Tuesday, November 18, 2008

33,000 default on HDB Loan....

UPDATE: There is indeed some manifestation of the socialist heart as I watched "Today in Parliament". A minister explained that those who can't pay are not immediately evicted. They are allowed to stay until all avenues are exhausted. Unfortunately, in recent years many HDB owners were encouraged by low interest rates to take up bank loans for the HDB. How will the banks handle default for HDB flats? Also, those who restructured their loans in recent years reverse the priority of the banks and CPF for repayment - if they foreclosure your home, banks get paid first. We know the banks are quite brutal for private property - your property going under the hammer once you default. If you have negative equity, you end up still owing the bank after losing your home.
In the US, in many states, the 1st time home buyer can just return his keys if he cannot service his loan. The bank is required by law to forgive his entire housing debt. This pushes some responsibility back to the bank to prevent overlending during housing bubbles. Unfortunate, they did overlend and they(banks) now swallowed this poison pill. In many states (in US), there is a homestead law which prevent the banks from foreclosing and seizing your assets for default on unsecured debt. This form of protection is not available in Singapore. In Singapore, banks are kings. .....not just in the minibond saga...all our laws favor the banks. It is great to be a bank in Singapore. If I find time, I'll write about the other problem caused again by MAS deregulation - unsecured debt. This will be a big problem in the coming months as the recession worsens.
33, 000 households have missed their HDB mortgage payment for 3 months. 420,000 households have outstanding HDB loans.This means the default rate is aboutt 8% If HDB flats are affordable, why are so many people defaulting on their mortgages. Do we need an American style rescue package for these home owners - forgive part of their loans, lower interest rates and easier repayment terms.
In the US housing crisis, 5 million American home owners are affected out of a population of 300M people. We have about 3.5M people (residents), the 33K people who cannot afford to pay for their HDB + unknown number who cannot pay for private housing means we have a problem that has the same scale as the subprime crisis in terms of people not being able to service their mortgages.

The last time we compare the actions/performance of the PAP vs HK govt on minibonds - we find the situation quite embarassing for the PAP. Given the actions of the American govt to help households with their mortgage payments, if we start to compare...again it is "do-nothingness" vs proactive govt. 10,000 people losing their lifesavings can be treated like it is no big issue....33,000 households not able to pay HDB probably isn't a big issue for the PAP govt.
33,000 flat owners owed HDB arrears of three months or more
Long term measures to help HDB mortgage defaulters is best solution By Cheryl Lim Mei Ling, Channel NewsAsia SINGAPORE : The Housing and Development Board (HDB) will continue to keep tabs on flat owners who default on their HDB mortgage payments. It stressed that long term measures to help these owners manage their mortgage payment is the best solution, and that compulsory acquisition of the flat is a last resort. As of October 2008, some 33,000 flat owners owed HDB arrears of three months or more. They make up less than 8 per cent of the 420,000 households with outstanding HDB loans. Giving this update in Parliament on Tuesday, Parliamentary Secretary for National Development Mohamad Maliki Osman said home owners should buy within their means. But he recognised that there are some who are affected by the economic downturn and one option for them is to downgrade to a smaller unit. More 2 and 3-room HDB flats will be coming on stream next year to cope with the growing demand for smaller flats. Dr Maliki also said heavily subsidised rental flats should be given to those who are in dire need. - CNA /ls


barttan said...

To downgrade from say a 4rm flat to 3rm, there will be a resale levy so whats the point of building more 2 or 3rm when turn left you are caught with 'some' policy and turn right also same thing. Sometimes, I wonder, have all this high flyers ever sit down and brainstorm for a better solution or just patching whenever some problems pop out.....

Anonymous said...

I am waiting with glee to see the property market crash and blood on the streets. Someone said it before, any real change in Spore will only happen through financial shocks. We are starting to see a series of them:, lehman minibonds, town council investments, stat board investments, and of course the perennial opaque GIC and Temasick.

Sgcynic said...

Long term measures to help HDB mortgage defaulters? Let's see...
1) Lengthen the mortgage repayment to 40 years.
2) Allow children and grandchildren to cover the mortgage loans
3) Job retraining - work two jobs instead of one

Clear eyed said...

Singaporeans are shock-proof. Even a river of blood on the street will not make them take the first step towards change.

yamizi said...

Will homeless and penniless increase the rate in crime?

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yes yamizi, i think so.

i once read an interview of this millionaire from england. he grew up as an orphan. in his teenage years he lived from train stations to train stations. there was one time, when he was so hungry that he had to steal food. he wasn't proud of what he did but he said at that time, he was so hungry he had to do it to survive.

If you think about it, where does a homeless and hungry person turn to for help in Singapore?

Some rich people profess that there are many hands to help these unfortunate people in Singapore.

Well only time will tell. My guess is that crime rates will go up few years from now unless these people commit suicide.

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Singapore is doing great. The banks are doing well too - including the Overseas Chinese Banking Corporation (OCBC). Really!

So, please, do not let all these news influence your decision to invest or to park your money in Singapore.

Anonymous said...

You know what is my greatest fear? When election time comes along, the garmen throw a few goodies to us, all is forgotten and they continue with their rule.

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in Sg, election is an illusion of choice and release valve for those innocent-eyed Sinkies. The despots and their cronies would have fixed any viable alternatives so that you won't have a real choice. They do not even put up pretences any more.

Anonymous said...

Over the next 6 to 9 months, the chances of this financial crisis degenerating into social unrest (anarchy even) in some countries is quite high.

When that happens, our MSM can surely be counted upon to feature the rioting scenes over and over, on front pages of print media as well as during tv news. The people will be frightened and wish for 'stability' to continue. The gahmen calls a quick election. Presto! Another 5 years in the bag for the miw, with a bigger 'mandate' to boot. Seems quite likely, doesn't it?

Anonymous said...

Hi Lucky! No update yet on Stat Board investment on structured products?

Anonymous said...

HDB decision to stop building 3-room flats is hurting flat-owners now. Yet they insisted it's the owners who bought flat without prudence. Very sad

Anonymous said...

i wondering if this is like the era of water margin where all the good guys (not in the govt) are suppressed by the cronies?

micky said...

Don't worry, here'll be many foreign talents in SG soaking up these defaulted HDB properties.

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