http://www.straitstimes.com/archive/...loans-20130908

Fewer defaulting on HDB home loans

Cases of mortgage arrears falling steadily, halving from number of cases five years ago

Published on Sep 08, 2013

By Charissa Yong


The number of people who have been defaulting on their Housing Board (HDB) home loans has halved from five years ago, new figures show.

As of July, there were just over 16,000 arrears cases, according to new HDB data.

There were 18,100 cases of mortgage arrears at the end of last year, capping off a steady decline from 32,300 cases at the end of 2008.

This represents a decrease from 7.7 per cent to 4.9 per cent of all flat owners servicing their HDB home loans.

Such arrears are fewer in non-recession years because fewer people lose their jobs and can pay off their loans, said property consultancy R'ST Research head Ong Kah Seng.

He added that owners are able to better afford their HDB flats, especially after the economy recovered from the financial crisis of late 2008 and early 2009.

Typically, home owners tend to default on their loans due to unforeseen circumstances, such as illness and losing their jobs.

For example, HDB housing counsellor Jeffrey Tee has helped a man who was the sole breadwinner for his wife and daughter, both of whom are wheelchair-bound.

"Previously, he was doing okay. But when he turned 50, he got retrenched and became a security supervisor. Before that, he was a company manager with a monthly income of $4,500," said Mr Tee.

The family became unable to afford the monthly $1,000 repayments for their four-room flat on his new salary of $1,700 a month.

Another case involved a divorcee with two children who was working a part-time job. Her irregular paydays caused her to fall into arrears shortly after buying her three-room flat, said Mr Tee.

The solution for both families, as with many others, was to downsize to a smaller flat. "We try to talk to the residents and explain their financial limits," said Mr Tee, adding that instalments more than half a family's monthly income are untenable. "If your financial situation doesn't warrant (a big flat), at this juncture you need to right-size to a smaller flat. In the future, if you can, nobody will stop you from buying a bigger one."

Since 2008, housing counsellors have helped 4,242 households get HDB loans to get a smaller flat. Of these, 349 obtained their loan last year, less than a quarter of the 1,620 in 2009.

The HDB has about 70 housing counsellors across its 21 branches.

Arrears can take an average of between three and six months to be resolved. Counsellors may also advise flat owners to sublet spare rooms for extra income, or help them work out temporary instalment plans until they find a job. To date, they have referred 826 households to social agencies and voluntary welfare organisations for job placements and other support.

Banks contacted did not reveal their number of mortgages in arrears. DBS Bank's senior vice-president of deposits and secured lending Linda Lee said it has stayed "consistently low" over the years.

"In recent years, the man in the street has increasingly recognised public housing as a very good asset," said Mr Ong. "Owners better manage their monthly mortgage repayments... so overall, this led to a reduction in arrears."

[email protected]