A friend indeed

The Straits Times

A friend indeed

January 13, 2009 Tuesday, 10:31 AM

Goh Eng Yeow on DBS' move to help home-owners with their instalments.

LAST Monday, I wrote a Cai Jin column raising the possibility of banks bringing back interest-payment only loans for home borrowers who may have problems servicing their mortgages, as the economic gloom deepens.

In the column, I had recalled how DBS Bank came to the rescue of the rescue of cash-strapped Singaporeans by offering them a loan package which allowed them to pay only interest for the first three years.

To many people, the home is their most important asset – the nest where they spend their lives in matrimonial bliss and raised their families. It is not surprising to find the enormous sacrifice they are willing to make, in order to keep their home.

After so many years, I can still recall my parents saving a dollar here and a dollar there to ensure that they had sufficient money to pay off their monthly HDB instalments.

When it came to my turn to own a flat, I found myself doing the same thing. I did my sums to make sure that I had sufficient cash and CPF to pay the monthly housing instalment.

For much of last year, Singapore had been fortunate to escape the full fury of the global financial crisis that had inflicted heavy wounds on bigger economies such as the United States and Britain.

But since late last year, the business climate has turned noticeably chillier and the prospects of more job losses is mounting.

For the middle class, as writer Seah Chiang Nee described in an article last week, the biggest challenge is how to ride out the storm.

Unlike unemployed Indonesians or Thais who can leave for the countryside and live off the land, a jobless Singaporean, who has little or no financial safety net, has no hinterland to escape to.

It is against this grim backdrop of people tightening their belts and wondering where they can get the extra cash to put into their pockets that I got a call from DBS Bank late last week.

They would like to discuss the points raised in my Cai Jin column.

I met Mr Jeremy Soo, the head of consumer banking and Mr Koh Kar Siong, the head of secured lending from the bank yesterday.

Mr Koh assured me that the last thing DBS wants to do is to repossess the flats of home-owners who defaulted on their payments.

What is the point of taking the flat and trying to sell it? It would only dampen the property market further, he said.

The bank would like to help cash-short home-owners to vary the terms of their loan agreement to tide over this difficult period.

And the bank has a battery of options to help borrowers – interest-payment-only scheme for six to 18 months, extending the tenure of the loans for younger borrowers and etc.

The point is to communicate the bank’s desire to help its customers.

I suppose that this is a message which financially-strapped home-owners would like to hear. But no one will get to hear it, unless the bank specifically comes out to say so.

Many cash-strapped borrowers are probably in the dark as to what to do. Should they wait for the last drop of CPF money to dry up before they confess to their cashflow problems ? By then, it may be too late.

On its part, the bank will also have a trying time.

Because of the manner in which our monthly instalments are automatically deducted from our CPF and bank accounts, it has almost no contact with the borrower. There is no way it can tell if any home loan is in danger of defaulting, until the payments stop coming.

Imagine the shock it would have, if it suddenly gets a large number of defaults on monthly instalments, simply out of ignorance ?

I hope that other banks will take the cue from the DBS and encourage cash-strapped customers to open up as well. Don’t wait till the loan turns sour, before acting.

As I have noted many times, we will swim or sink in this financial crisis together.

What a bank can do is to make sure that the umbrella is extended to keep the borrower safe and dry, as the financial storm lashes our shores.

It will give a fresh meaning to the old saying: A friend in need is a friend indeed.