Source : New Paper - 20 Nov 2008
Their failure to cooperate made things difficult: insurer
MADAM Ng and her husband were the only reverse mortgage customers who had exceeded the 80 per cent loan-to-valuation threshold.
NTUC Income said that two other loan accounts were close to the threshold in 2004.
One customer found his own buyer and the sale proceeds were more than enough to cover the loan amount.
Another customer arranged for his children to take over the property and refinanced the loan with another bank.
Income added that Madam Ng and her family were never evicted when repayment was due. The insurer had tried all means to assist them.
Mr Jeffrey Lee, Income’s senior vice-president and chief financial officer, said: ‘The failure by the customer to cooperate made the situation difficult for both parties.
‘In this difficult situation, we would like to point out that the borrowers were never evicted. Ultimately, we had to make the difficult decision to regain the property.’
The trigger point is when the money lent hits the ceiling stated by the insurer - the valuation ratio.
In May 2004, when the ratio was nearing 80 per cent, Income wrote to the couple about the need to reduce the monthly advances.
‘At that point in time, the customer indicated that he would be selling the property,’ said Mr Lee.
‘When the borrower and his wife met up with our loan managers around June 2004, we went above and beyond our obligations and discussed options to help with their financial situation.’
Mr Lee said the options included an offer of employment to Madam Ng and her son, who had recently graduated, as well as suggestions to let out a room at the property.
But these were turned down, he said.
Income wrote to Madam Ng’s husband between January and June 2005 to inform him that the valuation ratio had exceeded 80 per cent and requested for an update on the sale of the property.
It sent more letters between November 2005 and May 2006, Mr Lee said.
‘These repeated requests from NTUC Income drew a blank and sometimes, a muted response,’ he added.
The property was surrendered in August 2006 - two years after the borrower had indicated he would sell it and after Income’s lawyers had sent him a letter.
‘In approaching this case, we would like to emphasise that we exercised great patience in working with the borrower,’ Mr Lee said.
On the borrowers’ claims that they were lay people who were only made to understand simple terms, Mr Lee pointed out that its legal firm which handles its reverse mortgage transactions ‘makes it a practice to explain all terms and conditions to borrowers’.
Mr Lee said that in every instance, it will inform the borrowers about the value of the property with respect to the market price.
And when the valuation ratio is exceeded, Income takes ‘extreme care to explain the various options to the borrowers’.
These include the borrower selling the property, renting out the property to make up for the shortfall in payments or the possibility of their children taking over the loan.
Mr Lee said: ‘In sum, we try to be fair in all our dealings with customers. We also take a long-term view, as evident in the above instance.’
He added that as a social enterprise, Income will extend a helping hand to special cases that are genuine and unfortunate.
Madam Ng said the family was reluctant to sell the house earlier as it would not yield enough money to buy another place.
As for the job offers, Madam Ng said she went for an interview with Income but was not successful in meeting the requirements.
Her son was offered a commission-based job as a financial planner but did not take it up as he got a contract job which had a more stable income.
Madam Ng did not want to rent out a room as her house was old and she would have had to spend money for furnishings.
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