Ravi Chandran
A petition has gone up asking how the Covid-19 loans deferment programmes will affect the credit standing of those that have applied for loan restructuring. The petition it titled, “Petition MAS to instruct banks to treat borrowers who opted for COVID-19 Repayment-Deferment-Resi-Property NOT as inferior credit standing.”
The petition said that “under the Repayment-Deferment-Resi-Property-Loans-for-Individuals, MAS has committed that the deferment will NOT result in the loan being classified as a restructured loan for the purpose of credit reporting.”
MAS is silent on the following on Covid-19 loans deferment programmes
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“However it is silent however on the following:
1. Will the credit report reflect Repayment-Deferment-Resi-Property-Loans-for-Individuals being taken up and reflected in the credit report.
2. Will banks be able to find out in some form of records through bank’s sharing of data and hence consider the borrower in a lesser light.
3. Banks have not committed to whether they will instruct their credit department to rank these borrowers who opt for the Repayment-Deferment-Resi-Property-Loans-for-Individuals at a lesser credit standing and thereby reducing their future credit standing with the banks.”
The petition appealed for MAS to confirm the following regarding the Covid-19 loans deferment programmes:
“1. Instruct banks not to report to credit bureau on borrowers who has taken up Repayment-Deferment-Resi-Property-Loans-for-Individuals (Covid-19 loans deferment).
2. Instruct banks not to treat borrowers who had opted for Repayment-Deferment-Resi-Property-Loans-for-Individuals (Covid-19 loans deferment) in a different or impaired credit standing and guarantee them the same credit assessment criteria as a person who has not opted for the deferment.”
The petition also appealed to HDB for the following regarding Covid-19 loans deferment programmes:
“We appeal for HDB to allow a similar Residential Loan Repayment Deferment for HDB loans.”
The Monetary Authority of Singapore (MAS), together with the Association of Banks in Singapore (ABS), the Life Insurance Association (LIA), the General Insurance Association (GIA), and the Finance Houses Association of Singapore (FHAS), on March 31 announced a package of relief measures to help ease the financial strain on individuals and SMEs caused by the COVID-19 pandemic. The package of financial relief measures complements the initiatives in the Government’s Unity Budget and Resilience Budget to preserve jobs and support enterprises and households.
MAS and the financial industry have collaborated on a package of relief measures to help individuals and SMEs facing temporary cashflow difficulties to ride through the storm. The package has three components:
- help individuals meet their loan and insurance commitments;
- support SMEs with continued access to bank credit and insurance cover; and
- ensure interbank funding markets remain liquid and well-functioning.
The relief measures for individuals and SMEs will be provided on an opt-in basis, as their cashflow circumstances will differ.
Deferring payments increases future obligations and hence borrowers and policyholders should weigh their options carefully. Financial institutions will process all applications expeditiously.
Helping Individuals with Loan and Insurance Commitments
Defer Repayment of Residential Property Loans
Individuals with residential property loans may apply to their respective bank or finance company to defer either (i) principal payment or (ii) both principal and interest payments up to 31 December 2020.
Interest will accrue only on the deferred principal amount; no interest will be charged on the deferred interest payments. Lenders will approve the request for deferment as long as the individual is not in arrears for more than 90 days as at 6 April 2020. Individuals do not need to demonstrate any impact from COVID-19 to obtain the deferment.
Lower Interest on Personal Unsecured Credit
Individuals with unsecured credit facilities from banks or other credit card issuers may apply to their respective lender to convert their outstanding balances to term loans at a reduced rate of interest, capped at 8% (compared to the 26% typically charged on credit cards). The term of the converted loan can be up to five years, depending on the individual’s ability to meet the minimum monthly repayment. (The monthly repayment amount for a five year term loan at 8% effective interest rate will be at less than 2% of the loan amount.)
This option is available to all individuals who have suffered a loss of 25% or more of their monthly income after 1 February 2020 and are at risk of incurring substantial arrears. Individuals may apply to their lenders for conversion of their outstanding unsecured debt from 6 April till 31 December 2020.
Defer Premium Payments for Life and Health Insurance
Individuals with life and health insurance policies may apply to their insurer to defer premium payments for up to six months while maintaining insurance coverage during this period. Premium deferment is available for all individual life and health insurance policies with a policy renewal or premium due date between 1 April and 30 September 2020. This measure supplements existing premium relief measures available to policyholders, such as taking up a premium loan against the policy cash value or converting to a paid-up policy by reducing the sum assured.
Flexible Instalment Plans for General Insurance
Individuals holding general insurance policies, such as for property and vehicles, may apply to their general insurance company for instalment payment plans while maintaining insurance protection. By working with their insurance company on an appropriate instalment plan, policyholders can pay their premiums in smaller amounts and enjoy coverage for the paid-up period, instead of paying a lump sum premium for the entire policy period at the start.
The petitioner, Mr Paul Ho, chief mortgage officer at iCompareLoan, said: “For people taking up the Covid-19 loans deferment, let us help to make sure that their future credit standing is not impacted, to give them an even chance of recovery.”
