Sub-prime HDB financing?

July 20, 2010 at 11:06 am Leave a comment

Parliament just passed an urgent bill to stop the use of HDB flat as collateral in moneylending activities. The fact that this bill was passed so quickly shows the severity of this problem.

It is somewhat similar to the sub-prime financing activities of US, those who need money urgently used their flats as a ATM. However, this is only possible because of the sharp rise in HDB flat prices which is a sign of HDB flat price bubble.

The problem comes when they can’t pay back their loan+high interest from the moneylender and has to see their flat being foreclosed. This problem will get more severe if the bubble bursts, thus the new law is to nip the problem in the bud, which is welcomed.

Although there are no NINJA loans in Singapore due to strict regulations, Singapore govt should not let any signs of sub-prime financing rear its head. The root cause is the high HDB prices, HDB should tackle it firmly and quickly so that moneylenders and flat owners will not be tempted to make a quick buck.

Entry filed under: Watch your step. Tags: .

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