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HDB: $431,000 CPF – But homeless soon?

Leong Sze Hian /

It was 8 p.m. on a Thursday night when our first couple came for financial counseling.

Mr Lim (not his real name) is a 47-year-old taxi driver and a bankrupt. Mrs Lim is an accounts executive. They have three children  – two are in school and one is in National Service.

They have obtained permission from the Official Assignee to sell their Executive Condo (EC), so that they can try to clear their debts and buy a resale HDB flat. However, HDB sent them a letter, dated 1 June, rejecting their appeal through their Member of Parliament (MP) for a HDB Concessionary Loan.

Over the last few months, they have appealed a few times directly to the HDB and also through their MP.

EC owners not eligible

The HDB letter of rejection states that:

“... applicants who wish to apply for a second HDB concessionary loan must meet all the eligibility requirements, one of which is that they must not own/have an interest in any private property, including Executive Condominium (EC).

You are currently owning an EC. Hence, your household is not eligible for a second HDB concessionary loan.

From the documents submitted, we gathered that you are selling your EC at $954,000. After deducting the outstanding loan of $276,000, your wife and you are expected to receive CPF refunds of about $431,000 and cash proceeds of about $213,000. You have informed that you use about $106,000 to discharge from bankruptcy, $70,000 to settle your wife’s debts and the rest for your children’s university fees.

Your wife and you may wish to use your combined CPF refunds and available cash savings to outright purchase an affordable flat, before using the balance to settle your debts."

Facing bankruptcy and homelessness

As Mr and Mrs Lim have been trying to explain to the HDB in their appeals, it is the Official Assignee’s requirement when permission was given to sell their EC that the cash proceeds must be used to discharge his bankruptcy debts, and that his wife’s debts must be cleared because she may be made bankrupt too and thus not be able to purchase a resale flat. Their combined net income is already insufficient to pay for their EC mortgage monthly repayments and the minimum monthly repayments on Mrs Lim’s credit card debts, as well as the cash-over-valuation for a resale flat.

Mrs Lim’s credit card debts of over $70,000 were primarily incurred to keep their home for the last seven years, which has a monthly mortgage of over $2,000. They won’t have this problem, if theirs is a HDB flat, as HDB flat sales proceeds are protected from creditors.

Since some EC owners may in a sense have been forced by HDB to buy, because they exceeded the Income Ceiling of $8,000 for HDB flats, why are they being discriminated as never ever needing a second HDB concessionary loan like Mr and Mrs Lim?

How can the HDB assume that all EC owners can get a bank loan?

Singaporeans who are undischarged or discharged bankrupts, have adverse Consumer Credit Bureau credit records, have been sued in their lifetime for a debt, loan quantum less than $100,000, etc, are typically denied housing loans by banks.

This leaves them short of about $30,000 to $50,000 (depending on the resale flat’s COV), which they are asking the HDB to lend to them as a second HDB concessionary loan, because no bank will lend them a housing loan as the husband is a bankrupt.

Second concessionary loan eligibility?

As we try to explain the HDB’s new second concessionary loan eligibility requirements which were changed last year to allow downgraders to be eligible, but at the same time imposed more stringent eligibility requirements such as that half of the cash proceeds from the previous flat’s sale must be utilised for the resale flat, Mrs Lim broke down and kept saying she cannot understand why they have $431,000 of CPF but yet they can’t buy a resale flat, because of HDB’s policies.

We tried to console her by saying that as there is now a new National Development Minister, who has been saying almost every other day that he will look into the HDB’s policies and help Singaporeans who may be suffering from their HDB housing problems, that hopefully the policies which affect Singaporeans like them may be reviewed soon.

Homeless soon?

Although we all put up a brave face and tried to console Mrs Lim that the new Minister may look into issues like theirs soon – we knew deep down in our hearts that they may be homeless, by the middle of next month, as they had already signed the documents to sell their EC following the Official Assignees’ approval.

Alex Lew, Lee Mei Wei, Ko Siew Huey and Leong Sze Hian provide free financial counseling every Thursday from 8 - 10 pm., at Block 108, Potong Pasir Ave 1.