Amendments to the Housing and Development Bill have already been passed in Parliament under a ‘certificate of urgency’, a move that is aimed at preventing moneylenders from pushing homeowners to use HDB flats as collateral for any debt other than as mortgage.
A growing number of HDB homeowners are using their properties as collateral to pay off loans. A total of 12 registered resale applications with caveats lodged by moneylenders were recorded in 2008, and this number increased to 546 in 2009 and to 556 in the first half of this year.
The government wants to stop this worrying trend. “A HDB flat is for long-term home ownership. I cannot over-emphasise this fact,” said Mr. Mah Bow Tan, Minister for National Development.
However, the new law will only work if homeowners do not prematurely encash their retirement asset.
“If the flat owners already plan to sell their flat and take a loan from a licensed moneylender, for example as a bridging loan to meet some urgent needs, the caveat ensures that the loan would be paid from the sales proceeds,” said the minister.
The amended bill prevents moneylenders from claiming caveats to have first cut of the sales proceeds of a seller’s flat.
Mr. Mah also said the amended bill will not affect existing agreements with legitimate caveats lodged to recognise the contracts’ sanctity.
The amendments also do not affect financial institutions, as they can still grant loans on the flat’s security for the purpose of financing its purchase.