Mah Bow Tan
Singapore
“The previous generation of Singaporeans overcame huge odds together to create this improbable nation which we call home. Let this generation work as one to define our country for the next lap of our journey. Sir, on this note, I fully support the amended Motion. Page: 143”
“Like all upgrading programmes, there is a certain budget, and a certain pace at which we will build. We have completed the LUP and now we are going on towards the HIP. The Estate Upgrading Programme (EUP) is ongoing.”
“For those who cannot afford home ownership, we will provide rental flats. For the rest where there is hardship involved, that is where the safety net comes in. I do not think we should make the safety net so wide as to bring in everybody.”
“Building a studio apartment is no different from building any other HDB flat. If a person applies now and the building works start now, he can get it in two-and-a-half years to three years. We have stepped up the building of studio apartments over the last couple of years.”
“Mdm Halimah Yacob asked the Minister for Health (a) how many people have signed an Advance Medical Directive (AMD) and how many have revoked them since; and (b) whether there is a need to review the current rules on AMDs which do not require a person who has revoked the AMD to inform the Registrar, thus causing uncertainty for hospitals t…”
“Parents who wish to exert more control over the maximum mobile service charges incurred by their children may consider service options such as mobile pre-paid cards. IDA is aware of the public's concerns on mobile subscriptions, and will continually review policies and look into measures to further protect the interest of consumers.”
The complete record
Every one of 3,030 lines we hold for Mah Bow Tan, in date order, each linked to its source. Free to read, in full, without an account. Page 32 of 61.
“) The spindle that held the guide wheel grated against the rail and damaged 900 metres of it. SLRT had to replace the damaged sections. The repair was time-consuming due to the extent of the damage. Each connection had to be dismantled and re-installed carefully. Extensive checks and trial runs had to be conducted to ascertain the safety of the entire LRT system before commencing service. Partial service resumed on 24th October at 6.30 pm and full service resumed on 26th October at 12 noon. The incident caused a lot of inconvenience to commuters but it did not pose any safety implication for them. In any case, having a driver on board would not have prevented the occurrence of the incident. (BP LRT is not an unmanned system, just that technology has allowed it to be controlled remotely by the crew in the Operations Control Centre. The crew constantly monitors the system and carries out swift recovery actions when faults are detected.) The Land Transport Authority has directed SMRT, the parent company of the SLRT, to investigate the incident. One of its terms of reference is to look into measures to prevent similar incidents from re-occurring. The investigation team is expected to complete its investigation within four weeks. MASS RAPID TRANSIT FARE CARD 5. Mr Steve Chia Kiah Hong asked the Minister for Transport (a) if his Ministry has thought of using other more convenient fare systems when replacing the single-trip Mass Rapid Transit fare card with the standard fare card where a deposit is required and refunded at the end of each trip, which has highly inconvenienced commuters; and (b) what happens to the deposits that remain unclaimed after a while.”
“As at 1st October 2002, there are 42 vacant market produce stalls and five cooked food stalls at Block 11 Hougang Avenue 7 Market/Hawker Centre. The vacant stalls in this market/hawker centre are reserved for allocation on a temporary basis to stallholders who are affected by closure of their markets/hawker centres under the Hawker Centres Upgrading Programme (HUP). This will facilitate the smooth implementation of the HUP and help the affected stallholders find alternative vacant stalls to continue their business during the HUP. Hence, HDB has no plans to tender the vacant stalls in the market/hawker centre for rental. BREAKDOWN AT BUKIT PANJANG LIGHT RAIL TRANSIT 4. Mr Steve Chia Kiah Hong asked the Minister for Transport (a) why is the Bukit Panjang Light Rail Transit constantly breaking down despite repeated assurances from the Ministry that service standards are up; and (b) what kind of safety measures are in place for such a driverless transport system, when train wheels can become dislodged in the operation process. Mr Yeo Cheow Tong: The Bukit Panjang LRT system has had many teething problems in its initial years. But in recent months, it has largely stabilised. Until the recent breakdown, it has performed to the high service standard of 99.7% that we demand. (Meeting this standard means a maximum service disruption of less than four minutes over a 20-hour daily operation.) The average service availability from June to September was 99.74%. This compares well with other similar systems in the world. The recent breakdown occurred on 21st October at around 6.40 am, when one guide wheel was dislodged, causing a power trip. (A guide wheel helps to steer the vehicle towards the desired direction, unlike a normal wheel which helps to propel the vehicle forward.”
“Sir, I thank the hon. Member for his amendment. He has got very sharp eyes. It is correct. It is a typographical error and the word should be "charge" instead of "change". Clause 13, as amended, ordered to stand part of the Bill. Clauses 14 and 15 ordered to stand part of the Bill. Bill reported with an amendment; read a Third time and passed. SMOKING (CONTROL OF ADVERTISEMENTS AND SALE OF TOBACCO) (AMENDMENT) BILL Order for Second Reading read.”
“Generally, as a rule, the answer is that they would be considered as third-timers. But, the HDB has so many rules and regulations, you always tend to have somebody who runs afoul of those rules in some way or other. We always consider all cases very carefully. And if there is a good case made out, then special consideration can be given, but not as a general rule. Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. - [Mr Mah Bow Tan]. Bill considered in Committee. [Mr Speaker in the Chair] Clauses 1 to 12 inclusive ordered to stand part of the Bill. Clause 13 -”
“I did not realise that marriage is a risk! But I am not an expert on that, so I better keep quiet. What was your question?”
“The hon. Member talks about risks. I thought we were saying that we should let people take some risks. Allow them to take some risks but give them the responsibility. However, at the same time, give them some more flexibility, some more freedom. This is exactly what we are doing. Of course, there is risk. In every decision, there is a risk involved. In this particular case, there is a risk too. But if you do not want to take the risk, then what happens? Ms Braema Mathiaparanam (Nominated Member) rose.”
“I do not think I said anything of that sort. Basically, what I am saying is that if you buy your second or third HDB flat, and you cannot get a market rate loan from HDB, you go to the bank. And when you go to the bank, the bank will ask you questions, you will have to answer those questions. Then you have to decide whether you should proceed or not. Can you afford it or not? And if the answer is yes, you can afford it, go ahead. If the answer is no, you do not think you can afford it, you are worried about the future, you are worried about your job, you are not sure, just keep in view. It is a bit strange, because here we are talking in this House, and Members have said so, that we should give Singaporeans more responsibility, we should not be a nanny state, we should allow them to make up their own minds. A simple thing like this where you have to decide whether you should buy a flat and how much you should pay, these are things which every responsible person should be able to decide and make up his mind for himself. Do you expect the Government to decide for them?”
“Mr Speaker, Sir, I thought this is what happens all the time. This is what we all do. We make our decisions based on what we believe is the right thing to do. Surely, the hon. Member does not expect the Government to tell him what he should do, whether he should buy a flat or not, what is going to happen to the economy. All of us have to make up our own minds. This is what responsibility is all about, surely.”
“Mr Speaker, Sir, there are already certain schemes in place for the cases that Mr Othman mentioned earlier. In other words, if you are staying in a subsidised flat and you have financial difficulties, we already have various schemes in place, ranging from deferment of your instalment payments, reduced repayment schemes, and so on and so forth. Quite a few of those who are in financial difficulties and come to HDB for financial assistance have been put on these schemes. So far, I believe these have been well received. So, I do not think there is a need for us to expand this scheme for subletting.”
“But, now, they are looking for the second, or third flat, or they are PRs, private property owners, or high income earners. These are the people who need to get a market rate loan. These are the ones who have to go to the bank. Is Mr Low saying that these people would also need to have a guarantee that the Government will help them if they default on their bank loans? Surely not. So we are really talking about those people who do not need a concessionary loan, who already are required to get a market rate loan from HDB. These are the ones who will have to go to the bank to get a loan. And these are the people who should be in a good position to judge whether they would like to get a loan at that price or not. In other words, you have to make your decision based on your own situation. You have to do your sums before you get the loan. We are not talking about those who are buying HDB flats for the first time. For those people, nothing has changed.”
“Sir, as I said in my Second Reading speech, when somebody goes to the bank for a loan, he would have to abide by the bank's rules of foreclosure, he would have to abide by the bank's rules on credit assessment. So, the short answer to him is that all borrowers would have to abide by the rules that are laid down by the lender. And it is no different for HDB's case, it is no different for the bank's case. In the case of HDB, when they come to HDB to borrow, HDB has to do a credit assessment. If they do not comply with those conditions, and they default on their loans, HDB can evict. But, as Mr Low rightly pointed out, HDB is more forbearing, more forgiving. HDB has various schemes in place to help borrowers, such as stretching of repayments, and so on. We do not expect the banks to do so. Neither should we. When they go to the bank for a loan, they have got to do their sums. And when they go to the banks currently, they may find that the banks may actually be more flexible than HDB. They may find that the banks may offer them a lower interest rate than HDB. They may find that the banks are willing to give them a longer period of loan. I understand that some banks will allow 30 years or more. HDB has a maximum, which is less than that. All this will have to be factored by the borrower. Do you want to go to the bank to borrow or not? Do you want to buy that flat in the first place or not? These are decisions which individuals would have to make. We are not talking about facilitating the purchase of the first flat. This is what I explained right from the outset. The first timers who want to purchase their first flat go to HDB, and it will provide them the subsidised loan, provide them with a subsidised flat and they will have their first flat.”
“Sir, I do not have the exact numbers with me. But I can recall that there were less than 10.”
“Sir, in the first place, when somebody buys a property to live in - and I am talking again, and I remind the House, that this is not the first basic flat, we are talking about the second or even the third flat - when he decides to purchase that second, third, or whatever flat, he has to do so with his eyes wide open, knowing exactly what he is doing, whether he can afford the purchase price, whether he can afford the downpayment, whether he can afford the repayment, the instalment payment, and so on. So I do not expect the Government to stand guarantor to every person who buys a flat using bank loans and say that if you default, if you cannot afford to pay your instalments, do not worry, we will give you a rental flat. There is no blanket guarantee. Of course, as in all cases which come to HDB, when MPs put up appeals on behalf of their constituents, when there is a genuine case of hardship, if the family has really fallen on hard times, and we look at it, we find that there is a case for special consideration, we will provide special consideration. And that is the rule of thumb. But to expect HDB to have a blanket ruling and say, "Don't worry, we are going to provide you with a rental flat if you default on your loan", I do not think that is a wise thing to do. And it creates a moral hazard. That is not something that we would like to see. What we want to do is to explain to our people, when you make a commitment like this for public housing, or for private housing, when you go to a bank for a loan, please make sure you know what you are doing and do your sums.”
“We want HDB to concentrate on building good public housing. We want HDB to concentrate on managing, on making sure that towns are properly built, and so on. HDB is not a bank. It is not a financial institution. There are many financial institutions, over 100 at the last count, who are better placed to provide market rate loans. These are market rate loans. These are not concessionary rate loans. So for market rate loans which are provided at market rates, let us leave it to the banks. HDB should concentrate on doing what it does best - building good quality, affordable public housing. That is the motivation for this move. It has got nothing to do with what Mr Low mentioned just now. On clause 2, I think I have already explained to him what the changes are about. Mr Speaker, Sir, I believe I have answered all the questions.”
“Based on HDB's statistics, for those who are either totally non-subsidised or those who can actually re-finance, there is something like 15,000 HDB flats which are eligible for subletting with the 10-year rule. Having said that, I think not all of them will be subletting their flats straightaway. In the first place, they would have to find another place to live. And, secondly, I do not think that HDB lessees would just want to sublet their flats without careful consideration. So although the maximum number is 15,000, I dare say that the final number that will actually be released out into the rental market will be far less than that. So I do not see that there will be a major impact on the rental market. Finally, I would like to respond to Mr Low Thia Khiang. His point is that this whole move is politically motivated that, as a result of this, Government will now wash its hands off market rate loans, so that we do not have to evict tenants who foreclose. Let me inform Mr Low that the number of evictions from HDB flats of tenants who do not pay up their loans, or who default on their loans, is extremely small. So that has never been the motivation for this move. It is not as if there are many HDB tenants who are defaulting on their loans and HDB is now deciding to throw this problem on to the banks. That has never been the intention, I assure Members of this House. HDB's role is to make sure that there is sufficient housing for our people. It is affordable, good quality housing and we want our people to stay in the flats. What is the motivation then, if it is not political? It is very simple. We are in the process of reviewing the role of HDB. We know what HDB should do. We want HDB to concentrate on public housing.”
“Mdm Cynthia Phua talked about second concession loan for downgraders. I have also addressed that. She also asked about preserving the residential nature of housing estates. I believe I have also addressed that point. Mr Ang Mong Seng asked why not just lift the MOP (minimum occupation period) completely. Why reduce it from two-and-a-half years to one year? The reason is very simple. The MOP for HDB flats is to ensure that public housing is meant for owner-occupation. It is not for speculation. It is not for investment. So the owner-occupation principle is very important. When you buy a HDB flat, you must live in it. It is not for buying and then renting out. That is the reason why we want to keep a MOP but we wanted to reduce it in order to create greater flexibility. When we relax the rules, when I said we want to treat HDB flats like private properties, I did not mean totally, completely like private properties. There is still a certain principle involved in public housing and that principle is owner occupation, which we would like to preserve. Secondly, we also want to keep the MOP of one year because, although it is a short period, it helps us to signal that HDB flats are not bought for speculation or for investment. And when the property market turns up, when trading of HDB flats comes back again, which was quite prevalent at one stage, we want to make sure that the minimum occupation period is in place to prevent such speculation. Mr Ang Mong Seng asked how many units are allowed to be sublet and will it disrupt the rental market. I think that is the thrust of his question.”
“But if we do decide to, we will obviously have to have further discussion on this. The last point that Dr Teo mentioned was on the Technopreneur Home Office Scheme. He asked whether we can expand this to other small businesses. Let me just say that at the moment, we are already allowing some businesses to be conducted within the HDB flat, businesses which do not pose any nuisance. Examples that come to mind include giving tuition, people who work from home, people who do small scale work, say, sewing, tailoring, that kind of business. But we are actually looking at broadening the scope of this to see whether we can, in support of the drive to encourage entrepreneurship, allow some other businesses to be allowed in HDB flats, provided that they do not create nuisance to their neighbours and they do not create disamenities in the general surroundings. But this is under discussion with the various relevant Ministries. So far, we have not come to any conclusion yet. But, yes, such discussions are ongoing. I believe I have answered Dr Teo's points. Mr Othman Haron Eusofe touched on two points. One was on financial hardship which, I believe, I have answered. He also asked about subletting, extending to those who are in subsidised flats. The general principle really is, in this particular case, that for those who are not getting any subsidy from the Government, whether in the price of the flats or in the loan, we are prepared to extend this concession to them. However, in the case of subsidised flats, I think there is a huge subsidy element involved. At this point in time, I do not think we should be extending such a concession to them. Encik Zainul talked about helping the downgraders. I think I have also addressed that point.”
“But I would like to disabuse him. There is no conspiracy here. It is quite a simple matter. What happened is that the Government Instruction Manual has changed whereby there are new authority limits. In the revised Government Instruction Manual, land sales below $10 million will no longer need ministerial approval. It goes to a Tenders Board. So the approving authority, in this case, for land sales below $10 million will be the Tenders Board. This Tenders Board will comprise the senior officials in the Ministry of Finance and the relevant Ministries, whichever Ministry is responsible for that sale. Land sales above $10 million will now go to a Ministerial Committee, and this Ministerial Committee will consist of Ministers from the Finance Ministry, the National Development Ministry and the relevant Ministry where that sale is taking place. So, basically, this is an administrative change in the Act which recognises the changes in the Government Instruction Manual. Clause 11 - what is "Special Upgrading Works"? This is what Dr Teo asked. Special upgrading works currently refer to the Lift Upgrading Programme. This is what we have at the moment. When we carry out the Lift Upgrading Programme, we do so under the Housing and Development Act. We carry out a poll for Lift Upgrading Programme under the Housing and Development Act, and we call this Special Upgrading Works. But, in future, we may expand the scope of Special Upgrading Works to include things like, for example, a pneumatic refuse collection system, if we do decide to implement that. There have been trials going on. If we wanted to do that, we could include that for the upgrading precinct but classify it as Special Upgrading Works. I just use this as an example. I am not suggesting that we are going to do this.”
“Dr Teo also commented on the possibility of lessees not understanding clearly the financial implications of banks taking the first charge, if they refinance the loans. I think this is a legitimate concern. But, having said that, I think we should also advise those who wish to refinance their existing loans with banks, all those who are going to go to the banks for a loan in the first place, to be aware and careful, to be financially prudent, and to do their sums before they jump in. Indeed, I dare say that the banks themselves, before they lend, would also have to do their homework, do due diligence work, and make sure that the people that they are lending to are creditworthy. On both counts, both parties, the lender as well as the borrower, will have to do their homework. And, I believe, this is currently being done when you go to a bank to borrow for purchase of a private property. They are not just going to lend it to you without asking any questions. Similarly, I expect that the banks will exercise similar prudence, credit assessments and judgement when they lend to HDB flat owners. HDB flat owners will also have to do their sums. So I would be loath to get HDB to do the financial counselling. It is not HDB's job to do financial counselling for those who are going to the banks. If HDB were to do so, one could argue why are we having bank origination in the first place. Because the whole idea of bank origination is for HDB not to be in the business of providing market rate loans. It is not their job. There are three minor points that Dr Teo raised. One is on clause 2 of the Bill - I think this is also what Mr Low Thia Khiang asked - why is it that we are changing the Act. Mr Low detects some monkey business somewhere, and this is the reason why he raised it.”
“You have to abide by such guidelines and these guidelines and conditions for subletting will also be applied when we relax the subletting of HDB flats. In the first place, they will have to seek prior approval from HDB before they sublet. Lessees will be held responsible for any infringement that their sub-tenants commit. And if there are such infringements, then, obviously, the HDB will be able to take action. HDB, for this particular purpose, will also conduct half-yearly flat inspections for approved subletting cases. This is to make sure that the situation that Dr Teo talked about does not actually arise in our HDB estates, where you have got 20 foreign workers living in one HDB flat, and so on. So there will be guidelines. There will be regular inspections to make sure that infringements do not take place. As a final safeguard, what HDB will do is to have regular dialogues with the grassroots leaders, advisers and Members of Parliament to get feedback to see whether the scheme is working well, to see whether there are indeed disruptions to the social environment, disamenities, people who are anti-social, and so on and so forth. But I do not think we should jump to conclusion that people who sublet HDB flats will automatically be anti-social. That is probably not being fair to those who may wish to sublet the flats. Let me just say that the subletting will actually allow quite a large number of people who may not want to buy HDB flats - the young couples, people who are in financial difficulties, who may not wish to commit - to also sublet such flats. So, I do not think we should straightaway jump to conclusion that it is only foreign workers who are subletting the flats.”
“So we recognise that there are such cases which downgrade due to financial difficulties and I would like to assure Members of the House that HDB will consider such cases sympathetically as and when they come to the attention of the HDB. Dr Teo also mentioned the cases of those who either move laterally or downgrade in order to stay near their parents. I believe he asked whether such cases can also be allowed to enjoy the second concessionary loan. Let me inform him that there are actually quite a few schemes in place to encourage people to move nearer to their families. There are higher CPF housing grants for resale flats, for those who wish to move nearer to their families. There is a married children priority scheme for purchase of new flats in the mature estates. And all these schemes have been fairly successful. The number of families living nearby or in the same estate has actually gone up. So, I do not think there is any special need for another scheme to promote family living. But, nevertheless, we will keep in mind his suggestion for another day. Dr Teo also proposed some restrictions on rental flats. If somebody wishes to sublet his flat, he is concerned that, without any restriction, this may be abused. It can either be let to foreign workers or to those who are not so socially responsible and so on. I believe several other Members have also made the same point. Let me assure them that this is a concern of the HDB and, in fact, this is the reason why even today, HDB allows subletting of the whole flat under special circumstances. There is already in place a set of guidelines to govern such subletting. In other words, you cannot just freely sublet to any Tom, Dick or Harry.”
“In addition to that, to encourage social mobility, to encourage people to move up, to allow those who have outgrown their flats - they may have bought a 3-room flat many years ago; their families have grown up; they want to have more rooms for their children - or they just simply want to have a bigger flat, HDB provides a second concessionary loan to those who have already bought their first subsidised flat. So, from the perspective of the need for housing, the need to have a roof over their heads, there is really no strong reason for an HDB flat owner to move laterally; in other words, move from one flat to another flat of the same size, or for him to downgrade. And those who decide to do so should consider carefully when they do so. They should act prudently and they should decide whether they have sufficient funds. Indeed they would have sufficient funds in most cases arising from the sale of the existing flat. Invariably, most of them who sell their first flat, which is a subsidised flat, would be able to enjoy quite a significant capital gain. They can then use this capital gain to finance the purchase of the second flat, which is either of the same size or smaller. But having said all these, we do know that there are people who downgrade because of financial difficulties, and these are the cases which, I think, Members in this House come across during their meet-the-people sessions. These are the cases which Members who have spoken just now are referring to - people who have difficulties in servicing their mortgage either because of retrenchment, prolonged illness, demise of their main breadwinner, and so on and so forth. Therefore, because of this, they have no choice but to downgrade.”
“Sir, I would like to thank various Members for speaking in support of the Bill, and I will respond to Mr Low Thia Khiang later. First of all, Dr Teo Ho Pin has asked whether we can help those who either downgrade or move laterally and who are in financial difficulties because he believes that in this current situation, they may find it more difficult to get a bank loan instead of a loan from HDB. Several other Members have also spoken along the same lines - Mr Othman Haron Eusofe, Mdm Cynthia Phua, Mr Zainul Abidin and also Mr Ang Mong Seng. Let me, first of all, explain - I think it was Mr Ang Mong Seng who said that this is a new policy - that this is not a new policy. This is an existing policy, and what this amendment Bill seeks to do is to require such lessees, instead of getting a market rate loan from HDB, to now get it from the bank. This is just for clarification. But back to the reason why we have not allowed these people who want to either downgrade or to move laterally from taking a concessionary loan and instead to take a market rate loan. First of all, let me, as I said in my Second Reading speech, repeat once again that the Government is committed to ensuring that public housing in Singapore remains affordable to its citizens. As the public housing authority, HDB's role is to ensure that all Singaporeans will be able to afford at least the first HDB flat. This is the reason why HDB sells new flats at subsidised prices and also with subsidised loans at concessionary interest rates, and HDB will continue to do so. If they do not wish to buy a subsidised new flat, they can also buy a resale flat and we give them a CPF housing grant. For the first loan, HDB will provide a subsidised interest rate for first-timers.”
“Fourthly, clause 5 of the Bill spells out that all flat lessees, regardless of when they bought their flats from HDB, must seek HDB's prior consent before they are allowed to use their flats as a Technopreneur Home Office or for other commercial purposes. Finally, clause 15 of the Bill increases the maximum penalty for refusing to give information or giving false information to HDB to a $2,000 fine or a 3-month imprisonment term or both. This is to enable HDB to effectively enforce against illegal parking along HDB service roads. Similar penalties are imposed under the Parking Places Act and the Urban Redevelopment Authority Act. Sir, I beg to move. Question proposed.”
“A 75% `yes' vote from the residents is required before MUP or LUP can proceed. Clause 11 of the Bill will make it clear that, although residents vote for both the MUP and the LUP at the same time, the LUP will only proceed, if both the MUP and LUP polls are successful. The other amendments related to upgrading works will provide a clearer definition of the various terms used. For example, lift upgrading is today defined under the category of `special upgrading works' in the Housing and Development Act. Clause 10 will provide HDB with greater flexibility should we decide to expand the present scope of special upgrading works to other types of HDB properties. Clause 14 will give HDB the power of entry, including forcible entry, into HDB flats to carry out upgrading works within a flat or building that has successfully voted for upgrading. Such powers will, of course, be used very sparingly if at all. Administrative measures The Bill will also introduce some administrative changes to improve the enforcement of public housing regulations and policies. Firstly, clause 2 of the Bill provides for the appropriate authority to approve the purchase, sale, lease and exchange of lands based on the land values. This is because the Government Instruction Manuals already provide for different approving authorities based on the value of the lands. Secondly, clause 3 makes it clear that the rules on renovation of HDB flats apply to both the flat owners and the renovation contractor. Thirdly, clause 4 of the Bill disallows HDB from delegating the power to make subsidiary legislation to any person. It also disallows HDB to delegate the power to delegate to another party.”
“The bank, in place of HDB as mortgagee, will have first charge on the market rate loan should there be a foreclosure of the mortgage. The Government recognises that bank origination is a significant move for HDB flat buyers. We are therefore keeping certain safeguards in place. The current protection clause in the Housing and Development Act against third-party creditors will not be changed. Flat lessees and their families, including those who take their mortgage loans from banks, will not lose their flats as a result of claims by third parties, in the event that they become bankrupt. Clause 6 of the Bill also allows CPF Board to, as a last resort, exercise its power of sale to recover CPF monies used in the purchase of the flat when solicitors acting for the various parties fail to ensure proper refund of CPF monies when the flat is sold. This will help to safeguard the return of CPF savings to the CPF member's account for his retirement use. Currently, HDB's consent is required before a mortgage by a bank can be made on a HDB flat. To facilitate the process of obtaining HDB's consent and to set out the terms and conditions for granting such consent, clause 9 of the Bill enables HDB to make rules for the creation of mortgage on HDB flats. Upgrading works in HDB precincts Let me now touch on the subject of upgrading works in HDB precincts. There is no change to our policies, but the amendments will ease the implementation of the upgrading programmes. Sir, the Lift Upgrading Programme (LUP) that was introduced last year can be implemented as part of the Main Upgrading Programme (MUP). New lifts and lift shafts will be added, where it is technically feasible and cost-effective to do so, to give residents barrier-free access when their blocks are identified for the MUP.”
“HDB will allow them to sublet their entire flat if they have occupied them for 10 years or more. With these changes, HDB resale flats bought without any CPF Housing Grant and without any loan from HDB will be treated more like private properties. Subletting guidelines to prevent disamenities Sir, let me stress that the Government is not abandoning the principle of long-term owner occupation, or the social objectives of public housing. That is why we have not completely relaxed the MOP and subletting rules. To preserve the good environment of our housing estate and to minimise nuisances that may arise from subletting, the HDB will apply certain guidelines and conditions on subletting that are already in place. Lessees are still expected to comply with the covenants in the lease and will be held responsible for infringements committed by their sub-tenants. The HDB will also work closely with the grassroots organisations and the residents to ensure that subletting does not become detrimental to the living environment of the HDB blocks. The HDB will be releasing more details soon on the relaxation of the MOP and subletting rules. Amendments to the Act Sir, let me now turn to the specific amendments to the Housing and Development Act - what they are and why they are being amended. Amendments related to bank origination Bank loans for the purchase of HDB flats are secured on the value of the flats. Hence the bank has to be able to foreclose the loan, recover vacant possession of a HDB flat and conduct a mortgagee sale, should the flat owner default in his mortgage payments. Clause 6 of the Bill will allow this, by enabling the bank to attach the flat when it is exercising its power of sale under the terms of the mortgage charge.”
“The MOP is currently five years for a flat bought at subsidised prices, ie, either directly from HDB or a flat from the resale market but bought with a CPF Housing Grant, and it is 21/2 years for a non-subsidised flat bought from the resale market without any CPF Housing Grant. Subletting of the whole flat is also currently disallowed, except in special circumstances. For example, the lessee may be overseas, or he may be elderly and, subject to various criteria, he can sublet his whole flat for income generation. These restrictions reinforce the principle of long-term owner occupation for subsidised public housing. They help to justify the subsidies enjoyed by HDB flat lessees and are fundamental features distinguishing HDB flats from private property. Policy refinements The Government has considered the proposals from the ERC carefully. It has decided that, together with the move to bank origination in January 2003, HDB will relax the current restrictions on MOP and subletting for resale flats that are bought without the CPF Housing Grant and which are financed by bank loans. From 1st January 2003, HDB lessees who buy resale flats without any CPF Housing Grant and with bank loans will only need to occupy their flats for one year, instead of the current 21/2 years, before they can sell it in the open market. Existing resale flats bought without any CPF Housing Grant will also qualify if the lessee re-finances his outstanding HDB market rate loan with banks or fully redeems his HDB market rate loan. The reduction in MOP will also apply to existing resale flats that are bought without CPF Housing Grant and without any loan from HDB. Subletting rules for these categories of flat buyers will also be relaxed.”
“We will continue to maintain our home ownership policy by providing subsidised loans for subsidised flats so that eligible Singaporeans can continue to afford good quality public housing. However, with bank origination of market rate loans, the Government is indeed pulling back the safety net at the fringes. But this will only apply to those who do not need extra help in the first place. They are either the financially better off, or those who already own a HDB flat. Flexibility with responsibility While flat-buyers will enjoy greater flexibility by obtaining loans from banks, this greater flexibility also comes with greater responsibility. Those who take loans from banks should exercise financial prudence, do financial planning, and buy a flat within their means. They must go into the purchases with their eyes wide open, and expect to be subject to the mortgage financing rules and foreclosure practices of the banks. In tandem with the move to bank origination and greater responsibility, I had, in July this year, signalled my Ministry's intention to treat certain HDB flats bought with bank loans more like private properties. I informed this House that MND was actively studying whether and how the restrictions on resale and rental of HDB flats can be relaxed. This is also in line with the recommendations of various Economic Review Committee sub-committees, such as the CPF Working Group and the Sub-Committee on Entrepreneurship, that the Government explore various ways to help homeowners monetise their housing assets and thus free up capital in the economy. I am pleased to announce the results of our review. Current policy HDB flats are restricted by a minimum occupation period (MOP), which is the minimum period that a lessee needs to own a flat before he can sell it.”
“A guiding principle of the review is that HDB should, as far as possible, let the private sector take over those functions which extend beyond this core responsibility. One such activity is the provision of market rate loans. As these loans are not subsidised and are pegged to commercial rates, there is no reason for HDB to continue to provide them. Our financial institutions have the resources and are well positioned to provide competitive mortgage financing for the purchase of public housing. Hence, the Government decided that HDB will no longer provide market rate loans with effect from 1st January 2003. Flat buyers who are not eligible for HDB's concessionary rate loans can take market rate loans from the many banks which are licensed to offer housing loans. Existing HDB market rate mortgagors can transfer their remaining mortgages to the banks if they so wish. Some Members have previously expressed concern that the provision of market rate loans by banks, instead of HDB, is in effect a withdrawal by Government of its social safety net. They see HDB as generally being more sympathetic towards flat owners in arrears, and will not repossess flats as a last resort. On the other hand, they perceive banks as being less forbearing, as they are profit-driven. Let me reiterate that there is no change in the Government's commitment to the provision of basic housing in the form of subsidised HDB flats. We are not touching our basic housing safety net. Our housing subsidies have enabled the vast majority of Singaporeans to own their own homes. Concessionary loans are a key instrument to promote home ownership. Hence, the Government will continue to provide HDB loans at concessionary rates to eligible buyers.”
“Mr Speaker, Sir, I beg to move, "That the Bill be now read a Second time." In July this year, Government announced that the bank origination of HDB market rate loans would be implemented from 1st January next year, 2003. One of the objectives of this Bill is to facilitate the implementation of bank origination. The Bill also seeks to fine-tune the Act to facilitate HDB's implementation of its upgrading programmes. Sir, before I explain the proposed amendments in greater detail, allow me to first reiterate the rationale for bank origination of market rate loans. Bank Origination of HDB Market Rate Loans HDB Concessionary and Market Rate Loans HDB provides mortgage loans at a concessionary interest rate to help eligible Singaporeans buy HDB flats. These subsidised flats are granted to first-time subsidised flat buyers as well as second-time buyers who are upgrading from smaller flats. HDB currently also provides loans at market rates. Such market rate loans are for HDB buyers who have either previously consumed HDB housing loan subsidies, or who do not qualify for HDB subsidies in the first place. There are five categories of such buyers: Singapore Permanent Residents; private property owners; high income households, ie, those which earn $8,000 or more a month; those who have already enjoyed two concessionary loans; and, finally, those who have enjoyed one concessionary loan for the purchase of a subsidised flat and are buying a similar-sized flat, or a smaller flat. Bank Origination from 1st January 2003 As Members are aware, my Ministry is reviewing the functions of HDB to see in what way HDB can better fulfill its core responsibility, which is to provide good quality and affordable public housing.”
“In addition, BCA has started the Building Energy Efficiency Indices (EEI) as a guide to the industry for the amount of energy consumed by the various building types. It is also conducting research on the use of solar energy in our local context. WRITTEN ANSWER TO QUESTION CONSTITUTION OF THE REPUBLIC OF SINGAPORE 1. Mr Charles Chong asked the Minister for Home Affairs whether his Ministry will review Article 122(1) of the Constitution of the Republic of Singapore making the conditions for according Singapore citizenship by descent to foreign born children of a Singapore parent more gender equal.”
“In the planning of the physical development of Singapore, the Government has always emphasised comprehensive and integrated efforts to provide shade and greenery to our urban built environment. Our Garden City initiative has succeeded in providing a pervasive garden environment for Singapore. Our roadside trees, the planned parks and green spaces provide the necessary green lungs and aesthetics as well as work towards ameliorating the heat build up in our environment. BCA, NParks, HDB and NUS are jointly studying the causes and impact of heat build up in our environment. So far, the study has shown that rooftop gardens can almost halve the temperatures of the roof surfaces of highrise buildings, resulting in less heat radiated to the surrounding areas. NParks is therefore promoting rooftop gardens to owners and developers through public education and awareness programmes. To encourage skyrise greenery, URA allows for certain GFA exemption for the provision of sky terrace. URA also allows developers to provide balcony floor area up to 10% above the GFA allowable under the Master Plan in the design of residential, mixed residential and hotel developments. To enhance the energy efficiency of buildings in Singapore, BCA has set more stringent standards to reduce the energy consumption of building services. These are in areas such as the design of air-conditioning and mechanical ventilation systems and the minimum efficiency of equipment and lighting systems in buildings. BCA also intends to set a stricter compliance value of the heat gain into a building which is to be incorporated into building designs. This will lessen the load on the air-conditioning system in new buildings and therefore help reduce the electricity consumption.”
“As I had announced in Parliament in May, HDB will offer 1,300 new flats for sale in Punggol and Sengkang under the Build-To-Order (BTO) System in the 4th quarter of this year. As nearly all the unsold flats in the non-mature estates are 5-room and Executive Flats, only 4-room flats will be offered under this exercise. If the take-up rate for the flats in these sites is good, HDB will proceed with the construction. HDB will study the response to its ongoing sales measures and the BTO offer in the 4th quarter of this year, as well as the economic conditions next year before determining the building plans for 2003 and beyond. 2.00 pm”
“Mr Speaker Sir, at the beginning of this year, HDB had about 17,500 unsold flats in the non-mature estates available for sale to the public. In the first quarter of this year, HDB offered these unsold flats to all the Registration for Flat Scheme (RFS) applicants on the queue. After RFS applicants had selected their flats, the remaining unsold flats were then offered to the public on a monthly basis under the Walk-In Selection (WIS) process from April this year onwards. For the convenience of buyers, HDB organised roadshows, conducted bus tours, opened up showflats and sample units and set up on-site sales offices to facilitate their flat purchase. So far, WIS exercises in five towns have been launched - Sengkang, Choa Chu Kang, Sembawang, Punggol and Woodlands. Through these measures, HDB has sold more than 7,000 flats in the non-mature estates from January to the end of July, leaving about 10,000 flats still available for sale. These flats will continue to be made available through the WIS on a monthly basis. HDB will assess the unsold flats supply when all the unsold RFS flats have been released under the WIS, before deciding if additional measures are necessary. In addition, HDB has sold more than 1,300 of the 1,900 flats that were offered in the first of the twice-yearly Balloting Exercises for flats in mature estates. This was held in January this year. These flats were built to re-house lessees affected by HDB's redevelopment programmes such as the Selective En-Bloc Redevelopment Scheme (SERS). HDB intentionally built these surplus units so as to optimise the land use in these popular estates and is now able to release them to the public in batches.”
“The amendments in this Bill will enable banks to keep up with technological changes and help Singapore move to a more efficient payment system. Mdm Deputy Speaker, I beg to move. Question proposed.”
“If the holder of the IRD deems that the reason for the original dishonour is no longer valid, for instance, the original cheque was post-dated or the account had insufficient funds, this holder can present the IRD for payment at the same presenting bank as if the IRD were the original cheque. The Bill also gives a person who has lost an IRD the same rights of recourse against the drawer that are currently available to a person who has lost a cheque. Clause 3 amends section 49 to allow an IRD to serve as a notice of dishonour to the drawer of the cheque, as per a dishonoured cheque in today's context. The holder of the IRD will be able to use the IRD to notify the drawer that the cheque has been dishonoured. The holder can then request for a new cheque from the drawer if necessary. Clause 4 amends section 86 of the Act to clarify that the new cheque truncation provisions in the Act that are applicable to cheques will also apply to other instruments such as cash cheques and banker's drafts. The addition of section 87C of the Act will allow the Monetary Authority of Singapore (MAS) to make regulations relating to cheque truncation with the approval of the Minister. MAS intends to prescribe via regulations, the electronic payment information required when a cheque is presented electronically and the particulars contained in an IRD. The Bill has incorporated the various comments that MAS has received through consultation with public bodies. Conclusion Mdm Deputy Speaker, the Cheque Truncation System will enhance the banks' efficiency by reducing transportation and microfilming costs, thus allowing banks to offer new services to customers.”
“The amendments have been drafted so that under the new process, the respective rights and duties of the various parties to a cheque will be the same as at present. Other jurisdictions have passed, or are in the process of passing, similar amendments to their cheque legislation. The United Kingdom has allowed the clearance and payment of cheques using magnetic-ink character recognition information instead of physical presentment since 1996. In the United States, the Federal Reserve Board is in the process of getting Congress to enact a Check Truncation Act. Let me now explain the proposed amendments in detail. Allowing electronic presentment to replace physical presentment Clause 6 of the Bill introduces section 87A that will allow the presentment between banks to be done through electronic transmission of cheque image and payment information instead of the physical cheque. However, the paying bank will still have the right to demand that the physical cheque be presented instead, if it deems it necessary. Image Return Document (IRD) Clause 6 also introduces section 87B, which will allow for the presenting bank to issue an Image Return Document (IRD) instead of returning the original cheque to its customer if the cheque is dishonoured by the drawer's bank. An IRD is a banking document bearing the image of the cheque together with other related information. However, if the customer requires the original cheque, he or she can still request it from the bank. The bank may also choose to return the original cheque instead of issuing an IRD.”
“The Clearing House then sorts the cheques for the respective paying banks to collect, whereupon each paying bank verifies whether the cheques can be paid. If the cheque cannot be paid, it is then returned to the presenting bank in the same way. Over the years, the banking industry in Singapore has introduced new technologies to improve this cheque clearing process. An example of this is the magnetic-ink character recognition (MICR) information on cheques that banks have been exchanging to facilitate faster cheque clearing. However, physical cheques are still required by the paying bank because they need to verify information such as dates and signatures on the cheques. The Cheque Truncation System, to be launched later this year, leverages on new imaging technology that enables banks to exchange electronic images of cheques. Cheques will be scanned when deposited and their electronic images will be transmitted throughout the entire clearing cycle. The new system will use a private network with public key cryptography to ensure that images are encrypted and transmitted securely between banks. In addition, the system includes a centralised image archive for banks to store and retrieve cheque images. Since a cheque image contains all the necessary information required by a paying bank to determine whether the cheque can be paid, there is no longer an operational necessity for them to have the physical cheque. This Bill contains amendments to allow banks to present a cheque by electronic means in place of physical presentment. This Bill will also recognise the rights of a holder of an Image Return Document, or IRD in short, which is a document that banks will issue instead of returning the original cheque when a cheque is dishonoured.”
“The proposed transfer of past reserves from BCCS to MAS as past reserves would require amendments to the Constitution. This will be covered separately in the Constitution (Amendment) Bill, which would be presented for Second Reading at the next available sitting. The Constitution (Amendment) Bill will also propose the deletion of BCCS from the Fifth Schedule of the Constitution. Mdm Deputy Speaker, I beg to move. Question put, and agreed to. Bill accordingly read a Second time and committed to a Committee of the whole House. The House immediately resolved itself into a Committee on the Bill. - [Mr Lim Hng Kiang]. Bill considered in Committee; reported without amendment; read a Third time and passed. BILLS OF EXCHANGE (AMENDMENT) BILL Order for Second Reading read. The Second Minister for Finance (Mr Lim Hng Kiang): Mdm Deputy Speaker, I beg to move, "That the Bill be now read a Second time." The Bills of Exchange Act provides the legal framework of bills of exchange, cheques and promissory notes. It was last amended in April 1998. This Bill seeks to amend the Act for the purpose of establishing a Cheque Truncation System, or CTS in short. Overview of Cheque Truncation System (CTS) Let me begin by giving an overview and benefits of the Cheque Truncation System. Singaporeans have written an average of more than 83 million cheques a year over the last 10 years. In 2001, the figure was 92 million. Significant costs are incurred by the banking industry to clear these cheques. Today, after a bank's customer deposits a cheque at his bank, also referred to as the presenting bank, the bank will batch it together with other cheques and transport them to the Automated Clearing House.”
“If MAS' funds are insufficient, the balance of the deficiency will be paid out of the Consolidated Fund. Clause 7 repeals sections 22A and 23 pertaining to the Currency Reserve Fund and the Currency Fund Income Account. Under the new arrangement, income from the Currency Fund will be ploughed back to the Currency Fund itself, and expenses arising from currency issue and investments will be charged against the Currency Fund. Definition of Legal Tender Currently, section 13 provides the legal tender limits for the various denominations of the currency. The notes and coins issued by BCCS are legal tender up to the value specified in section 13 for the purpose of discharging any debt or paying for goods and services. Over the years, BCCS has regularly received queries from the public regarding the definition of "legal tender". Some members of the public were unclear whether merchants could refuse to accept certain coins of small denomination. The payment for goods and services is essentially a contractual agreement between a willing buyer and a willing seller. Neither party can be forced to enter into a transaction unless he willingly does so. In order to clarify the intent and purpose of the law, clause 5 will amend section 13 to allow a merchant to specify that he will not accept one or more denominations of notes or coins as payment for his goods or services. If the merchant does not specify any conditions on how he would like to be paid, then he must accept legal tender for the settlement of the debt, or else the debt may be forgiven. Conclusion The proposed amendments in this Bill are part of the legislative amendments required to implement the merger of BCCS with MAS.”
“The merger of MAS and BCCS will enable us to rationalise common functions and realise efficiency gains, without compromising the overriding objective of managing the currency and maintaining confidence in the Singapore dollar. MAS will become a full-fledged central bank. This Bill seeks legislative amendments to the Currency Act to effect the merger of MAS and BCCS. This Bill also contains other amendments which are intended to update and streamline certain procedures and provisions in the Currency Act. Madam, let me now highlight the main amendments proposed in the Bill. BCCS Funds Currently, the Currency Act requires that the face value of the currency issued by BCCS must be at least 100% backed by external assets in the Currency Fund. A separate fund - the Currency Reserve Fund - serves as a buffer for the Currency Fund, as the value of the external assets that make up the Currency Fund may fluctuate. All dividends, interest, or other revenue from the Currency Fund and the Currency Reserve Fund are paid into a Currency Fund Income Account. All expenses incurred by BCCS are charged to this Currency Fund Income Account. With the merger, the Currency Fund and the Currency Reserve Fund will be combined into one fund, which will still be called the Currency Fund. The new Currency Fund will continue to provide at least 100% backing for the currency-in-circulation at all times. Clause 6 amends section 21 to provide that assets in the Currency Fund in excess of 100% of the face value of currency-in-circulation could be transferred to MAS' other funds at any time. Section 21 is also amended to provide that any deficiencies in the Currency Fund will be made up from MAS' funds.”
“Background BCCS was set up in 1967 to implement the currency board system, which Singapore then practised. The features of the currency board system were: first, the exchange rate was fixed between the domestic currency and a specified foreign currency; second, domestic notes and coins were fully convertible at the fixed exchange rate; and third, the domestic currency was fully backed by foreign assets or gold. Singapore has progressively evolved away from the system of a fixed exchange rate since the Singapore dollar was floated in 1973. In 1982, convertibility of domestic currency notes and coins into gold and other foreign currencies on demand was repealed. Today, the exchange rate of the Singapore dollar is managed by MAS, against a basket of currencies of our main trading partners, with the objective of keeping inflation low and maintaining the purchasing power of the Singapore dollar. The only feature of the currency board system that we have retained is the full backing of currency-in-circulation by external assets. Hence, Singapore no longer operates a currency board system, except for the full backing of currency-in-circulation. This is required under the Currency Act, and has contributed to confidence in the Singapore dollar. This feature will not change after the merger. Currency-in-circulation will continue to be fully backed by external assets all the time. From a broader perspective, confidence in the Singapore dollar exchange rate derives from the consistency and soundness of our monetary and fiscal policies, as well as our foreign reserves.”
“If we are talking about being entrepreneurial, taking risks, or about people being self-reliant, answering for themselves, then we have to be self-propelled and, we have to be, to a much greater extent than before, on our own. By shifting to bank origination, and allowing banks to take first charge when granting housing loans, we are taking just one important step in this direction. We are taking it carefully, we know there are risks, we know there will be consequences, and there will be some people who will still think there is a safety net. And when they realise there is not one, they will try and create one, and may look for Dr Lily Neo and the other Members to ask for one. But these are problems which we will have to manage in the context of our moving forward to a more self-reliant system. And today's move is a significant step, as far as a housing safety net is concerned. Sir, I thank all Members for participating in this debate and I beg leave, Mdm Deputy Speaker, to withdraw the Motion. Motion, by leave, withdrawn. CURRENCY (AMENDMENT) BILL Order for Second Reading read. 5.38 pm The Second Minister for Finance (Mr Lim Hng Kiang): Mdm Deputy Speaker, I beg to move, "That the Bill be now read a Second time." In January this year, the Government announced its plans to merge the Board of Commissioners of Currency, Singapore (BCCS) with the Monetary Authority of Singapore (MAS). The merged entity would still be called the MAS. This is an organisational change to streamline our institutional structure. There will be no change in the way currency is managed. The Singapore dollar notes and coins that are currently in circulation will continue to be fully backed by the Currency Fund.”
“Every country needs to provide for the retirement needs of its people. Our system is based on savings. In other countries which do not have high savings rates and a CPF-type system, their solution is tax - social security based on tax or on social security contributions - pay as you go. In other words, this generation of young people pays tax to contribute to the pension for the current generation of old people. And when they themselves grow old, they had better hope that there are enough young people who are willing to pay enough taxes to meet their needs. It creates serious problems of solvency and sustainability. It has done so in Europe. The Americans have had their share of the problems. Our CPF avoids that. The Economic Review Committee recommendations will adjust the balance in the CPF between the retirement and housing needs. It will focus the scheme on the needs of the central group of Singaporeans, ie, those between the 10th and the 80th income percentiles, and it will reduce the negative impact of too high a CPF rate on the older workers. These are very important improvements to the CPF system. The HDB changes are also a significant policy shift. It is not just a matter of banks offering lower mortgage rates than the HDB can. The issue is how extensive our housing safety net should be, and how we can progressively allow and encourage Singaporeans to be more self-reliant, rather than depending on the Government for many of their needs. The core of our home ownership policy remains unchanged. But at the margins we need to adjust, not only to free up the housing market, but to have Singaporeans make their own decisions, and take responsibility for them.”
“It is based on individual responsibility and on self-funding. It is comprehensive. It covers retirement as well as housing and medical expenses. It allows members a very wide range of investment choices and, if we allow pension funds, an even wider range. It enables Singaporeans to own homes, gives them a stake in Singapore and substantial savings, whose value they will want to protect. So, they will not take a chance with a government which will devalue our currency or let the country go down the drain. The CPF is a unique system. It evolved in special circumstances during the period of our economic take-off. It was built up over many years, starting at 10% contribution rate in 1955, long before independence. After independence, we built up the contribution rates steadily year by year. At the time of our economic take-up when the economy was growing at 8%, 9%, 10%, 12% per year, wages went up correspondingly, and we put aside 2%, 3%, sometimes 4%, a year into the CPF as wages went up, in order to enable Singaporeans to own their homes. By 1984 - which was nearly 20 years after independence - we had built up the rate from 10% to 50%. But we could not keep it there. The following year, we had a sharp recession, we had to bring the rate back down all the way to 35% to get out of the recession. Then we built it back up again painfully. This time, we did not aim for 50%; we aimed for 40%. It took us six years. We got there in 1991. But when the Asian crisis struck, we had to reduce the rate in 1998, and we had to bring it down to 30% again. Now we are back to 36%, hoping to get back to 40% over the next 2-4 years. If we lose this unique institution, we will never get it back again. Therefore, we have to build on and preserve this system.”
“It is not a very tidy situation because the old loans were on one set of rules and the new loans are put on to a different set of rules, reversal of lien plus the Valuation Limit. But after much deliberation, we have decided in MAS that if you are refinancing with another bank, then the new mortgage must be subject to the Valuation Limit, because there will be a new agreement. The new agreement has to have a charge reversal and you must have the bank standing first, which is different from the status quo where the bank stands second. We cannot allow the CPF to have second charge and, on top of that, to have the CPF not capped by a Valuation Limit. So, if you are going to a second bank to refinance your loan, then new rules will apply. We also do not want the second bank to make a new mortgage on old terms and have the CPF rank ahead, in which case, the problem which was with the first bank is now taken and has moved to a second bank, and we will be in a situation where you do not know where the bad loans are and the bad loans are being shuffled around. So, if we have a refinancing with a second bank, then the new mortgage will be subject to the Valuation Limit. But, of course, if your current bank is willing to vary and improve the terms of the mortgage, without reversing the lien position, and without having to conclude a new agreement, it is between you and your bank and the CPF is not involved, then we will allow that. It is not entirely what Mr Leong Horn Kee hoped for, but it is what is practical to do in this situation and, I hope, will be of some help. Finally, Mdm Deputy Speaker, may I make a few remarks on the overall philosophy of this exercise. The CPF is a critical part of our social safety net. It is a good system.”
“So the cash buffer is necessary, but it is not sufficient. We have not had a serious problem up to now. Firstly, because property values have appreciated steadily over the last couple of decades, and typically, people have resold properties frequently. On average, from bank mortgages, the duration is only five years, which means on average, every five years, people sell their property, they pay off their mortgage, they go on to buy a new property. But going forward, this is not going to be the situation. The second reason we have not had a problem so far is because, even though some of the mortgages are under water, people have continued to service their mortgages. It is partly a cultural thing. You feel that it is your duty to pay back the loan, and not just to default on it. And partly it is our good luck that our unemployment rates are not that high and most people are working and, as long as he is working, the customer will service the loan. But that is not the experience in other countries. In America, if your loan is under water, you ask, "Why should I bust my guts out? I return the keys to the bank, and good luck to the bank." Now, if ever that happens to Singaporeans, we are in very serious trouble. Therefore, we have to reverse the lien. The CPF is your own money. You are borrowing from the bank. The bank has to come first before you and therefore CPF. Just as you borrow from HDB, HDB has to come first. So you must pay back the bank before you get back your own money. It is a basic principle. Thirdly, refinancing. Mr Leong Horn Kee suggested allowing refinancing of existing loan not to be subject to the Valuation Limit. We have examined this in detail. The arguments go both ways.”
“If you do not service the loan, the house is available and it can be sold and the bank can recover its money. Therefore, the bank has confidence. But as it stands today, the CPF ranks first. And it is not just 10% or 20% of the value of the house which is the CPF's claim, but all of your CPF money you put into the house month by month, year by year, stands first, and stands more and more at the front and grows every year. So as you service the loan, as the loan matures, far from the bank feeling relieved that the journey is nearly over, in fact, the bank is getting into a more and more serious position when its loan is less and less collateralised. This is fine if your property value is increasing because then, although you put money in, the value increases even more and there is always a buffer. And before you get into trouble, you sell the property and move on to another project. But if the property value falls, which is not inconceivable, then beyond a point, the mortgage may not be collateralised at all because the CPF you have put in may be worth more than the current value of the property after five or seven years. And then the bank actually has an unsecured personal loan in everything, but name. We start off with the 20% cash buffer when you buy a house. It is a requirement which MAS imposed in 1996 and which we have stringently adhered to despite any entreaties, pleadings, demands, requests, we just said, "no". Because we knew we were in a vulnerable position and we needed this 20% cash buffer at the bottom. It is a buffer for the bank and, then beyond that, buffer for the CPF. But because the CPF claim builds up quite quickly within five or six years, the cash buffer actually is reduced to zero, unless the property value has gone up.”
“We can address the problems of the present cohort of the 50-55s. The civil service has got the TCTC. It is a catchy acronym. I hope the idea also catches on. It is not a problem which is upon us today, but it is a problem which is coming upon us which we can see and we can either start addressing it now, or we can talk about it, and then postpone the problem for 4-5 years. I discussed this with several of the union MPs before we decided on this. And I said, the alternative for us is to say, "Let's postpone this problem. Restore to 40%. After that, gradually bring it back down again because I would have given due warning, 4-5 years would have passed and I would take another five years to bring it down. Would you prefer that?" And they said, "No. You know there is a problem. You are at the point when people accept that things have to be changed. Better change now." Over 10 years, any number of mishaps can come along. We may have another crisis come our way, better to get this done with, and past. And that is why we are proposing to act now. The second issue, which I would like to address briefly, is bank loans - the question of charge reversal. Several MPs have asked why we need to do this. Mr Ravindran said the present system of CPF having first lien is fundamentally sound. Dr Lily Neo asked why fix it if it ain't broke. I can understand this because this is an arrangement which we have made for 21 years and now we have decided to change the arrangement. But, unfortunately, there is a need to change the arrangement. The basic reason is this. As things now stand, when you have a mortgage loan, it is not really a secured loan. A secured loan means that when you borrow, there is a house, the house is a surety.”