory acquisitions being "very rare" at slightly more than 1,480 since January 2008, this may just be part of the picture, as most who could not pay would have sold in the open market, with cash-over-valuation, instead of disposal by compulsory acquisition at only 90 per cent of valuation by the HDB.

How many have been forced to sell their homes, with cash and/or CPF losses?



From TODAY, Voices - Thursday, 23-Sep-2010
No choice but take bank loans
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