CPF SAVINGS/CONTRIBUTIONS (Use for financing bank loans on mortgages of private residential properties)

Mr Heng Chiang Meng asked the Acting Minister for Labour whether a Central Provident Fund member, having borrowed from a financial institution, such as a bank, based on a mortgage on his private residential property, will be allowed to use his CPF balance and/or contributions to repay and/or finance his bank loan.

Mr Lee Yock Suan: Mr Speaker, Sir, the fundamentals of the CPF scheme are being reviewed. The study will also examine whether CPF savings could be allowed to refinance a property which a CPF member has already purchased with cash. At present, this is not permitted.

CPF funds can presently only be used for the purchase of a residential property or for servicing a loan to finance its purchase. The CPF Board has first charge on the private residential property purchased with CPF funds in order to protect the member's CPF savings. A member cannot use his CPF savings to service a mortgage loan for purposes other than the purchase of the property.

Mr Heng Chiang Meng (Jalan Kayu): Sir, would the Acting Minister agree that there is presently nothing in the regulations to prevent a member from selling his present house to repay the original bank loan, and then to use his CPF funds to buy a new house?

Mr Lee Yock Suan: Yes, it is true that a CPF member can sell his present property and buy another one with CPF funds. In the process, of course, he has to pay commission charges, conveyancing fees and so on. This is one reason why the CPF Committee of my Ministry is looking into the question of whether we should allow CPF funds to be used to refinance the purchase of a property. This matter is still under consideration.

Mr Heng Chiang Meng: Does it mean that the Minister will look favourably on such circumstances, especially in times like this when people, having mortgaged their house to finance their business and who are faced with problems of bankruptcy, now require their CPF funds to pay off their business loans?

Mr Lee Yock Suan: Mr Speaker, Sir, I think we should wait for the Committee to complete its study. But the primary objective of the CPF Board and the Government is to protect the member's CPF savings for his old age. So I am not so sure whether it is a good idea to release his entire funds so that he can pay off his creditors, because in the process he will have nothing left. At the moment, the CPF savings, whether they are held with the Board or held against properties, are protected against creditors. So, in the event of bankruptcy, they cannot be seized. I think we have to be very careful here.

Mr Tang See Chim (Chua Chu Kang): Sir, can the Minister tell the House when he expects the study of the Committee to be finalized so that he could report to the House?

Mr Lee Yock Suan: Before the end of this year, Sir.

Mr Heng Chiang Meng: Sir, would the Acting Minister say that, in the circumstances that I have just described, the member's CPF funds will still be secured by the first mortgage, albeit this will be on a new property that he has purchased.

Mr Lee Yock Suan: That depends on the circumstances of the case. What I painted was a scenario where the member has been owing a lot of money. And there are cases of bankrupts asking whether they can use their CPF funds to settle their loans. So against this, our objective is to protect the member's CPF savings.

Mr Heng Chiang Meng: May I ask the Acting Minister whether he will consider a particular case if I submit the particulars to him?

Mr Lee Yock Suan: Mr Speaker, Sir, I do not understand the Member's impatience. If the case has been referred to the Board, we will look at it under the present regulations. The Committee will look into it seriously and consider all the factors. So please be patient.

Mr Heng Chiang Meng: Sir, does the Minister not realize that patience may kill the patient?

Mr Speaker: Next Question.