Dec 22, 2008

Letters From Our World-Class Government

Two posts ago, I featured a letter in the TODAY newspaper. The writer, Ee Teck Siew, suggested that when a customer seeks a housing loan, some kind of risk profiling should be done to help the customer determine whether he is able to afford this long-term obligation.

You may or may not agree with this suggestion, but Teck Siew certainly did express his idea clearly enough. His last sentence sums it up: "It is high time a more rigorous regulatory regime, one with a focus on educating consumers, be added to help Singaporeans in their financial decisions."

The Ministry of National Development has now replied. Rather predictably, its response was mostly irrelevant and rather inane:
Monday • December 22, 2008
Letter from Lim Yuin Chien
Deputy Director (Corporate Communications),
Ministry of National Development

In “Risk profiling for homebuyers?”(Dec 17), Mr Ee Teck Siew suggested that the Government and industry associations consider implementing a “fact finding process” to ensure that potential home buyers buy properties they can afford, based on their abilities to service mortgage loans.

Most homebuyers would need to obtain a bank loan upfront. The homebuyers would therefore be subject to credit screening by the banks, which will ensure that the home-buyers can afford the properties they intend to buy. In the credit checks, the banks would typically take into consideration the homebuyer’s income, age and other debt commitments.

Housing and Development Board (HDB) flat buyers taking HDB concessionary loans are required to obtain a HDB Loan Eligibility (HLE) letter before committing to the flat purchase. The HLE letter similarly takes into account the flat buyers’ age, income and other financial commitments to calculate the maximum loan quantum and the expected monthly installments to ensure that the flat buyer is not financially overstretched.

We thank Mr Ee for his feedback.
As I had already explained in my earlier post, it is quite true that the bank will definitely check its customer's credit, before granting him a housing loan. However, as I had also already explained, the bank performs these credit checks for its own benefit, not for the benefit of the customer. Furthermore the bank has no duty to advise the client.

Now if you were going to take a 30-year mortgage to buy a new home, here are some of the issues that you would want to think about first. How many children do you have, or plan to have? Do you expect them to go for higher education, and if so, how much do you plan to save for that? How much are you saving for your own retirement? If you were to become unemployed for six months, would you still be able to meet your mortgage payments?

Do you have aged parents to support? How much money might you need to do that? What are your own career prospects, at least for the foreseeable future? Will you be needing extra capital, to run your own business? How much does your current lifestyle cost to maintain? Does your spouse work, or is yours a single-income family? If the latter is the case, what's the game plan if that sole breadwinner were to lose his job, become ill or die?

You have to think about these kinds of questions, before you decide how much you can afford to borrow. The future can't be predicted with 100% certainty, but that's precisely why you need to do your planning.

These are also the kinds of questions which neither the banks nor the HDB will help you with. Therefore Teck Siew's suggestion was that perhaps some kind of regulatory process could be put in place to help Singaporeans work through such questions.

In its reply, the Ministry failed to address any of the above. It was really a nothing sort of reply. Almost completely meaningless.


Anonymous said...

Don't forget that's why we pay our civil servants and politicians extravagant amounts so that they can go all broody when issues like these are raised and come up with answers that will tax the brain of Alice in Wonderland. It is therefore unfair and utterly wrong for us to criticize the administrators and politicians for doing nothing. "Nothing will come of nothing" and nothing is an art form that needs creativity, experience and a certain amount of low cunning. Ask Madoff, he knows all about it.

Anonymous said...

This is the standard of the current govt what. Meaningless replies from ministers at the top to lackeys and civil servants at the bottom. Don't expect any change soon.

Anonymous said...

it is the typical pontius pilate response...the banks should or ought to be doing this so we should not intervene....missing completely the point that the banks are doing it only from the bank's POV (sigh.. ) Maybe we should increase the salaries for the public servants ( ministers included ) as we are obviously not able to recruit the ones with real brains only those who are good at passing exams!

Anonymous said...

I think I am also capable of giving such replies and willing to do it for half or quarter of their pay.

After all, I think I gave more intelligent and well thought comments and replies for free to Mr Wang's and others blogs.

Anonymous said...

Dear Mr. Wang,

As you point out yourself, these are issues which given the complexities, can only be sorted out by individual borrowers themselves.

I wouldn't fault the Ministry's response to what I think to some extent is an inane request: I don't expect the Ministry, let alone the bank, to act as my financial nanny.

Besides, so long as the bank acts above board, they cannot be faulted for pursuing their self-interest. After all, they aren't charities.

Wouldn't we, as persons in our own right, act in the same way say, when we negotiate with our employers?


Gilbert Koh aka Mr Wang said...

"As you point out yourself, these are issues which given the complexities, can only be sorted out by individual borrowers themselves."

I didn't say that. In my previous post, what I said was that individual borrowers SHOULD do such things for themselves now, as things currently are, especially *because* there is there is no official process anywhere in place to help them with such things.

What Ee is suggesting is that there SHOULD be some official process put in place.

I can indeed envisage a wide variety of possible ways by which some kind of official process could be put in place. Some would be more detailed; some would be less detailed.

An example of a fairly simple process might be as follows:

(a) before granting a housing loan, the bank / HDB is required to alert the customer that he may wish to consult a financial adviser about his mortgage and its implications on his overall financial condition. The bank / HDB could then provide the customer with a list of independent financial advisory firms in Singapore which could provide sch services. It's left to the customer to decide whether he wants to consult such a firm or not.

Another example of a fairly simple process could be as follows:

(b) the bank / HDB is required to provide basic information to the would-be borrower, about the various factors that he should think about, before he takes a housing loan. Such information could come in the form of a standard, basic, pre-printed booklet. This booklet could even just be an expanded version of this publication by Case & ABS.

A more complicated process would be one where the bank itself is required to walk the customer through a questionaire about his financial lifestyle / goals etc, before granting the customer a loan. This questionaire would not be all that different from the ones that banks currently use, before selling their customers an investment product.

Anonymous said...

George says:
Mr Wang,

Have you considered that it is not in the interest of the HDB to'nanny' potential buyers of its flats since it would mean a long drawn out process and there is the very real possibility of the potential buyers ending up being pronounced as 'disqualified' by virtue of projected inadequacy in funding. Lot's of HDB flats would then be left vacant abegging for buyers. When this happens the govt would also then be left without a 'handle' to manipulate Singaporeans, since they would not be saddled with a mortgage to pay for the rest of their working lives!

Anonymous said...

We always criticise the Singapore for being an authoritarian nanny state, yet when problems arise, the first thing we do is go crying for nanny. No wonder the PAP continues to be condescending and authoritarian. We asked for it.

"Whether I can afford it" is the most basic question that anyone with half a brain would ask himself when buying something as expensive as a house. Factors like planned family size, expected future income, retirement age, etc will naturally be taken into account. Why should public funds be spent on mollycoddling everyone who wants to buy a house just because some people are too dumb to do basic financial planning?

Anonymous said...

Root of the problem : HDB too expensive.


Anonymous said...

Syl, if indeed the Ministry shared your view, then it should have just said so. Instead of giving an irrelevant, nonsensical reply that assumes Singaporeans to be stupid.

Anonymous said...

Hi Mr Wang

At the risk of pcking bones ...
The Mr Bean dude is a multimillionaire and has an IQ way above that of Lim Yuin Chien.

Anonymous said...

To be fair, Lim Yuin Chien's response is typical of what you might expect from any jobsworth bureaucrat anywhere in the world.

Anonymous said...

Regarding inanity
1-All ministries have KPIs.
2-KPIs must be met.
3-A probably KPI is that all enquiries must be answered (hence the Answer).
4-A complete answer may pacify 95% and inadvertently ruffle 5%.
5-A partial answer may pacify 50% and inadvertently ruffle 50%.
6-An inane answer will ruffle no feathers and pacify no one.

So what will you settle for?
1-A complete answer that may result in being tarred and feathered?
2-A partial answer that may result in being tarred and feathered?
3-An inane answer will say nothing, do nothing, and yet satisfy a requirement to have said something.

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.
Donald Rumsfeld

darth said...

there're independant financial advisers that can do just that. insurance, investments, housing loans, will-writing. Now you just need to meet a tactful one that knows how to tell u nicely:

"mr so-and-so, i understand your dream of owning a home with ur lovely wife. Given ur income, monthly committments, expenditure blah blah blah, it would be in your best interests to stay with ur parents for the time being"

LOL. Anyone, some of these advisers have blogs. Do check them out.

ArtBoon said...

If I go to supermarket to buy chicken, I want info on when the chicken is packed, place of import, etc.

I have to decide for myself whether or not the chicken is to my taste.

If I start asking government to tell me which dietitians can show me whether I should eat chicken or fish, then I am asking government to tax me more for that additional service.

On the other hand, I will ask them to do more if I think that they are already collecting too much "profit" out of me, I better get my money's worth and demand more service.

Anonymous said...

That response reflects the worldview of the Singaporean government - that the state of the state is already perfect, and to suggest an improvement not already thought of by the bureaucrats is to malign their perfect foresight. That does not mean that the bureaucrats / state does not introduce 'improvements' from time to time, but when they do that they hope that people would not identify it as a measure to correct a pre-existing fault...

Xtrocious said...

Actually, my main concern about Ee's letter is the ever-present need for a "nanny state"...

Everything also must or have to be "official"...cannot use cow sense (common is never common it seems) to decide or reason for oneself...sigh

As long as we have these sort of mentality, we can never grow...

And as long as people (sheep) expect such nannying, guess who will remain in power?

Anonymous said...

I am not sure whether I am right. But isn't HDB started out to provision affordable and "subsidized" housing to Singaporean. But recently, subsidized housing cost half-a-million. Personally, it is not quite affordable for me. I am just newly-wed and a new father. I am still staying with my parents because there is a complete shortage of housing. For example in the recent balloting exercise, there are 149 flats available for sale. and I was told the total queue number swells up to 1500. My queue number is 800++ I am not sure if HDB is aware and is doing anything about the situation.

When I approach my MP about my housing problem. I was told he has no authority over HDB. HDB advised me to go to open market for available housing. So yes, as a first timer, I do get my priorities, but priorities does not guarantee a flat.


Anonymous said...

I agreed with Syl. Singaporeans just want to be nanny but then complain on the most frivolous of things and bragged too much control. Isn’t it better to make your own decision (even if it may end up being a wrong decision) than being controlled and coerced?

Anonymous said...

shocking to see how irrelevant the ministry's reply was. If this was an exam, it would have scored an F for being so out of the point.

Anonymous said...

How else do you expect the Ministry to reply? That chap has asked/given an irrelevant question/suggestion to an irrelevant party.

It is his own obligation to determine how much he can afford/risk etc. The Ministry has no obligation to tell him how he should plan his finances, family etc.

I cannot imagine a grown adult actually expecting the government to make this kind of decisions for him.

Anonymous said...

It might be exactly why our HDB "subsidised" housing is so expensive, we need 30 years of our working lives to repay. Even for a graduate.

And they tell us that "standard" of living has been improving. Why then, is the loan period not correspondingly shorten due to better qualified citizens getting better wages?

The failings of the past 10 years of governing or direction is getting obvious for all now. I hope they ponder on it and start to really work on improving our lives instead of repeating same old lines, then grumbling the better educated, more dissening young are not voting for them. Time to sack a lot of old timers who screwed up and did creative statistics intepretation.

Gilbert Koh aka Mr Wang said...

Actually 20-year or 30-year mortgages are common in many, many countries around the world.

Anonymous said...

20-30 year morgates are plenty in the world, but how many of them have the level of debt GDP as compared to Singapore?

Anonymous said...

We pay them top dollar, surely we cant expect them to spend so "much" time on "simple" stuff like this right?