REPOSSESSION OF HOUSING AND DEVELOPMENT BOARD FLATS BY BANKS

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REPOSSESSION OF HOUSING AND DEVELOPMENT BOARD FLATS BY BANKS: 5.

Mr Hri Kumar asked the Minister for National Development from 2003 to 2006, what is (i) the number of HDB units that had been repossessed by banks and the current rate of repossession; (ii) the number of repossessed units currently being held by the banks; (iii) the average time taken by the banks to dispose of the repossessed units; (iv) the average outstanding amount owed to banks and the average interest rates charged on these outstandings; (v) the number of persons currently in arrears in loan repayments to HDB and the banks; and whether the bank's repossessed units are disposed at market prices and, if not, what is the range of discount to the market price.

The Parliamentary Secretary to the Minister for National Development (Dr Mohamad Maliki Bin Osman) (for the Minister for National Development): Mr Speaker, Sir, as at 31st December 2006, the banks have completed the mortgagee sale of 895 HDB flats financed by bank loans. This works out to about 1% of the 89,000 HDB flats financed with bank loans since the start of bank origination in January 2003.

The rate of bank repossession has fluctuated over the past three years. In recent months, the rate is about 60 cases a month, but the number is on the decline in tandem with the improving economic condition and employment situation.

The banks normally take about six months to sell off HDB flats which they have repossessed. Currently, they have about 550 repossessed HDB flats in hand. As the majority of the repossessed flats are

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the smaller types which are currently popular with flat buyers, the banks have generally been able to sell them off at market prices.

As information on banks’ arrears cases, including outstanding loan and interest rates charged, is confidential, HDB does not have data on them.

As at 31st December 2006, about 7% of HDB mortgagors are in arrears of three months or more. HDB has in place various financial assistance measures to help flat owners who have difficulties servicing their mortgage loans.

Mr Hri Kumar (Bishan-Toa Payoh): Will the HDB consider being more flexible in granting concessionary loans to those who may not qualify because they have already had two such loans previously?

Dr Mohamad Maliki Bin Osman: Sir, as Members of the House will probably know, HDB's policy is to allow one concessionary loan for every household buyer and to allow a second so-called bite of the cherry if they choose to upgrade. I know a lot of Members of the House have faced residents who have difficulties asking for second, third or fourth concessionary loan with regard to those who are downgrading because of financial situation. As I mentioned in the House previously, HDB is very sympathetic to each case. And if we look at the circumstances surrounding the case, we look at the case based on the history of the loans that they have taken and whether, in fact, the loans have been taken based on flats that were purchased direct from HDB or flats that were purchased in the resale market, and so on.

To answer the question, we will continue to be sympathetic to every case that comes to HDB for request for concessionary loan. But, sometimes, we do come across cases where they may not be capable of purchasing the flats at

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that point in time and we advise them on other alternative solutions with regard to their capability at that point in time.

Mr Siew Kum Hong (Nominated Member): Sir, I would like to ask the Parliamentary Secretary, before the market was liberalised for bank loans to purchase HDB flats, what was the number of HDB units repossessed by HDB itself? And in light of this historical figure, does the Ministry think that the 1% repossession rate is acceptable?

Dr Mohamad Maliki Bin Osman: Sir, I do not have the figures for the number of cases that were repossessed prior to bank origination. Then, all loans were with HDB, but we are glad to surface the figures if the Member is interested. Whether the 1% is acceptable or not, I think we have to look at the perspective of why this 1% happened. We have to understand the circumstances surrounding cases that were repossessed. Many of them were repossessed because they were not able to manage their loans at different points in time. We understand that what is important is for them to appreciate the contract that they come into with the banks and the policies that the banks have put in place. One of the most important things today is to ensure that flat buyers are aware of what they are getting into - be more vigilant and be more prudent in their expenditure.

For HDB loans, we have put in place new policies like the housing loan eligibility requirement where they have to ensure that they get the housing loan eligibility assessment done first. The banks are also putting forth similar parallel measures where they will have to get approval from the banks with regard to the amount of loan that they can get from the banks. What is important now is to ensure that the public is educated and informed of the decisions that they are

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going to make. I think it is not to say whether it is acceptable to the Ministry because we will want to ensure that every household who purchases their flat is capable of managing their flat. But if they are really unable to do so, we will try to see how else we can assist them, ensuring that the different solutions are made available to them and for them to be able to decide on all these solutions. Some of the solutions are short term; and some are longer term. What is important is to continue to assist and educate them on what they can do.