Media Releases
Published Date: 12 October 2006

MAS Invites Comments on Proposed Regulatory Framework for Mortgage Insurance Business

Singapore, 12 October 2006...The Monetary Authority of Singapore (MAS) issued a consultation paper that sets out the proposed regulatory framework for mortgage insurance business.  The paper also describes how mortgage insurance will be treated in the calculation of the capital requirements for locally incorporated banks. 

2.  Mortgage insurance protects residential mortgage lenders against losses on mortgage loans arising from default by borrowers.  It is unlike mortgage life insurance which pays off the outstanding mortgage debt if the borrower, being the life insured under the insurance policy, dies.

3.   The paper proposes to regulate mortgage insurance business under the insurance regulatory framework, with additional regulatory requirements to address risks specific to mortgage insurance business.   The key additional requirements include:

  • Mortgage insurers will be required to operate as mono-line insurers, that is to conduct only mortgage insurance business and not any other lines of insurance business;
  • Mortgage insurers will be subject to a contingency reserve requirement to provide for peak losses during downturns in the economic and property cycles;
  • Mortgage insurers will not be allowed to deal directly with borrowers in the loan origination process. This prohibition includes, but is not limited to, solicitation of business from and entering into contracts with borrowers; and 
  • Where a mortgage insurance arrangement creates any obligation on the borrower or confers the mortgage insurer any right against the borrower, the bank is required to disclose to the borrower before the commencement of the arrangement about the nature of mortgage insurance, the name of the mortgage insurer, the borrower's rights and responsibilities under the mortgage insurance contract, and any subrogated rights that the mortgage insurer may acquire in the event of the borrower's default and its effects on the borrower.

4.  The paper further proposes that a Singapore-incorporated bank be allowed to recognise the credit risk mitigation effects of mortgage insurance for a mortgage loan with a loan-to-value of more than 80% if certain conditions are met.

5.  Interested parties should forward their comments on the proposals in the consultation paper by 15 November 2006. The consultation paper is available on the MAS website. [Click here to view the consultation paper] (85.4 KB)***