MAS adjusts TDSR rules for refinancing; cooling measures to remain

[reporter2]

http://www.businesstimes.com.sg/real...ures-to-remain

MAS adjusts TDSR rules for refinancing; cooling measures to remain

By Jamie Lee

[email protected]

@JamieLeeBT

Sep 1, 2016


THE Monetary Authority of Singapore (MAS) on Thursday refined rules behind the total debt servicing ratio (TDSR) framework that would allow overleveraged borrowers to refinance their housing loans, subject to a prescribed debt restructuring plan.

"The refinements... do not represent a relaxation of property market cooling measures," the MAS said in a press statement, noting that these would allow borrowers to better manage their debt through refinancing.

With immediate effect, loans for investment properties purchased before TDSR came into effect can be refinanced above the TDSR threshold of 60 per cent as long as the borrower commits to repay at least 3 per cent of the outstanding balance over a maximum of three years, and meets the bank's credit assessment.

Prior to this, the MAS did not prescribe an interest rate for debt reduction plans that such borrowers must commit to before refinancing at above the 60 per cent threshold.

[Arcachon]

THE Monetary Authority of Singapore (MAS) on Thursday refined rules behind the total debt servicing ratio (TDSR) framework that would allow overleveraged borrowers to refinance their housing loans, subject to a prescribed debt restructuring plan.

"The refinements... do not represent a relaxation of property market cooling measures," the MAS said in a press statement, noting that these would allow borrowers to better manage their debt through refinancing.

With immediate effect, loans for investment properties purchased before TDSR came into effect can be refinanced above the TDSR threshold of 60 per cent as long as the borrower commits to repay at least 3 per cent of the outstanding balance over a maximum of three years, and meets the bank's credit assessment.

Prior to this, the MAS did not prescribe an interest rate for debt reduction plans that such borrowers must commit to before refinancing at above the 60 per cent threshold.

[Arcachon]

TDSR Rules on Refinancing Fine-tuned

Singapore, 1 September 2016… The Monetary Authority of Singapore (MAS) announced today that the refinancing rules under the Total Debt Servicing Ratio (TDSR) framework will be fine-tuned to allow borrowers more flexibility in managing their debt obligations. This is in response to feedback from some borrowers who are unable to refinance their existing property loans owing to the application of the TDSR threshold of 60 per cent.

2 The TDSR framework and threshold will continue to apply to new property loans. The refinements being introduced for refinancing of loans will enable borrowers to better manage their existing debts. They do not represent a relaxation of property market cooling measures.

Refinancing of owner-occupied housing loans

3 Under current rules, for owner-occupied residential properties bought before the introduction of TDSR, a borrower may be exempted from the TDSR framework when he refinances his housing loan.

4 MAS will now extend the same concession on refinancing to all owner-occupied residential properties, including those bought after the introduction of TDSR1. This adjustment recognises that all new housing loans would have been subjected to the TDSR framework at inception.

Refinancing of investment property loans

5 Currently, for properties that were purchased for investment before the introduction of TDSR, borrowers can refinance above the TDSR threshold of 60 per cent if they commit to debt reduction plans when refinancing their loans.

6 MAS will now allow a borrower to refinance his investment property loan above the TDSR threshold, regardless of when the property was purchased, if he meets the following two conditions2:

(a) commits to a debt reduction plan with his financial institution to repay at least 3 per cent of the outstanding balance over a period of not more than 3 years; and
(b) fulfils his financial institution’s credit assessment.

7 MAS reiterates the importance for borrowers to exercise prudence and reduce their debt burdens, as the current low interest rate environment will not persist indefinitely. Borrowers will face higher mortgage repayments when interest rates rise.

8 The revised rules will take immediate effect3. Please refer to the Annex for a summary of the rules.

9 MAS Deputy Managing Director, Mr Ong Chong Tee, said: “The TDSR is a structural measure to encourage prudent borrowing by households. The adjustments announced today will help borrowers to refinance their existing property loans at lower interest rates and better manage their debt obligations over time. They do not apply to loans for new property purchases and are not an easing of the property cooling measures.”

1 The same concession will be extended to the Mortgage Servicing Ratio limit of 30 per cent for the refinancing of housing loans relating to HDB flats and Executive Condominiums that are owner-occupied.
2 This includes a loan secured on a borrower’s equity in a property.
3 This supersedes the 10 February 2014 announcement where a transition period ending 30 June 2017 was given to borrowers who purchased their properties prior to the introduction of TDSR to refinance their investment property loans above the TDSR threshold.
Annex

SUMMARY OF TDSR RULES FOR REFINANCING OF PROPERTY LOANS
(WITH EFFECT FROM 1 SEPTEMBER 2016)


http://www.mas.gov.sg/News-and-Publi...ine-Tuned.aspx

[Arcachon]

SINGAPORE - Existing home owners looking to refinance their home loans will enjoy more flexibility with relation to the Total Debt Servicing Ratio (TDSR), the Monetary Authority of Singapore said on Thursday (Sept 1).

The move will allow property owners to take advantage of current low interest rates even if refinancing would mean busting the TDSR limit of 60 per cent.

About 2.5 per cent of new home loans are currently above the TDSR threshold.

Previously, this exemption was granted only to the refinancing of loans for properties bought before the introduction of the TDSR framework in June 2013.

Now the exemption applies to all owner-occupied housing loans.

Under previous rules, investment property loans could be refinanced above the 60 per cent TDSR threshold if the borrower committed to a debt reduction plan and applied for the refinancing before 30 June 2017.

Now the MAS has specified that to benefit from the TDSR exemption, the debt reduction plan should involve the borrower committing to repay at least 3 per cent of the loan's total outstanding balance over three years.

The TDSR rules will still apply to new housing loans and the MAS notes that this move does not represent a relaxation of property cooling measures.

One party the new rules would help are those who have bought after the TDSR was introduced and wish to refinance; however they may recently have become unemployed, have lower income compared to when they first bought the property, or chalked up additional liabilities since and cannot refinance below the 60 per cent TDSR threshold, said Mr David Baey Ee-Qiang, the head of mortgage at personal finance comparison portal MoneySmart.sg.

This is because the TDSR threshold now does not apply for refinancing regardless of when the property was purchased.

http://www.straitstimes.com/business...ing-home-loans

[Kelonguni]

Congrats bro Arcachon. It had been a great durian season. Be bold. Have divine discontent. Work hard. Life will take care of the rest.

[Arcachon]

Agree, just need to maintain and the Sun will shine again.

For those waiting for Durian to drop have to wait a bit longer.

For MTB every day your money in the Banking depreciates, your loan tenure reduce, your loan amount reduce, cash to pay increase.

Money printing can only increase and will never stop.

If only Bank can lend me money to buy property I will buy again.

[reporter2]

http://www.straitstimes.com/business...ty-refinancing

More flexible rules to help with property refinancing

Sep 2, 2016

Yasmine Yahya

Assistant Business Editor


Feedback from some borrowers that they were unable to refinance their residential properties to take advantage of the low interest rate environment because they could not meet the total debt servicing ratio (TDSR) threshold has prompted the Monetary Authority of Singapore (MAS) to introduce some flexibility to the rules.

The TDSR framework stipulates that borrowers cannot take on total debt obligations exceeding 60 per cent of their gross monthly income.

With immediate effect, borrowers may be exempted from the threshold if they meet certain conditions. Previously, they might obtain exemption only to the refinancing of loans for properties bought before the introduction of the TDSR framework in June 2013.

Now the exemption applies to all owner-occupied housing loans.

This new flexibility does not represent a relaxation of property cooling measures as the TDSR framework will still apply to new housing loans, the MAS said yesterday.

Refinancing of properties bought for investment was also made less onerous. Previously, investment property loans could be refinanced above the 60 per cent TDSR threshold if the borrower committed to a debt reduction plan and applied for refinancing before June 30, 2017.

Now, to get the TDSR exemption, the debt reduction plan should involve the borrower committing to repay at least 3 per cent of the loan's total outstanding balance over three years. The borrower would also have to meet the bank's credit assessment criteria.

[reporter2]

http://www.straitstimes.com/business...g-measures-mas

Property refinancing: Rule tweaks not easing of cooling measures, says MAS

Sep 2, 2016

Yasmine Yahya

Assistant Business Editor

Rennie Whang


Home owners looking to refinance their mortgages will now enjoy more flexibility with the total debt servicing ratio (TDSR).

The Monetary Authority of Singapore (MAS) tweaked the rules yesterday so that under certain conditions, borrowers may be exempted from the TDSR framework when refinancing their loans.

The TDSR rules will still apply to new housing loans and the MAS noted that this move does not represent a relaxation of property cooling measures.

About 2.5 per cent of new home loans are currently above the TDSR threshold.

The MAS said it had received feedback from some borrowers that they were unable to refinance because they could not meet the TDSR threshold of 60 per cent.

This deems that borrowers cannot take on total debt obligations exceeding 60 per cent of their gross monthly income.

Previously, the TDSR exemption was granted only to the refinancing of loans for properties bought before the introduction of the TDSR framework in June 2013.

Now the exemption applies to all owner-occupied housing loans, regardless of when the property was purchased.

Moneysmart's head of mortgage, Mr David Baey, said: "MAS has done a very good job in reducing the burden of people with owner- occupied properties, and who were unable to refinance their loans due to the date restriction and a drop in household income. They are the ones who need it the most."

Ms Wong, 40, who did not want to give her first name, bought a four-room HDB resale flat in late 2013. She noted that while her debt obligations have not risen since she took out her loan, she would likely want to refinance in the near future to take advantage of lower rates.

"At least I know I won't be disadvantaged if I take on more financial commitments," added Ms Wong.

Under previous rules, investment property loans could also be refinanced above the 60 per cent TDSR threshold if the borrower committed to a debt reduction plan and applied for the refinancing before June 30 next year.

Now the MAS has specified that to benefit from the TDSR exemption, the debt reduction plan should involve the borrower committing to repay at least 3 per cent of the loan's total outstanding balance over three years.

The borrower would also have to meet the bank's credit assessment criteria.

Cushman & Wakefield research director Christine Li said the MAS move is a timely one that will ensure the stability of the property market.

"In view of the recent weaknesses in the oil and gas and financial services sectors, retrenchment and pay cuts could affect the home owners' ability to refinance existing home loans," she added.

"While mortgage rates are still low, the inability to refinance under the old TDSR rules could result in some foreclosures where home owners are forced to sell their properties in a down market."

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MAS kneads out refinancing knots posed by TDSR

Concessions broadened so borrowers of loans for homes and investment properties can get refinancing even when TDSR limit is breached

By

Jamie Lee

[email protected]

@JamieLeeBT

Kalpana Rashiwala

[email protected]

@KalpanaBT

Sep 2, 2016


WITH 5-10 per cent of households here estimated to be highly leveraged, the Monetary Authority of Singapore (MAS) on Thursday refined rules behind its debt-to-income threshold - better known as the total debt servicing ratio (TDSR) - so that such borrowers will have more flexibility in refinancing their property loans.

This extends from exemptions made in 2014 that were given to those who had bought properties before TDSR came into force. Consultants said the new rules will give little boost to demand in the property market, but create more room for refinancing by overleveraged borrowers.

In its press statement, MAS said: "The refinements being introduced for refinancing of loans will enable borrowers to better manage their existing debts. They do not represent a relaxation of property market cooling measures."

Under TDSR, a borrower is limited to making total monthly debt repayments of no more than 60 per cent of his or her gross monthly income. This has been in place for more than three years.

With immediate effect, loans for all investment properties can now be refinanced above the debt-to-income threshold of 60 per cent as long as the borrower commits to repay at least 3 per cent of the outstanding balance over a maximum of three years, and meets the bank's credit assessment. This translates roughly to a year's worth of mortgage payments.

Prior to this, only borrowers with properties bought for investment before the introduction of TDSR could refinance above the TDSR threshold of 60 per cent if they committed to debt reduction plans when refinancing their loans. This was part of the exemption offered in 2014. But then, MAS did not prescribe a repayment rate, and said the exemption was for a transition period until the end of June 2017.

To be clear here, the tweaked rule will apply to refinancing loans for all investment properties - that is, any property bought before or after June 29, 2013, the fateful day TDSR came into effect.

In the years after that, banks typically could approve housing loan applications only from borrowers who met the debt-income ratio of 60 per cent. But as TDSR is a ratio based on income, an individual who suffered a loss in income after getting his or her housing loan within TDSR limits could have his or her debt ratio exceed the threshold later.

MAS has thus tweaked a second rule. Loans for all owner-occupied residential properties can now be refinanced even when the borrower's debt limit has breached 60 per cent of his or her income. This extends from the exemption made in 2014, when MAS allowed borrowers with owner-occupied properties bought before TDSR was introduced to refinance even if they busted the debt-to-income ratio.

TDSR will continue to apply for new loans, with MAS taking pains to stress that cooling measures are not being relaxed. This adjustment, MAS said, came after market feedback that some borrowers have been unable to refinance their existing property loans due to the debt limit set by the regulator, though it did not specify how many refinancing attempts have been thwarted by TDSR limits.

The debt-to-income ratio was meant to curb speculation in properties in this extraordinary (albeit prolonged) period of low interest rates.

In a statement, MAS deputy managing director Ong Chong Tee said the adjustments will help borrowers to refinance their existing property loans at lower interest rates and to better manage their debt obligations over time.

DBS director of secured lending Tok Geok Peng said this fine-tuning move will give borrowers peace of mind in handling their mortgage loan repayment, regardless of their debt servicing status. "While we rarely see our customers' refinancing requests being rejected due to TDSR requirements, this move now makes it more efficient for banks to process refinancing by existing borrowers."

UOB head of personal financial services Dennis Khoo said the revised TDSR rules are a step in the right direction to address the needs of homeowners trying to better manage their monthly cash flow through refinancing. "Ultimately, a home financing solution must suit their needs and financial situation. We encourage customers to consider and be clear about the long-term commitments of home ownership, and to ensure they have enough funds to provide for any unforeseen circumstances."

In its financial stability review in November 2015, MAS estimated 5-10 per cent of households have debt-servicing ratios above 60 per cent. It said then that while the number is expected to decline as households pay down their loans, that process will take time.

The same MAS review showed almost all new housing loans granted since the introduction of TDSR fell within the 60 per cent threshold. It is understood about 2.5 per cent of new home loans are currently breaching the TDSR limit. But these would be loans granted on an exceptional basis and which had to be approved by the banks' board of directors, MAS said in 2013, when TDSR was introduced.

The proportion of new housing loans with TDSR of less than 40 per cent stood at 40 per cent in the third quarter of 2015.

Cushman & Wakefield director of research Christine Li said MAS's move to tweak TDSR for refinancing is a timely one so as to ensure the stability of the property market.

"While the mortgage rates are still low, the inability to refinance under the old TDSR rules could result in some foreclosures where home owners are forced to sell their properties in a down market," she said.

Knight Frank Singapore research head Alice Tan noted, though, that the fine tuning would not significantly boost demand for properties since it does not apply to new property loans. "Despite pockets of encouraging sales, the general mood in the private housing market remains muted amid growing headwinds from slowing economic growth and (worries about) job security."

CBRE Research head of Singapore and South-East Asia Desmond Sim commented that while developers may be disappointed that the authorities are not relaxing the property cooling measures, they may also be heaving a sigh of relief that the MAS announcement does not make things any worse for them either.

JLL national director Ong Teck Hui highlighted that the "mention that the move does not represent a relaxation of the cooling measures reinforces similar earlier statements, which provides certainty in the market, and that has helped both buyers and sellers to be more decisive".

In July, MAS managing director Ravi Menon said it was not time yet to ease the property cooling measures. He noted that while property prices had fallen 9.4 per cent cumulatively from the peak in the third quarter of 2013, this followed a surge of 60 per cent between 2009 and 2013; over the same period, nominal income was up just 30 per cent.

[Arcachon]

http://www.straitstimes.com/business...ty-refinancing

More flexible rules to help with property refinancing

Sep 2, 2016

Yasmine Yahya

Assistant Business Editor


Feedback from some borrowers that they were unable to refinance their residential properties to take advantage of the low interest rate environment because they could not meet the total debt servicing ratio (TDSR) threshold has prompted the Monetary Authority of Singapore (MAS) to introduce some flexibility to the rules.
.

Can I Feedback I need more money from the Bank since they are printing it.

[Kelonguni]

Can I Feedback I need more money from the Bank since they are printing it.

TDSR means loan sum is reserved for each individual, differential sum depending on his or her earning power. No matter how much is printed, it still has to be shared across the nation.

[Arcachon]

But lot of them still in the old world thinking money is from MAS not from the Bank printing it.