Singapore, 30 August 2002. The Monetary Authority of Singapore (MAS) today issued a Housing Loan Notice to all banks, merchant banks, finance companies and direct insurers setting out revised housing loan rules. This Notice, to take effect from 1 September 2002, replaces the Housing Loan Directive issued on 15 May 1996.
2 The Notice continues to limit the maximum housing loan quantum to 80% of the value of a property, but has been updated to allow the use of CPF savings beyond the financing limit for up to a further 10% of the value of the property, leaving the minimum cash requirement at 10%. The Notice also consolidates in one document various policy changes and clarifications that have been made on housing loans since the rules were issued in 1996.
3 MAS recently ruled that the aggregate amount of credit used to purchase a property, whether secured or unsecured, should not exceed the loan to value limit. This ensures that the property buyer commits at least a certain minimum amount in cash. This reduces the chances that he will default on the loan. It also discourages excessive property speculation. The Notice requires lenders to take reasonable steps to account for all credit facilities obtained for the purchase of a property when computing the housing loan limit. MAS has advised lenders that one way to satisfy this requirement is by obtaining a written confirmation from the borrower, but they are free to satisfy the requirement in other ways.
4 MAS has also reviewed the rules on refinancing. There is no change to the current position of allowing lenders to refinance up to the full outstanding housing loan. If the value of the property exceeds the outstanding claims of the bank and CPF Board, banks may grant additional loans secured on the property. MAS will no longer subject these additional loans to the 80% loan to value limit. However, lenders should exercise prudence because such loans have last claim on the property, behind the mortgage loan and CPF Board's claims. Furthermore, additional loans granted above a 100% LTV ratio are to be treated as unsecured loans, and must comply with MAS Guidelines on unsecured credit to individuals.
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