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HDB rejects couple's loan application as husband's salary is too low. By Andrew Loh.

Means testing for public housing?

Update: In view of the comments posted here by readers, please allow me to clarify a few issues which readers have brought up. Please see below.

Andrew Loh / Deputy Editor

A couple with 4 children and an elderly mother appeals to the HDB for a concessionary loan to purchase a flat. The appeal process has lasted almost a year – with no success.

What happens if you are unable to service your HDB mortgage loans and are forced to sell your flat? Will you be able to apply for a new HDB loan to purchase a new one?

More importantly, is means-testing being quietly implemented by the HDB?

Mr and Mrs Yap (not their real names) are in such a situation. Having owed the HDB arrears of more than $25,000, including $4,000 in late payment charges, they were forced to sell their 4-room flat in Bukit Merah in September this year.

The couple had hoped that they would be able to successfully apply for a HDB concessionary loan and purchase a new flat after they had settled the arrears.

As it turned out, however, their loan application has been a frustrating affair and they do not understand why the HDB is refusing to grant them one which is sufficient enough for a new house.

The Online Citizen met up with Mrs Yap over coffee.

When the couple had their second child in 2002, Mrs Yap, 33 and who was working as an operations manager in a pub, quit her job in order to care for the infant. Her husband was then working in dispatch. Their 4-room flat in Bukit Merah then was home to six persons – including their two children and Mr Yap’s parents, who had moved in with them in 1999. (They later had two more children – in 2005 and 2008).

Their woes started in 2007, when they defaulted on the monthly mortgage loans. It eventually accumulated to $25,611 and they were forced to sell their flat in September this year (2008) in order to settle the arrears. But even before the completion of the sale, the couple had already started to apply to the HDB to grant them a loan to buy a resale 4-room flat.

Application rejected

In December last year, HDB rejected the application, saying that Mr Yap’s salary of $1,200 was not enough to service the loan which they would need to purchase a resale flat. HDB advised them to “use the CPF refund and cash proceeds from the sale of your current 4-room flat to buy a smaller flat, without taking a loan.”

“I can’t buy a smaller flat,” Mrs Yap told TOC. “Where will my children sleep? What about my mother-in-law?” More importantly, the couple feels that since this would be their second HDB loan and hence the last one they would be granted, they want to purchase a 4-room flat to live in for the long term.

Disappointed with HDB’s rejection, the couple approached their Member of Parliament, Mr Baey Yam Keng, who appealed to the HDB on their behalf. In his letter in May 2008, Mr Baey informed the HDB that Mr Yap’s income had recently increased to $1,450. He also noted that they are unable to obtain any loans from the banks as they had a record of owing some credit card debts.

Appeal

In its reply on the 6th of June, HDB again rejected the application, citing the couple’s difficulty to service the loan based on Mr Yap’s income. “I need a flat so that my mother-in-law can live with us. She is being abused by her husband. Also, she is not allowed to rent a flat either,” Mrs Yap told us. The HDB said her mother will have to either find someone to jointly it with or to pick a name from HDB’s rental flat waiting list and live with that person, a prospect which Mrs Yap frowns upon. “If she lives with us, she can help me look after my children and I can go to work to supplement the family’s income,” says Mrs Yap. She feels that even if she worked part-time, she would be able to add another $500 to $600 to her husband’s $1,450 salary and thus be able to help service the HDB loan.

In July, after Mr Baey made a second appeal on their behalf, the HDB finally relented and agreed to grant them a loan which is “100 per cent of the selling price or market, whichever is lower”, according to Mrs Yap. The HDB later offered them $67,000 to purchase a 4-room flat – provided the new flat was below $250,000. However, the loan amount was not enough for the couple to buy a 4-room flat in Teck Whye, which is one of the cheapest areas in Singapore, Mrs Yap told TOC. She said they are asking for a loan of “about $90,000 to $100,000” from the HDB.

“Our proceeds from the sale of our previous 4-room flat is $126,000, which is put back into our CPF,” she told TOC. The cash portion from the sale was $57,200. “But we only get $49,604 after deducting the $5,000 of deposit & appears to HDB & TC,” she explained.

HDB insisted that a loan of $67,000 would be enough for the new flat. But Mrs Yap disputes the figure. “Our CPF refund was $120,000 but $6,000 was credited into our special account,” she said. More was used to pay their S&C charges to the town council and their housing agent. They would also need to do some simple works on their new home – such as painting, re-wiring and pay the “cash over valuation” on the resale flat purchase.

“That means we can only buy a 3-room flat if we’re very lucky because the prices of flats keep increasing,” she said in her email reply to HDB. She checked the HDB website several times for the latest resale prices of 3-room flats in Teck Whye and they ranged from $201,000 to $230,000.

Frustration

After more than 6 months of appealing to the HDB, she feels frustrated as during the period, prices of flats have escalated and has made it harder for them to purchase a new home. Prices of 4-room flats in Teck Whye have risen to as high as $240,000 and $305,000 – figures which Mrs Yap took from the HDB website and included in her email to the HDB.

In September, after numerous appeals spanning almost one year, a glimmer of hope surfaced. HDB informed them that it is “reviewing [their] re-appeal for a higher HDB loan”. That glimmer turned to frustration again one week later when the HDB informed them that it is “unable to accede” to their request for a higher loan.

In her desperation, she fired off an email to the Prime Minister, Mr Lee Hsien Loong, last month. In it, she told the PM that “it is not that we do not work hard for our future [but even when we do] we can’t even secure a … home for our children.” She went on, “We’ve been writing in for a year, fighting for a loan to purchase a flat and not asking for [a free ride].”

On 25th September, having had enough of the frustration of not being able to secure the loan, she told the HDB to “cancel the approved loan of $67,000 for now”, as there’s no point for them to buy a 3-room flat. “I’ll still be unable to work as nobody can look after my children,” she said.

Mrs Yap is extremely disappointed that HDB would consider her husband’s salary too low to service a mortgage loan.

“[The} Government encouraged us to have more children. But after having more children, we can’t provide them a proper home, my husband can’t provide his mother a place to stay, because his salary was [considered] too low to service a HDB loan.”

Read Leong Sze Hian’s article, “HDB means-testing?

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Update: Andrew Loh’s comment on certain issues brought up by readers.

The Yaps are not asking for a free handout.

What they are asking for is to be given a loan (an additional $33,000 to the $67,000 which HDB has already offered) in order to buy a 4-room flat.

Why a 4-room flat?

In a word, space. The four kids which they have (the youngest is just two months old) will grow up and the couple’s intention is to have a flat big enough for them. It’s a long-term thing. Also, a 4-room will enable Mr Yap’s mother to live with them, which in turn will allow Mrs Yap to go out to work, which will enable her to supplement her husband’s income and help service the $100,000 loan.

Second and last loan.

HDB only allows Singaporeans to apply for two concessionary loans. As they have already received one such loan, this second loan will be their last from the HDB. Thus, they hope to secure a loan which will be enough to buy a 4-room so that they can live in it for the long term, without having to loan from the banks, which for the time being they cannot as they owe credit card bills.

Means-testing

The bigger issue here is why HDB is implementing, effectively, means-testing for public housing without any official announcement or statements from the National Development Minister? Are there many cases of people defaulting on their mortgage loans? Further, what are the criterias or salary ceilings for applying for loans to buy a 3-room, 4-room or 5-room flat? What are the cut-off points for these?

Why have 4 kids?

I think this is a personal issue which the family decides. Financial ability to provide for the children is of course important but not all couples put that as the main consideration. Some have religious beliefs (I’m not saying the Yaps do). But whatever it is, however many kids the couple has, the point is that they are not asking for a handout. Mrs Yap wants to go back to work so that she can help supplement her husband’s income in order to help service the loan and be able to purchase a 4-room flat in order to give her children better living conditions and also to provide security – and safety – for Mr Yap;s mother who’s been abused.

Living within one’s means

It is said by some that the couple should live within their means. While this would be generally encouraged, situations are not all the same. The difference here is that Mr and Mrs Yap are working hard to provide for their children. Mrs Yap wants to go out to work.

Providing public housing

HDB’s policy, inadvertently, is discouraging the average Singaporean from having more children, it would seem, which is contrary to what the Government is trying to do. HDB is supposed to be an agency or Government department which provides public housing at affordable rates for the average Singaporean. Has HDB lost sight of its original purpose?

Again, the biggest question is: Why is HDB in the business of means-testing and what are the criterias? Why no public announcements about this?

Perhaps the HDB should provide Singaporeans with the statistic of those who have defaulted on their loans, who are unable to purchase flats because of their income level and give us the reasons why.

In a word, transparency.

Why is Mr Yap’s $1,450 salary not enough to qualify for a sufficient loan? Should Mr Yap work a second job?

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