Round-Up Speech by Minister Desmond Lee on the Housing and Development (Amendment) Bill

Oct 6, 2020

Allow financial institutions to use residential property loans involving HDB flats as collateral for MAS’ liquidity facilities

Ms Cheryl Chan asked if the MAS SGD Term Facility is a temporary or permanent facility, and if MAS can direct the banks to on-lend the funds borrowed from MAS to local businesses instead of channelling them to overseas investments.

The facility is a pre-emptive measure, to strengthen the resilience of the banking sector given the significant economic headwinds created by COVID-19. The facility will remain in place throughout the COVID-19 crisis. After the crisis is over, MAS will review if the facility needs to be retained. 

The intent of the facility is not for the banks to directly on-lend the funds borrowed from MAS. Instead, the facility serves as a backstop that will provide banks with greater certainty of funding. It provides the banks assurance, and in doing so supports their lending to businesses and households during periods of heightened market uncertainty.

Ms Cheryl Chan also asked if HDB flat owners will be notified when banks pledge their HDB loans to MAS. Ms Nadia Samdin asked about the administrative implications on flat owners when MAS takes over the HDB loans, and if the terms of HDB loans from banks will stay the same. 

The borrower-lender relationship between the HDB flat owner and the bank as set out in the terms and conditions of the housing loan remains unchanged when the bank pledges the HDB loan to MAS. HDB flat owners continue to service their HDB loans with their respective banks and the bank still retains the legal title to the loan. There is therefore no change in the relationship between banks and the flat owners, and therefore MAS will not require the bank to inform the HDB flat owners that their loans have been pledged to MAS as part of a portfolio of loans, both private and public (residential loans), in return for this facility.

But in the highly unlikely scenario where a bank defaults on its loan from MAS, MAS will take ownership of the HDB loans, and will appoint an agent bank to administer the loans on MAS’ behalf. Under this scenario, HDB flat owners will be promptly notified to re-direct  loan repayments to the agent bank. This is an administrative process, and the terms and conditions of the HDB loans, including the interest rates charged, will not be affected in the process. Again, we emphasise that this is a very unlikely scenario, as banks in Singapore are well capitalised and maintain healthy liquidity buffers and this is indeed a pre-emptive measure.

Mr Louis Ng shared his concerns that increased default rates on home loans during periods of economic uncertainty may increase the likelihood of banks defaulting on their loans from MAS, and asked about the current and projected default rate of bank loans on HDB flats. The current housing non-performing loan ratio remains low and stable at around 0.5 per cent. The majority of borrowers are able to service their mortgages and should continue to avoid further build-up of debt. But we will keep a close watch on the situation as the crisis unfolds.

As Mr Ng had pointed out, economic and employment conditions remain challenging for many households, and we can expect homeowners to face difficulties in the period ahead. For borrowers in financial difficulties, MAS has worked with financial institutions on further support measures that allow them more time to resume their monthly mortgage instalments. These measures, which were announced yesterday, will help ease individuals’ cashflow while gradually encouraging them to resume their home loan repayments in 2021. This complements HDB’s own loan arrangements which were announced a couple of days before MAS’.

Ms Nadia also asked if the use of HDB loans as security will increase the pressure on banks to foreclose loans with outstanding arrears. The MAS facility does not impact how banks manage their residential property loan portfolios. As banks now have access to an added layer of liquidity insurance provided by MAS, their ability to deal with liquidity stress should in fact be enhanced.  

Finally, Ms Cheryl Chan asked how the proposal would interact with various scenarios relating to material changes in the ownership of the flat. In short, there is no impact on how such cases will be handled. The existing HDB policies will continue to apply. The banks will also continue to administer the loans based on their existing procedures.

I have sought to respond to Members’ queries regarding the amendments made to enable MAS’ SGD Term Facility. If there are any further technical queries regarding this or to the financial system, my colleague Minister Ong Ye Kung will be here to address them. 

Extend ability to compulsorily acquire flat for transfer of flat ownership

Next, let me address the points made regarding compulsory acquisition.

Ms Nadia Samdin asked if this would excessively penalise flat owners who may be innocent and unaware of the false statements or misrepresentations of fact. 

I would like to assure the Member that HDB will not exercise its powers to compulsorily acquire flats lightly, and will generally only contemplate such action as a last resort for egregious and severe cases, and where the flat owners refuse to regularise the ownership of the flat. Before initiating acquisition action, HDB will investigate each case thoroughly. Depending on the circumstances of each case, HDB may instead consider imposing a financial penalty or issue a warning. HDB will consider the interest of the parties involved, including any non-complicit owners and occupiers of the flat, and may allow the flat to be sold on the open market if there are extenuating circumstances.

The statutory appeal channel to the Minister under Section 56 of the Act serves as yet an additional safeguard for the interests of potentially non-complicit owners. 

Mr Louis Chua asked about the rationale for this amendment, and, like Ms Cheryl Chan, also asked if there had been a significant rise in false statements or misrepresentations in the transfer of flats. 

I would like to clarify that this is not the case. By and large, HDB’s existing process and system checks are able to reduce such occurrences. In fact, HDB had found around 10 such cases in the past three years (in relation to purchase or transfer of flats). They principally revolve around false statements or misrepresentations about eligibility, about ownership of other properties both locally and abroad, and of course other statements that are material to the transfer or to the purchase. This is thus a pre-emptive move to deter any such potential infringements in relation to the transfer of flat ownership. 

Mr Louis Ng asked about avenues for owners to amend unintentional or non-material errors in their applications to HDB. I would like to assure the Member that we will apply this provision to those who intentionally make misleading statements or misrepresentations.

He also asked about the specific definitions of the terms “acquisition” and “transfer” in the amendment. The Member is right that the definition of the term ‘transfer’ in Section 49 applies expressly to that section only. Section 49 sets out the various transactions for which HDB may act for parties who do not engage their own solicitors. Such transactions include, among others, the purchase, sale, transfer of ownership interest, and surrender of HDB flats. The definition of ‘transfer’ in Section 49 is therefore purposefully broad, to cover the range of transactions where HDB can act for, some of which do not apply to the intended amendment in Section 56. 

For purposes of the Section 56 amendment, we should take the ordinary meaning of the terms ‘acquisition’ and ‘transfer’. To explain, the term “acquisition” in this amendment refers to the obtaining of an interest in the ownership of the flat by an incoming owner. The term “transfer” here refers to an interest in the ownership of the flat being passed to an incoming owner. Let me use an example to illustrate. When a couple includes their child as a co-owner of a flat, the child acquires an interest in the flat, while the parents transfer an interest in the flat to the child.

Enhance HDB’s ability to manage its Board appointments

Finally, Ms Cheryl Chan and Mr Louis Chua raised some queries with regard to the amendments relating  to the HDB Board.

As I mentioned earlier, the HDB Board plays a strategic role in guiding the development of HDB. When appointing Board members, we seek a diverse representation of perspectives to cover the breadth of its work. In fact, with the current Board size, HDB has had to make trade-offs in selecting and bringing on expertise. 

On the Member’s question as to whether HDB had considered enlisting the help of external consultants or industry experts instead, I would like to share that HDB does indeed engage such experts when dealing with specific projects or issues. For example, HDB has several advisory panels comprising industry experts to guide HDB in technical areas such as Architecture, Research, and Civil and Structural Engineering. Such panels are useful when HDB needs advice in more specific and technical areas. But they will not be able to replace the Board’s role in offering strategic guidance and contributing diverse viewpoints, including beyond their core areas of expertise, to guide HDB’s overall development. 

With the expansion, HDB’s Board size will be comparable to that of other Statutory Boards such as the Land Transport Authority (LTA), the Central Provident Fund Board, and JTC Corporation.

Mr Louis Chua had asked about the appointment of a deputy chairman, prior to the appointment of Dr Lily Kong as Deputy Chairman with effect October 2020. Prior to appointment, at the start of each term of HDB’s Board, there would be appointed in HDB’s Board, a temporary chairman who would, for all purposes and intents, perform the role of a Deputy Chairman in managing the Board, and holding Board meetings in the absence of the Chairman. This amendment brings the structure and composition of the HDB Board in line with other Boards, such as JTC, URA and LTA. 

Other issues

Finally, let me address an issue that is unrelated to the Bill but is very close to Mr Louis Ng’s heart. This Bill relates to Credit, Compulsory Acquisition, Courts and Candidates for the Board – four “Cs”, but does not include cats. Nevertheless, let me address Mr Louis Ng’s points about the need to review HDB’s policy that disallows the keeping of cats in HDB flats. Let me first declare that I am a cat lover, and I have had four stray cats in the course of the last 15 years.

HDB’s pet ownership policies seek to strike a balance between residents who are pet lovers and those who are not. We will continually review, and I assure the member that we will review and update our pet ownership policies to ensure that they are effective and balance the needs of different stakeholders.