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Thread: MND to study if reverse mortgages should be provided by private market or govt

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    Default MND to study if reverse mortgages should be provided by private market or govt

    The National Development Ministry will study whether reverse mortgages should be provided by the private market or by the government in future.

    http://www.channelnewsasia.com/news/...e/1029158.html

    SINGAPORE: The National Development Ministry (MND) will study whether reverse mortgages should be provided by the private market or by the government in future.

    A reverse mortgage is a loan taken up by the owner using his property as collateral.

    This loan is then repaid with interest upon termination of the loan, or death, typically from the sales proceeds of the property.

    In Parliament on Monday, the government announced it has begun a "serious study" on reverse mortgages as another way for seniors to monetise their flat.

    Reverse mortgages were previously introduced in 2006 by NTUC Income. But the company later stopped accepting new applicants in 2009 because of the low take-up rate. Channel NewsAsia understands that there were just 24 cases during that period.

    The Housing and Development Board (HDB) said the low take-up rate could have been due to factors like a lack of familiarity with the scheme and a preference for the elderly to bequeath their flat to their children.

    Mohamed Ismail, CEO of PropNex, said: "Generally speaking, Singaporeans (being) Asians are still home proud. Many of them would like to hold on to an asset."

    HDB also said the payouts determined by the provider at the time may not have been sufficiently attractive to the elderly.

    There could have also been the fear of outliving the fixed tenure of a loan, a maximum of 28 years in the past, which would have meant owners would have to sell their property to repay the loan.

    Associate Professor Chia Ngee Choon, from the Department of Economics at the National University of Singapore, said: "If the government is to be the provider, they have the advantage of economies of scale -- they are better able to risk pool, they are also able to access a cheaper cost of fund for this product."

    MND noted that in the past, the government did not provide financial assistance or guarantees to commercial providers of reverse mortgages.

    It said it had encouraged banks and financial institutions to offer reverse mortgages for HDB flats on commercial terms, based on providers' evaluation of the costs and financial risks involved.

    Associate Professor Chia said that for the scheme to work, it will also have to provide a lifetime payout.

    She said: "The second expectation is that you will never have to have a negative equity. So at the point when the house is put up for sale, the accumulated loan that has been given to you should be able to be met by the value of the property at the time."

    Some property analysts said communication will be key.

    Eugene Lim, key executive officer of ERA Realty Network, said: "At the end of the day, when you are at their age, a major concern is 'I need money but I do not want my house to be taken away from me'.

    “The key is to explain to them clearly how the scheme works and if there is no hidden agenda and it is explained clearly, then I think there will be a buy-in.

    "At the end of the day, it is how the scheme is explained. It has to be explained in a very simple way, in a way they understand.”

    The government plans to consult and engage industry partners, experts and the elderly as part of the study.

    - CNA/ms

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    Default Couple sue NTUC Income over reverse mortgage deal gone sour

    Jul 28, 2009 - The Business Times
    Chew Xiang

    (SINGAPORE) A couple are suing NTUC Income - in what is seen as a test case - over a reverse mortgage deal in which their property was sold amidst falling property prices.

    Derek Chua, who is in his 70s and his wife Colleen Ng, who is in her late 50s, claim they lost their matrimonial home at Upper Serangoon in 2006.

    NTUC Income demanded repayment of a loan procured in 1997 under a reverse mortgage, and the couple claim they had to sell their home to repay it, according to a writ of summons filed earlier this month and seen by BT.

    The company's chief financial officer Jeffrey Lee said in an emailed statement that NTUC Income had been 'more than reasonable' in trying to help the borrowers and that the couple had been advised on the terms of the deal.

    The couple claimed that the 1997 reverse mortgage valued their house at $2.1 million, and based on a loan to valuation ratio of at most 80 per cent, they were given $495,000 cash to pay off their previous mortgage and payments of up to $2,000 a month.

    In May 2004, the couple were told the value of their house had dropped to $1.1 million and they were in breach of the 80 per cent loan to valuation limit, based on the outstanding loan amount of $926,000.

    According to the couple, they were told to top up $46,400 to bring the ratio down to the 80 per cent limit, and their monthly payments of $2,000 were reduced in steps to $1,500 from October that year.

    A year later, in October 2005, NTUC Income said the outstanding loan, at $1.014 million, exceeded the 80 per cent limit based on the property value of $1.15 million. The couple were told they would get just $300 a month until June 2006, after which the company would 'exercise (its) right to recall the property for auction sale'. The couple could also procure a buyer on their own or find another place to stay, according to a letter from NTUC Income, the couple said.

    By then, the couple owed $1,045,802.91. On June 30, solicitors for NTUC Income sent the couple a letter demanding repayment or else face legal proceedings

    The couple handed over possession of their property on Aug 31, according to their writ.

    The property was later sold for just over $1 million, leaving an alleged shortfall of about $55,000, which the couple were asked to pay.

    They claim that if not for NTUC Income's letter, they would not have sold the property - which in 2008 was again sold for about $1.5 million, the writ says.

    NTUC Income has yet to file its defence.

    The couple have engaged senior counsel Michael Khoo through legal aid. NTUC Income is represented by Rodyk & Davidson.

    http://www.propertyguru.com.sg/prope...mortgage-deal-

  3. #3
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    Wah, landed pty, 1997 is $2M. 2002, drop to $1M. 5 yr, 50% drop.

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    Quote Originally Posted by matrix0405 View Post
    Wah, landed pty, 1997 is $2M. 2002, drop to $1M. 5 yr, 50% drop.
    nothing is impossible

    just be prepare to see more interesting events/measures coming onstream

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    Quote Originally Posted by jwong71 View Post
    nothing is impossible

    just be prepare to see more interesting events/measures coming onstream
    Only developers who bid very high price in recent 1-2 years or those holding a lot of unsold units in CCR have a lot to fear.

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    If the property price appreciates, will NTUC Income give extra $ to the couple?

    Property prices and rental will always appreciate in the mid-long term. Reverse mortgage is a very lousy scheme that robs you of your potential profit.

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