HOUSING AND DEVELOPMENT BOARD FLAT LESSEES (Assistance measures in servicing mortgage loans)

[Mr Speaker in the Chair]

Dr Teo Ho Pin asked the Minister for National Development whether his Ministry will consider allowing lessees of Housing and Development Board flats to restructure their loans when they encounter financial difficulties during the current financial crisis.

Mr Cyrille Tan asked the Minister for National Development (i) how many households are affected by the increase in the interest rates of Housing and Development Board (HDB) housing loans and (ii) what measures will the HDB undertake to alleviate the increased burden of these households.

Mr Goh Choon Kang asked the Minister for National Development (a) what can a Housing and Development Board (HDB) flat owner do if he is retrenched and is unable to service his housing loan or stick to the original repayment scheme; and (b) what assistance the HDB will offer to such home owners.

The Minister for National Development (Mr Lim Hng Kiang): Mr Speaker, Sir, since Questions 1, 2 and 3 are related, can I have your permission to take them together?

Mr Speaker: Yes.

Mr Lim Hng Kiang: HDB adjusted the interest rates for its housing loans on 1st July 1998. The public rate was raised from 3.58% to 4.39% in line with the upward revision of CPF interest rate. The market rate was also increased by 1% from between 5.25% and 5.75%, to between 6.25% and 6.75%. While the interest rate adjustments affected some 440,000 households with outstanding mortgage loans, the increase in the monthly loan instalment was $40 or less for 60% of the households.

HDB has in place various financial assistance measures to help lessees who have difficulties in servicing their monthly mortgage loan instalments. These measures are:

(1) Allow lessee to pay the mortgage loan arrears by instalments within a reasonable period;

(2) Allow lessee to reschedule the mortgage loan repayment period up to the maximum repayment period that they are eligible for;

(3) Allow lessee to defer payment of loan instalments for an initial period of six months. The deferment may be extended for another six months, if necessary;

(4) Allow lessee to convert the loan scheme to an easy repayment scheme. Under this scheme, the monthly instalment for the first five years is set at 75% of the normal monthly instalment. The monthly instalment will then be recomputed from the sixth year to the end of the repayment period based on the outstanding loan at the beginning of the sixth year; and

(5) Advise lessee to include a working family member as a joint owner if the latter meets the eligibility conditions. This will enable the family to use the CPF monies of the new lessee to pay for the arrears.

Dr Teo Ho Pin (Sembawang): Mr Speaker, Sir, may I ask the Minister whether the HDB will levy any administrative charge for those who need to restructure their loans?

Mr Lim Hng Kiang: If the loans are rescheduled, then the whole loan is recomputed.

Dr Tan Boon Wan (Ang Mo Kio): Mr Speaker, Sir, in view of the prevailing difficult economic situation, may I ask the Minister if he would ask the HDB to consider deferring the collection of the principal element in the payment and require the house owner to only pay for the interest element, in the case of families facing financial hardship? In other words, of all the alternatives that the Minister has proposed just now, can I ask that this alternative be also considered?

Mr Lim Hng Kiang: The five measures which I outlined earlier have been very effective. Very few HDB mortgage cases require us to repossess the flats. As of today, the percentage of arrears of mortgage loan instalments has increased only slightly from 1.9% in May to 2.1% in June. So the situation is still very much under control and HDB takes a very helpful approach to the mortgage loans.

Mr J. B. Jeyaretnam (Non-Constituency Member): Mr Speaker, Sir, may I ask the Minister that if, in spite of all these schemes that the HDB has, the flat owner is unable to meet his payments, how much time does the HDB allow before it decides to repossess the apartment under the powers given in the Housing and Development Act?

Mr Lim Hng Kiang: Under one of the schemes which I have outlined earlier, we first give them an initial period of six months and then, if they still face difficulties, we give them a further period of six months. And we work very actively with them to see how they could reschedule the loans, how they can make use of the ballooning scheme, how they can include additional family members to help pay for the loan. So our experience, both in the 1985/1986 recession, as well as all these years, is that servicing the mortgage loans for HDB flat is never really a big problem.

Mr Jeyaretnam: The Minister said that very few apartments have been repossessed. Could he tell us how many apartments were repossessed?

Mr Lim Hng Kiang: I do not have the exact number. But if my memory serves me, probably five or seven last year.

Mr Shriniwas Rai (Nominated Member): Further to the question by Mr Jeyaretnam, would the Minister tell the House what is the percentage of increase compared to last year?

Mr Lim Hng Kiang: As I said earlier, the percentage of loan arrears has gone up by a very small percentage compared to nearly half a million mortgage loans that we administer. HDB takes a very positive and helpful attitude towards all home owners. It is our objective to let them keep their flat, own their flat, and we try our best to help each case that comes before us to reschedule and to make the payments, to stretch it over a longer time. The number of cases where we actually take back the flats is very few.

Mr Goh Choon Kang (Marine Parade): Sir, I would like to ask the Minister, if a flat owner is willing to downgrade, would the HDB help him?

Mr Lim Hng Kiang: This is part of the various measures which HDB has. If a family has over-extended themselves by buying a bigger flat than they could really afford, especially with this economic downturn, and it is quite clear that they cannot continue to service the loan, HDB would help them to sell off their flat if they are eligible to sell it off, and buy a smaller flat.

Dr Tan Boon Wan: Mr Speaker, Sir, eviction notices are fearful messages to receive, especially to a person who is already down in the dumps, enveloped by a sense of gloom and helplessness. Will the Minister ask the HDB to thoroughly investigate each case to assess its merits before eviction notices are issued? Now is the time when understanding and compassion are appropriate. Households will be extremely grateful to the Board for their support to help them overcome their difficulties. I have no qualms with the Board taking harsh actions against those who try to abuse the system.

Mr Lim Hng Kiang: If a family falls behind in its loan repayments, HDB will have to serve the necessary notice. This is the first warning to them, and then they come forward, and we work together. By deferring serving the eviction notice, I do not think you are helping the family adjust to its present circumstances.

Dr Teo Ho Pin: Sir, may I ask the Minister whether HDB is prepared to allow a working member in the family, who is an existing HDB lessee, to be included as a member to pay the mortgage instalments?

Mr Lim Hng Kiang: The HDB's policy on this is very clear. You are only allowed to own one HDB property.

Mr Jeyaretnam: May I ask the Minister what is the position as regards those who are just paying rents as distinct from loan instalments? What is the policy as regards them?

Mr Lim Hng Kiang: Our rental tenants belong to the lower income group and therefore HDB takes an even more sympathetic approach towards these families. Our rental arrears are higher than the loan instalment arrears because these are from the lower income families. But we do not evict people unnecessarily. We take great pains to let them stay in the HDB flats and, unless it is absolutely necessary, we do not evict our rental tenants.