The Monetary Authority of Singapore (MAS) announced that banks must obtain a written declaration from a borrower on the amount of discount, rebate or benefit received for the purchase of a property when granting a housing loan.

The declaration should also include the amount of loans obtained by the borrower from other financial institutions or the seller for the purchase of the property.

Buyers will have to disclose these amounts, including any private arrangements with the seller that are not reflected in the purchase price, in their loan applications to the banks.

This requirement will apply to all loan applications received by banks from 13 September 2004.  This does not mark a change in MAS' rules on housing loans.

Banks are already required under the existing rules to take reasonable steps to ensure that these amounts are taken into account in computing the loan quantum.

This requirement establishes a uniform procedure for banks to comply with the housing loan rules, as currently, banks adopt varying practices.

Notes:

Under the existing MAS Notice on Housing Loans, a bank is required to deduct discounts, rebates or other benefits provided by the seller to the borrower from the purchase price in computing the loan quantum that may be granted.

These discounts, rebates or benefits help the buyer to meet the minimum cash down payment and make the true purchase price of the property lower than the transaction price stated in the sale and purchase agreement.

The existing Notice also requires a bank to take reasonable steps to ensure that the aggregate amount of credit obtained by the borrower for the property purchase does not exceed the prescribed loan to value limit.

Such credit could include loans from other financial institutions as well as the property seller, e.g. via a direct loan from the property developer or a scheme where the developer pays advance rental to the buyer.

The housing loan rules, in place since 1996, are meant to ensure that the property buyer has paid the minimum cash down-payment from his own financial resources before the housing loan is disbursed by the bank. This is to curb excessive speculation in the property market.

Source: Monetary Authority of Singapore Press Release 6 Sep 2004

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