Banks Allowed to Pledge HDB Home Loans to MAS to Improve Access to Credit Amid COVID-19 Economic Fallout

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SINGAPORE: Financial institutions will be allowed to use their collateral in Housing and Development Board (HDB) apartments as liquidity collateral from the Monetary Authority of Singapore (MAS), as part of the government’s plan to improve their access to central bank financing in the midst of the COVID-19 crisis.

The new rule is part of the amendments to the housing and development bill adopted on Tuesday, October 6.

During the second reading of the bill, Minister of National Development Desmond Lee said that although Singapore’s banks have healthy liquidity reserves, better access to credit will strengthen their resilience in the face of current economic headwinds and constitute a “preventive measure”.

“Strong and stable banks are better placed to meet the financing needs of individuals and businesses in Singapore,” he said, adding that the practice of accepting residential real estate loans as collateral for liquidity is an established practice among the country’s major central banks. the world.

“The timely and abundant provision of liquidity by MAS can anticipate and ease liquidity strains in banks, thereby reducing the likelihood of spillovers to the wider economy,” he added.

This change will not affect the rights of HDB apartment owners to their apartments, nor will it change the terms and conditions of their home loans, Lee said. Apartment owners will continue to service their home loans with the approved financial institution during the period the collateral is pledged to MAS.

“In the very unlikely event that an approved financial institution does not repay its MAS loan, MAS will take over residential real estate loans and HDB apartment owners will be asked to redirect their loan repayments to another approved financial institution. appointed by MAS. he said.

The current rate of NPLs remains low and stable at around 0.5% despite the weak economy, he said, in response to MP Louis Ng’s question about the default rate. home loans.

MP Nadia Samdin asked if using HDB loans as collateral would increase pressure on banks to foreclose loans with unpaid arrears. Mr Lee said the new liquidity facility does not affect the way banks manage their residential real estate loan portfolios.

READ: Borrowers will have more time to repay their loans as MAS extends financial relief measures

“As banks now have access to an additional layer of liquidity assurance provided by MAS, their ability to cope with liquidity stress should in fact be enhanced,” he said.

TAKEOVER OF THE APARTMENTS

Another update to the bill is to expand HDB’s power and allow it to make forced apartment acquisitions when owners intentionally make misleading or false statements, or distort facts in the transfer of ownership. of the appartment.

Currently, the agency is allowed to repossess an apartment if the owners commit major offenses, such as unauthorized subletting, or if they were dishonest in purchasing the property.

Mr Lee said the amendment was intended to strengthen HDB’s position to seize the unit as a last resort if the owners “prove uncooperative and refuse to regularize the ownership of the property.”

“Such powers are needed to enable HDB to take proportionate action against the very small minority of apartment owners who flout HDB’s rules, and to protect the limited supply of public housing for those in need,” did he declare.

It will not be used against owners who did not know they had misrepresented or misrepresented facts, Lee assured, in response to MPs’ concerns over whether the compulsory acquisition action is too much. severe, especially if the owner accidentally gave false information in their HDB requests. .

READ: Individuals can request postponement of home loan and payment of insurance premiums amid COVID-19: MAS

“HDB will not exercise its powers to compulsorily acquire apartments lightly, and will generally only consider such action as a last resort in flagrant or serious cases, and when the owners of the apartment refuse to regularize the ownership of the apartment, ”Lee said.

When asked by lawmakers whether the revisions to the law were due to an increasing number of misrepresentation or misrepresentation, Mr Lee replied that it was not.

Instead, the new wording is a preventative measure to deter potential infractions in connection with the transfer of ownership of an apartment, he said.

The third main change in the bill is to increase the number of seats on the board of directors of HDB from 12 to 15.

Mr Lee said this would allow the agency to bring more diverse perspectives and expertise to provide better housing and a better living environment.

“These efforts will benefit from new knowledge, for example, in the areas of new technologies that can help us develop greener, smarter and more sustainable cities, and in the area of ​​health and aging issues to guide our efforts to offer a quality living environment. environment for an aging population, ”he said.

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