Unfair housing loan agreement

MOST if not all house buyers will require financing to buy their dream homes. While there appears to be stiff competition among banks for market share and interest rates may be kept low, house buyers are ultimately at the mercy of banks when it comes to the detailed terms and conditions of the housing loan. (Banks in this context refers to commercial banks, Islamic banks and other financial institutions).

Unfair legal fees

When a borrower takes a housing loan, the borrower is required to execute a loan and other related agreements. This entails the borrower having to pay legal fees, the amount of which varies, depending on the loan amount – the higher the loan amount, the higher the legal fees although the complicity and level of work does not necessarily commensurate directly with the loan amount.

Although it is the borrower paying the loan lawyers’ fees, the said loan lawyer is actually acting for and on behalf of the bank. As such, the loan lawyer is not in the best position to advise the borrower if there are clauses in the loan agreement which are not in the best interest of the borrower.

In addition, in the event of any dispute between the borrower and the bank, the borrower cannot ask the loan lawyer for advice as the loan lawyer is acting for the banks.

If this is the case, then is it “fair or equitable” for the borrower to pay such legal fees when it is clear that the lawyer is actually acting for the banks? Obviously not. Hence, the bank should absorb the legal fees as the lawyers are clearly there to act for the bank and protect its interest.

Exorbitant fees for simple letters

The banking sector in Malaysia is a very tightly regulated industry. Any fees that banks intend to charge must be approved by Bank Negara. It is disheartening to note that borrowers continue to be charged exorbitant fees which seem to have the explicit blessings and consent of Bank Negara. Instances of borrowers being charged unreasonable fees for copies of redemption statement, EPF statement letter etc are common.

Allocation of monthly repayment to principal and interest

This is a story about three friends who took a housing loan (HL) of RM500,000 ten years ago. They were offered the same HL interest rate of 4.2% (base lending rate of 6.60% less 2.40%) but took different loan tenures as follows:

Albert took a 20-year HL. Eric took a 25-year HL and Jamie took a 30-year HL.

After servicing their monthly loan instalments diligently for the past 10 years, they decided to fully settle their housing loan using a combination of their EPF monies and own savings. When they asked for a redemption statement to find out what was the principal sum outstanding, they received a shock of their lives.

Albert, Eric and Jamie were under the impression as they had served 50%, 40% and 33.3% of the loan tenure, their principal sum outstanding would be RM250,000, RM300,0000 and RM333,333 respectively.

So, when their respective redemption statement showed that Albert, Eric and Jamie still owed respectively RM301,654, RM359,415 and RM396,652, they got a big shock.

So, why did they still owe so much more than what they had thought? The answer lies in the allocation of the monthly instalment towards covering the principal sum and interest charged by the bank.

In an equitable world, the monthly instalments would be allocated on a “straight line basis” to cover the principle and interest charged. Thus, a borrower who served 10 out of a 20-year HL would only owe 50% of the original loan amount.

However, the reality is that the borrower still owes 60.3% of the original loan amount.

The typical borrower will always be “penalised” for settling his loan before the maturity date. Even in the penultimate year of the original loan tenure, the actual amount outstanding is still higher than the theoretical amount, which should be the amount outstanding had the allocation of monthly instalments been done on a straight line basis.  

Is it fair and equitable?

Most borrowers do not know or even understand how this allocation is calculated. Is such an allocation “fair and equitable” to the borrower? Under such circumstances, are borrowers supposed to accept that the bank’s own generated computer system has calculated the interest correctly and allocated the payments in the correct manner?

To the borrower, they have paid 10 out of a 20-year loan, he should only owe balance 50% and not 60.3%. Is this manner of allocation not just another unjust way for the bank to generate higher profits, after all the bank did receive the payments on time and in full every month. It is the dream of every borrower to be debt-free as soon as possible and it is not fair to the borrower to be penalised in such a manner when he wants to settle his loan early.

That said, borrowers have no choice but to accept the calculation of the bank as correct and final. If the borrower were to reject and not pay the required sum, the loan will not be considered as repaid in full. The borrower could even be blacklisted and even have his property auctioned off by the bank to recover the remaining sum outstanding if the borrower refuses to pay up.

It would be more transparent and equitable if the monthly payments made by the borrower are allocated in a “straight line basis” to interest and principal equally over thetenure of the housing loan. Short of that, borrowers are at the mercy of banks.

Some banks operate like a “cartel” and standardise their fees to be charged to customers. One wonder whether such unfair practices are condoned by the regulators like Bank Negara.

It is also interesting to note that banks are exempted by the Malaysia Competition Commission allowing banks to agree and collude on unfair fees, penalties and practices to be charged to borrowers.

Unnecessary expenses

Loan agreement “printing charges” – sold between RM150 and RM350. The banks’ solicitors need to purchase a standard loan agreement from the bank (via soft copy) and adds the borrowers’ details in order to complete the loan agreement. The banks charge the lawyer and the lawyer charges the borrowers.

Standard loan agreements are now downloaded from the bank’s website or from soft copy. The bank no longer need to print them and should not charge for such documents. Alas, this has been continuing till to date. Lopsided terms and conditions

Lopsided terms and “add-on” products are aplenty, if the borrower wants to identify with them. It would be good practice to remove or qualify the banks’ arbitrary powers.

Conclusion

The National House Buyers Association (HBA) had on Sept 4, 2014 made representation to the Finance Ministry (MOF), Bank Negara. Housing and Local Government Ministry in the presence of Association of Banks Malaysia and Islamic Banks of Malaysia in the form of slides presentation on some observations and unethical practices of some banks.

HBA is looking to work closely with MOF, Bank Negar and all related stakeholders to level the playing field for housing loan borrowers in the long-term interest of the banking industry. We had proposed to set up a working committee to resolve all unfair practices. MOF and Bank Negara have a legitimate interest in the final shape of the banking industry into operating a principled and towards a “customer friendly arena”.


Buyers Beware By Chang Kim Loong

Chang Kim Loong is the honorary secretary-general of the national House Buyers Association: www.hba.org.my, a non-profit, non-governmental organisation manned purely by volunteers.

Related posts:

House buyers, learn your rights

Who is responsible: developer, contractor, local council or house-owner for the damages?

 

Who is responsible for slope management? Does the responsibility come with the property bought by the purchaser? THE collapse of a...

We need local councillors who can do the job 

Reponsible housing developers' traits and qualities expected

Traits of a responsible housing developer. KNOCK, knock! Any “good” housing developers out there? I am reluctant to use the words “good developers” as the words are not in my vocabulary. However, there are responsible ...

Singaporeans from ''Third World to First', emotional farewell to Lee Kuan Yew

 ‘From third world to first’: Lee Kuan Yew’s legacy in charts

Andreas Paleit and Jennifer Hughes - Hong Kong

Lee Kuan Yew, who has died aged 91, presided over a turnround in the economic fortunes of his nation, taking it from a colonial backwater to its status as one of the richest places on the planet — a journey ‘from third world to first’, as Lee titled his memoir.

From ease of doing business to concentration of millionaires, 21st-century Singapore consistently ranks among the world’s most economically developed nations.

But Lee’s legacy goes beyond wealth-creators. Since he came to power just about every aspect of Singapore has been transformed, and along with it the fortunes of ordinary Singaporeans. The population has, of course, grown.

Singaporeans have become much better educated and crime has dropped, partly as a result of Lee’s authoritarian influence.

An enormous public housing programme in the 1960s and 1970s has allowed more than 80 per cent of citizens to live in government-subsidised apartments. But an ageing population raises challenges for the years ahead.

The Financial Times Limited 2015. You may share using our article tools.

Emotional farewell for Singaporeans

 Thousands wait in long queue for hours to pay last respects to Lee Kuan Yew

SINGAPORE: Singaporeans wept on the streets and queued in their thousands to pay tribute to founding lea­der Lee Kuan Yew as his flag-draped coffin was taken on a gun carriage to parliament for public viewing.

After a two-day private wake for the family, the coffin was taken in a slow motorcade from the Istana government complex, Lee’s workplace for decades as prime minister and cabinet adviser, to the legislature yesterday. It will lie in state there until Sunday.

The 91-year-old patriarch died on Mon­day after half a century in government, during which Singapore was transformed from a poor British colonial outpost into one of the world’s richest societies.

The government led by his son Prime Minister Lee Hsien Loong, apparently taken by surprise at the heavy early turnout, announced that Parliament House would stay open for 24 hours a day until Saturday night “due to overwhelming res­­ponse from the public”.

Lee will be cremated on Sunday after a state funeral expected to be attended by several Asia-Pacific leaders even though he was just an MP when he died.

Applause and shouts of “We love you!” and “Lee Kuan Yew!” broke out as the dark brown wooden coffin, draped in the red-and-white Singapore flag, emerged from the Istana housed in a tempered glass case on a gun carriage pulled by an open-topped military truck.

Earlier, in scenes that evoked Singapore’s colonial past, the carriage stopped in front of the main Istana building, where British administrators once worked, as a bag­­piper from Singapore’s Gurkha Contingent – the city-state’s special guard force – played Auld Lang Syne.

After the motorcade emerged from the palace, many in the crowd waiting behind barricades along the route were in tears as they raised cameras and mobile phones to record the historic event.

Some threw flowers on the path of the carriage, while office workers watched from high-rise buildings.

President Tony Tan and his wife Mary were the first to pay their respects in the parliament’s foyer.

By mid-afternoon Singaporeans were waiting for up to eight hours in queues that snaked around the central business district, many using umbrellas against the 33°C heat.

In true Singaporean fashion the crowds were orderly, with free drinking water and portable toilets set up for mourners.

Police helped direct traffic flow and priority queues were created for the elderly, pregnant women and the disabled.

People from all walks of life turned up to honour the authoritarian former leader popularly known by his initials “LKY”.

“These are amazing scenes. I have not seen anything like this in my lifetime,” said bank executive Zhang Wei Jie, 36.

“LKY is the founder of our country. It is a no-brainer that we have to pay respect. We have taken some time off from work, my supervisor is also here somewhere in the crowd.”

R. Tamilselvi, 77, brought two of her granddaughters, each clutching flowers.

“Lee Kuan Yew has done so much for us,” she said. “We used to live in squatter (colonies) in Sembawang, my husband was a bus driver. Now my three sons have good jobs and nice houses. The children all go to school. What will we be without Lee Kuan Yew?” — AFP

Related posts:

Singapore former PM Lee Kuan Yew leaves rich political legacy

Former Singapore prime minister Lee Kuan Yew waves to supporters as he submits his nomination papers to contest in the elections in Sin...

Lee Kuan Yew's meritocracy: a key reason for S'pore's separation from Ma'sia, his quotable quotes..

No one could accuse LKY of being weak When he suddenly fathered a reluctant new nation, the iron was forged in him. LEE Kuan Yew...

The Origins and Evolution of Ethnocracy in Malaysia: The Malay Supremacy!

Merdeka: (From left) Tunku Abdul Rahman, first Yang di-Pertuan Agong Tuanku Abdul Rahman and MacGillivray standing outside King’s House in...

Dr. M. Bakri Musa Speaks His Mind:Liberating the Malay Mind

>>>> " 90% of the Doctorates held by Malays is not worth the toilet paper on which it is printed because it was all prod...

Lee Kuan Yew's meritocracy: a key reason for S'pore's separation from Ma'sia, his quotable quotes..

No one could accuse LKY of being weak

When he suddenly fathered a reluctant new nation, the iron was forged in him.

LEE Kuan Yew, former prime minister of Singapore, has died at the age of 91.

He was born Harry Lee Kuan Yew on Sept 16, 1923 in Singapore. When he left England after graduating with a law degree from Cambridge University, he also left his English name behind.

In 1954, Lee formed the People’s Action Party (PAP). In 1959, at the age of 35, he won the national elections of Singapore, then still part of the British Empire, and became Prime Minister for the first time. After a brief merger with Malaysia, in 1965 the Republic of Singapore was born. Lee was PM until 1990 when he voluntarily stepped down, at age 67, to make way for a younger man.

It is a cliché, but it has to be said: the passing of Lee Kuan Yew is the passing of an era for Singapore and Singaporeans. A Singapore without LKY will take some adjusting to.

Older citizens will probably remember him with more affection and gratitude. Younger Singaporeans may attend the academic institutions and win scholarships that bear his name, but they will likely feel no particular affection or disdain, but rather, a vague admiration for the legendary leader whom they have been told was the architect of modern Singapore.

“I have been accused of many things in my life, but not even my worst enemy has ever accused me of being afraid to speak my mind,” he once said. Perhaps he will be best remembered through his own words.

In 1980, he said, “Whoever governs Singapore must have that iron in him.” For him, it was in August 1965, when he suddenly fathered a reluctant new nation, that the iron was forged - from the fire in his belly to make Singapore succeed.

From that “moment of anguish”, he would “spend the rest of my life getting Singapore not just to work but to prosper and flourish.” Over the years, he would use that same steel to fight all forms of obstacles and undesirable dogma, prejudices and even personal habits.

He would go on to confront and battle challenges that included corruption, unemployment, poverty, communism, political opposition, smoking and at the end, his own deteriorating health.

His self-belief and devotion to the Singapore cause was intense and absolute: “This is your life and mine. I’ve spent a whole lifetime building this (country) and as long as I’m in charge, nobody is going to knock it down.”

He will be remembered for his ferocious fight against corruption. He believed vehemently, “The moment key leaders are less than incorruptible, less than stern in demanding high standards, from that moment, the structure of administrative integrity will weaken, and eventually crumble. Singapore can survive only if ministers and senior officers are incorruptible and efficient.”

He will be remembered for standing up for meritocracy. A key reason for Singapore’s separation in 1965 was Lee’s belief in multiracial meritocracy. He was utterly convinced that, “If you want Singapore to succeed…you must have a system that enables the best man and the most suitable to go into the job that needs them…”

Every time a Singaporean takes a ride in a bus along a tree-lined avenue, plays with her children in a park near their flat, or enjoys a picnic in Botanic Gardens, she might just think of Lee. He launched Tree Planting Day and “set out to transform Singapore into a tropical garden city.” He was completely certain that, “Greening raised the morale of people and gave them pride in their surroundings.”

Lee’s beliefs and ideas went on to mould not just the development of a small new country with no natural resources to speak of, but also, some would argue, the personal lives of its citizens. Under his leadership, his government implemented policies and ran campaigns to compel and urge Singaporeans to save water, to keep Singapore clean, to have two children, and later, to have three if they could afford it, and to speak Mandarin, among many other exhortations.

In response to critics who accused his government of interfering in the private lives and personal behaviours of the city-state’s inhabitants, he had this to say, “It has made Singapore a more pleasant place to live in. If this is a ‘nanny state’, I am proud to have fostered one.”

He will be remembered for the power of his convictions. “I have never been over concerned or obsessed with opinion polls or popularity polls. I think a leader who is, is a weak leader.” No-one could accuse Lee Kuan Yew of being a weak leader.

Of his own accord, he relinquished the position of Prime Minister in 1990, but stayed on in government as Senior Minister and then Minister Mentor in the governments of both his successors, Goh Chok Tong and his own son, Lee Hsien Loong, the current Prime Minister. He retired from Cabinet in 2011 but remained a Member of Parliament.

For those who remember Lee Kuan Yew in his prime, no matter to which side of the political divide they belong, they will recall a perspicacious politician whose intellect found admirers far beyond the little red dot, a powerful orator whose words conquered crowds and carried generations of Singaporeans with him, and perhaps, most of all, a pragmatic visionary who, against all odds, made the improbable nation a reality.

Lee was known for his admiration, gratitude and devotion to his wife, the late Kwa Geok Choo. He is survived by his two sons, one daughter and seven grandchildren.


By Peggy Kek

Singaporean analyst Peggy Kek is a former director with the Lee Kuan Yew School of Public Policy at the National University of Singapore. The views expressed here are entirely the writer’s own.





Quotable quotes from Lee Kuan Yew

Lee Kuan Yew commenting on death: 'There is an end to everything and I want mine to come as quickly and painlessly as possible, not with me incapacitated, half in coma in bed and with a tube going into my nostrils and down to my stomach.' – AFP pic, March 23, 2015

Here are some notable quotes from Singapore's founding prime minister Lee Kuan Yew, who died Monday at the age of 91.

On Japan defeating Britain to occupy Singapore in 1942:

"The dark ages had descended on us. It was brutal, cruel.

"Looking back, it was the biggest single political education of my life because, for three and a half years, I saw the meaning of power and how power and politics and government went together, and I also understood how people trapped in a power situation responded because they had to live.

"One day the British were there, immovable, complete masters; next day, the Japanese, whom we derided, mocked as short, stunted people with short-sighted squint eyes."

After World War II when the British were trying to reestablish control:

"... the old mechanisms had gone and the old habits of obedience and respect (for the British) had also gone because people had seen them run away (from the Japanese) ... they packed up. We were supposed, the local population was supposed to panic when the bombs fell, but we found they panicked more than we did. So it was no longer the old relationship."

As a law student in Britain:

"Here in Singapore, you didn't come across the white man so much. He was in a superior position.

"But there you are (in Britain) in a superior position meeting white men and white women in an inferior position, socially, I mean. They have to serve you and so on in the shops. I saw no reason why they should be governing me; they're not superior. I decided when I got back, I was going to put an end to this."

On opinion polls:

"I have never been overconcerned or obsessed with opinion polls or popularity polls. A leader who is, is a weak leader. If you are concerned with whether your rating will go up or down, then you are not a leader. You are just catching the wind ... you will go where the wind is blowing. That's not what I am in this for."

On his iron-fisted governing style:

"Anybody who decides to take me on needs to put on knuckle-dusters. If you think you can hurt me more than I can hurt you, try."

On his political opponents:

"If you are a troublemaker... it's our job to politically destroy you... Everybody knows that in my bag I have a hatchet, and a very sharp one. You take me on, I take my hatchet, we meet in the cul-de-sac."

On democracy:

"You take a poll of any people. What is it they want? The right to write an editorial as you like? They want homes, medicine, jobs, schools."

On justice:

"We have to lock up people, without trial, whether they are communists, whether they are language chauvinists, whether they are religious extremists. If you don't do that, the country would be in ruins."

On his policy of matching male and female university graduates to produce smart babies:

"If you don't include your women graduates in your breeding pool and leave them on the shelf, you would end up a more stupid society... So what happens? There will be less bright people to support dumb people in the next generation. That's a problem."

On criticism over the high pay of cabinet ministers and senior civil servants:

"The cure for all this talk is a good dose of incompetent government. You get that alternative and you'll never put Singapore together again: Humpty Dumpty cannot be put together again... and your asset values will be in peril, your security will be at risk and our women will become maids in other people's countries, foreign workers."

On religion:

"I wouldn't call myself an atheist. I neither deny nor accept that there is a God. So I do not laugh at people who believe in God. But I do not necessarily believe in God – nor deny that there could be one."

On his wife of 63 years, Kwa Geok Choo, who died in October 2010:

"Without her, I would be a different man, with a different life... I should find solace in her 89 years of a life well-lived. But at this moment of the final parting, my heart is heavy with sorrow and grief."

On death:

"There is an end to everything and I want mine to come as quickly and painlessly as possible, not with me incapacitated, half in coma in bed and with a tube going into my nostrils and down to my stomach."

On rising up from his grave if something goes wrong in Singapore:

"Even from my sickbed, even if you are going to lower me to the grave and I feel that something is going wrong, I will get up."

Related post:

Singapore former PM Lee Kuan Yew leaves rich political legacy

Former Singapore prime minister Lee Kuan Yew waves to supporters as he submits his nomination papers to contest in the elections in Singapore...