ST : Act closes loophole on using flats for loans

Jul 20, 2010

parliament

Act closes loophole on using flats for loans

Moneylenders won't get first bite of sales proceeds under amended law

By Jessica Cheam

A HOUSING Bill was sped through Parliament and passed yesterday, with the aim of ending the growing practice by moneylenders who exploit cash-strapped home owners desperate for loans.

The Housing and Development (Amendment) Bill disallows HDB home owners from using the proceeds of selling their homes as collateral for loans, or for the payment of debts, except in approved circumstances.

The new law does not affect loans issued by banks or financial institutions.

Speaking on the urgency of the Bill, National Development Minister Mah Bow Tan told the House that a worrying trend had emerged recently. He said more home owners were pledging their flats to borrow money, and moneylenders were lodging caveats against the flats to claim a payment from the sales proceeds.

Previously, a legal loophole had allowed moneylenders to file a caveat on the flat, which ensures that they get first bite of the proceeds when the flat is sold.

In 2008, there were only 12 registered resale applications with caveats lodged by moneylenders, but the figure shot up to 546 last year; and in just the first half of this year, there were 556 cases.

This trend 'undermines the intention of the home ownership policy which seeks to provide a home for our people for long-term stay', said Mr Mah.

The issue was flagged in Parliament in April by Madam Halimah Yacob (Jurong GRC), who yesterday recounted a case of a 46-year-old cleaner who became homeless after he received only $250 after selling his three-room flat in Yishun and had to camp at East Coast Park.

She also asked if the Ministry of National Development (MND) could assist those who had caveats lodged against their flats in the period before the amended Bill was passed.

Mr Mah replied that the Government cannot change existing obligations under contracts already signed, but that help is available from credit counsellors and financial assistance from the community development councils.

Other MPs who weighed in on the Bill broadly supported it. The last time a Bill was expedited through Parliament using the Certificate of Urgency was during the Sars outbreak in 2003.

Madam Halimah and Madam Ho Geok Choo (West Coast GRC) highlighted the role of irresponsible housing agents who act in cahoots with moneylenders to mislead home owners.

Mr Mah acknowledged this, adding that MND will introduce a new Bill soon to establish a new regulatory authority that will oversee estate agents by licensing them.

He also said HDB will look into a suggestion by Mr Ang Mong Seng (Hong Kah GRC) that a one-week cooling-off period be given to home owners to think about the sale of their flats. Mr Mah reiterated to the House the function of the HDB flat as a long-term asset as well as a shelter.

'Flat owners should not willy-nilly or too freely use it to cash out, to take loans, to finance other uses. Even for very deserving uses...the HDB flat is not the cash cow that allows you to cash out and to spend the money, and the legislative changes that I've introduced today serve to emphasise this point,' he said.

jcheam@sph.com.sg