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How banks can help first-time house-buyers
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LETTER | The furore over affordable housing and the inability to secure bank loans (even by first-time house buyers) continues to rage on with various parties appearing to give conflicting views.

Yet the obvious pain-point here i.e the difficulty in securing bank loans still remains unaddressed. This problem persists not only for properties in the primary market (new houses sold by developers) but also for that in the secondary market i.e second-hand houses on sale by existing house-owners.

In the Klang Valley, it may be rare to find residential properties going for below RM200k. But in other areas such as Ipoh, Melaka etc there are still many residential properties priced at below RM200k.

This is especially so in the secondary market. These properties are all definitely within the "affordability range" of most genuine, first-time house-buyers.

Yet, in spite of the countless denials issued by the local banks through their mouthpiece i.e the Association of Banks Malaysia (ABM), most of these eligible buyers/borrowers continue to be spurned by the banks' overly-rigid credit evaluation policies, especially at the headquarters level.

Discreet checking with most property agents/agencies will reveal that the primary stumbling block for first-time house-ownership, especially outside the Klang Valley, is not the lack of affordable houses but rather the extreme difficulty in securing bank loans.

As an ex-banker (having served as head of the branch loans department) and subsequently as a registered senior property negotiator for the past 25 years, I would like to propose the following measures for all the banks' consideration in order to ease the burden faced by thousands of genuine first-time house-buyers around the country:

1. Banks can formulate a "special package" for genuine first-time house buyers by doing away with their "overly-cautious" internal loan assessment and approval guidelines. This may be packaged along the lines of the many products they roll out to assist Small-Medium Enterprises (SMEs).

2. To do away with rigid, across-the-board Net Disposable Income (NDI) computation. Instead, for genuine first-time house buyers, banks may give the discretion to branch loan officers and managers to calculate a fair and reasonable "living expenses deduction" instead of adopting a fixed formula.

Likewise in calculating an applicant's total net income, banks are to give reasonable weight to overtime, allowance and other income. I have discovered that some banks tend to suppress this, thereby affecting the NDI which then adversely affects the loan applicant's "score-sheet" and ultimately disqualifies him/her.

3. It's no secret that many banks assign "grades" to their loan applicants. These grades may be based on the applicant's nature/type of job or sometimes by his/her income threshold.

For example, I am given to understand that some banks automatically categorizes an applicant as a "vulnerable client" or "grade D' once the monthly income falls below RM5k.

Arising from this, the client's application will then be either declined or at best the margin of financing (MoF) will be slashed to as low as 70% in which case the poor applicant will be unable to accept the loan (even though the sale price of the house may be well within the affordability range.i.e below RM200k!)

To address this anomaly banks can adopt a more realistic and just credit grading system by giving a special leeway to genuine first-time house-buyers.

4. It's a well-known fact among most property practitioners that nowadays most housing loan applications have to be submitted to the respective bank's headquarters for management's approval (even for "small" loans with an applied limit less than RM100k for the purchase of low-cost properties!)

Here there is a need for banks to review this procedure as most banks' HQs are located within the Klang Valley and as such the officers/managers there may not have the necessary knowledge/nous or "sensitivity" to peculiarities or market situations outside their particular region.

To address this banks may "decentralise" the approving authority to their regional centres or even to their branches.

Note: However this flexibility may only be accorded to first-time housing loan applicants. Conversely, banks may upskill their HQ loans officers via secondment to regions/branches outside Klang Valley so that they can be better accustomed to assessing the realities outside their region.

5. Lastly, the authority that is best positioned to compel the banks to act is Bank Negara Malaysia who is the regulator of the financial industry in this country.

Therefore it is with BNM that the buck should stop. Indeed to date, BNM has done a sterling job in ensuring that banks do not step out of line when dealing with the public.

There is now an urgent need for BNM to play a more active and assertive role in resolving the woes of the poor genuine first-time house buyers in this country.

Towards that end, BNM has to adopt a more balanced stance in controlling the risks associated with banks' non-performing loans (NPL) while at the same time also ensuring that eligible first-time house buyers are not deprived of loans.

To their credit, BNM did conduct a research recently whereby they had identified the need to maintain a centralised registry for first-time house buyers.

In conclusion, that registry in tandem with the existing CCRIS report should
provide banks with a reliable database to launch their special loans package
to urgently help the thousands of genuine first-time house buyers who have
been unfairly let down by the banks' stringent policies these past few years.

So the onus is now on the banks and BNM. Indeed by urgently committing to this special loans package to help first-time house buyers, not only will it help to clear up the overhang of unsold affordable houses around the country, it will also help "liven up" several sub-sectors of the property market which has remained depressed for the past few years.


The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini

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