HDB to help home owners avoid defaults

Source : Straits Times - 7 Feb 2009

THE Housing Board has prepared a range of measures to help the increasing number of home owners who are defaulting on their home loans in this downturn.

The steps include a mix of short- and long-term measures such as deferring or postponing payments, counselling and, only as a last resort, compulsory acquisition, said National Development Minister Mah Bow Tan yesterday.

The moves come as evidence mounts that more owners are getting into difficulties as the number of job layoffs increases.

MPs Amy Khor (Hong Kah GRC) and Teo Ser Luck (Pasir Ris-Punggol GRC) told Parliament there has been an increase in appeals by struggling home owners at their Meet-the-People sessions.

‘This number will certainly only increase,’ said Dr Khor.

One key measure is that the HDB can reduce or defer payments for up to six months as home owners adjust to tougher times.

However, Mr Mah said this is not a solution as the longer the payments stretch, the more interest will accumulate.

‘More seriously, households may be lulled into a false sense of financial security, and reduce their resolve to settle their financial problems decisively,’ he added.

Citing numbers from the last recession in 2003, Mr Mah said the HDB allowed ‘very long periods of reduced repayments’.

Today, there are some 6,500 households in arrears for periods of more than two years; some are in arrears for three or four years even.

This is why the HDB has shifted its focus from short-term relief to long-term sustainable solutions.

These steps include downgrading. To this end, the HDB is prepared to depart from usual practice and extend a second concessionary loan to downgraders on a case-by-case basis, said Mr Mah.

Many MPs, such as Mr Charles Chong and Mr Teo from Pasir Ris-Punggol GRC and Mr Baey Yam Keng from Tanjong Pagar GRC, have called for this step. Under current rules, such loans are only for upgraders.

‘There’s no overall change in policy but recognising the situation, HDB will be more flexible to help those in difficulty to get another loan,’ said Mr Mah.

The HDB will also source for low-cost flats, either from its existing stock or from the open market, for ‘exceptional cases of financial difficulties’.

It is introducing a new concept of ‘interim housing’, which is essentially for those who may need to downgrade urgently but have bought a new flat that has yet to be completed.

The HDB will refer such cases to its managing agent, for temporary rental of a room at below market rate, while their smaller flat is being built, said Mr Mah.

Although downgrading is a tough decision, Mr Mah stressed it is ‘ultimately in the best interest of the family as it allows them to get a fresh start to rebuild and recover from their financial setback’.

Gardener Tan Suay Yan, 52, is one person who has had to make this difficult choice.

She and her husband, a 59-year-old cook’s assistant, bought a five-roomer in Woodlands in 1999 for $210,000 but soon started defaulting on payments as he was in and out of jobs.

Madam Tan told The Straits Times that HDB officers advised her on her options for a long time and finally, after an eight-year grace period, the family bit the bullet and downgraded to a $90,000 two-room flat in Toa Payoh.

Today, they are debt-free and own their own home. Madam Tan wrote a thank-you letter to the HDB in Lianhe Zaobao newspaper, which was cited by Mr Mah in Parliament yesterday.

Such advice and counselling will continue to be offered by the HDB, he said.

HDB officers made more than 60,000 house visits on arrears-related matters last year and conducted over 35,000 interviews and financial counselling sessions.

This is a ‘complex and painstaking task…but HDB will press on, as we want home owners to find a viable long-term solution,’ said Mr Mah.

He also urged home owners to be realistic and spend within their means. ‘And we will do our best to support you every step of the way.’

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The HDB is introducing a new concept of ‘interim housing’, which is essentially for those who may need to downgrade urgently but have bought a new flat that has yet to be completed. The HDB will refer such cases to its managing agent, for temporary rental of a room at below market rate, while their smaller flat is being built, said Mr Mah.