November 3, 2009 Tuesday

Drop in HDB home loan arrears

Defaults stemmed by slew of measures, says HDB in annual report

By Jessica Cheam

DESPITE the recession, the number of HDB home loan arrears fell from 33,670 in September last year to 30,770 during the same month this year.

The drop follows the Housing Board's introduction of a raft of measures at the outset of the financial crisis to aid owners at risk of defaulting on their home loans.

The measures, announced in February, included a mix of short- and long-term initiatives such as deferring payments, counselling and - as a last resort - compulsory acquisition.

The HDB also introduced the new concept of 'interim housing', intended for those who may need to urgently downgrade, but have bought a new flat that has yet to be completed.

Departing from its usual practice, the HDB started extending second concessionary loans to downgraders on a case-by-case basis.

Taken together, the measures led to a decline in the default rate from 7.9 per cent of 426,270 loans in September last year, to 7.5 per cent of 409,470 loans for the same month this year.

The HDB's annual report, released yesterday, also showed that the number of applications for rental flats fell 24 per cent - from 4,550 in February to 3,465 by the end of September.

This shaved eight months off waiting times as of end-September compared with a year ago, bringing the wait down to 13 months for those in need of heavily subsidised rental flats.

HDB moved in February to tighten the eligibility criteria for such flats, meant for low-income households, after burgeoning queues became a cause for concern. The stiffer criteria included assessing not just a tenant's income, but also assets like savings and whether family members owned private property.

At a press briefing last Friday, HDB chief executive Tay Kim Poh said the past year had been one 'of the fallout of the financial crisis loomed large'.

He added that HDB's efforts centred on helping groups hit by the downturn. This included boosting the additional housing grant scheme by raising the income ceiling from $4,000 to $5,000 and the maximum grant from $30,000 to $40,000.

Since its launch in March 2006, the HDB has spent $286 million on the scheme, with 18,000 households benefiting.

The building of smaller flats, which slowed in recent years due to falling demand, was ramped up during the year with 1,074 two- and three-roomers launched for sale under the build-to-order (BTO) scheme in order to help households downgrade.

Mr Teo Ser Luck, MP for Pasir Ris-Punggol GRC, said the new measures have helped: 'On the ground, I am seeing fewer cases of residents appealing for rental flats.'

And to help elderly folk monetise their HDB flats, the board launched the Lease Buyback Scheme in March, which pays out a monthly income.

It attracted 425 applications by the end of September, compared with 137 at the end of March. The HDB has approved about 100 so far.

The number of new flats booked reflected the uncertain economic climate, falling to 9,870 for the year ended March 31 from 12,580 the previous year.

But the economy has since brightened and HDB is seeing a pick-up in new flat demand. It recently ramped up its supply of BTO flats and will launch another 4,000 new flats before the end of the year, bringing the total supply of flats to 13,500 units for this year.

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Figures at a glance

# Dip in mortgage arrears

There were 33,670 cases in arrears, or 7.9 per cent out of 426,270 outstanding home loans, in September last year, but only 30,770 cases in arrears, or 7.5 per cent of 409,470 loans, this September.

# Lease Buyback Scheme

There were 425 applications by the end of September, compared to 137 at the end of March, and the HDB has approved about 100 so far.

# Additional housing grant scheme

The income ceiling was raised from $4,000 to $5,000, and the maximum grant was increased from $30,000 to $40,000 for the buying of both new and resale flats.

Since the scheme was launched in March 2006, more than 18,000 households have benefited and about $286 million has been disbursed as of this September.

# More smaller flats

For the year ended March 31, 1,074 units of two- and three-room flats were launched under the build-to-order scheme.

# More rental flats

The rental stock will increase from 42,000 to 50,000 units by 2012. So far, 1,567 converted and new rental flats have been completed.

# Tightened eligibility rules for rental flats

The number of applicants fell from 4,550 in February to 3,465. The waiting time fell from 21 months a year ago to 13 months as of September.

# Lift Upgrading Programme

Good progress has been made, with more than 80 per cent of 5,300 eligible blocks selected.

# Home Improvement Programme (HIP), Neighbourhood Renewal Programme (NRP)

As of September, 14,000 flats have been offered HIP and 33,000 offered NRP. Both programmes received strong support level averaging 90 per cent.