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