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Following is a question by the Hon LEE Wing-tat and a written reply by the Secretary for Transport and Housing, Ms Eva CHENG, in the Legislative Council today (January 9):
Question
The Housing Authority is currently providing a mortgage default guarantee in respect of Home Ownership Scheme ("HOS") flats covering a period of 15, 20 or 25 years ("the default guarantee period"), and includes in the title documents of the flats concerned a restriction that the overall repayment period for the total number of instalments payable under the fresh mortgage together with those already paid under the previous and existing mortgages shall not exceed the default guarantee period. Except those in respect of which premium has been paid, all HOS flats are subject to such a restriction. In this connection, will the Government inform this Council:
(a) of the respective names of HOS estates, together with the respective total numbers of flats involved, in respect of which the default guarantee period has expired, will expire in one year or more but less than 10 years, or will expire in 10 years or more but less than 15 years;
(b) due to the above restriction, buyers of second-hand HOS flats with the default guarantee period already expired or soon to expire often can only secure from financial institutions mortgage loans which have to be repaid in full within several years, and some may even fail to secure any mortgage loan, whether, in the past three years, the authorities have discussed the matter with the relevant financial institutions with a view to helping prospective flat owners to secure mortgage loans with longer repayment periods; if so, of the results of such discussions;
(c) whether the authorities had removed the restriction imposed on the repayment period under fresh mortgages at the time of ownership transfer of second-hand HOS flats in the past three years; if so, of the number of such cases, as well as the number of financial institutions which offered mortgage loans to the new flat owners; and
(d) whether the authorities will consider completely removing the restriction imposed on the repayment period under fresh mortgages at the time of ownership transfer of second-hand HOS flats, so that financial institutions will only need to vet and approve mortgage loan applications in respect of such flats in accordance with commercial principles?
Reply:
Madam President,
To encourage banks and authorised financial institutions to provide mortgage loans and better mortgage terms (e.g. larger amount of mortgage loan and lower mortgage rate, etc.) for buyers of the Home Ownership Scheme (HOS) flats, the Hong Kong Housing Authority (HA) provides a mortgage default guarantee for the banks and authorised financial institutions participating in the provision of mortgage loans for HOS flats (excluding those sold in the open market after payment of premium to the HA) (hereafter referred to as the "participating institutions"). Under this guarantee, the HA undertakes to meet the shortfall in repayment in the event of the borrower's default during a period of not more than 25 years as from the date of the first deed of assignment of the HOS flat concerned.
Taking into account the general practice of the mortgage market for private property, the affordability of HOS applicants in general and the need to control the risk borne by the HA within an appropriate level, the HA currently requires that the mortgage repayment period offered by a participating institution for a HOS flat covered by the mortgage default guarantee should not be more than 25 years. The HA however does not require that the mortgage repayment period should co-terminate with the mortgage default guarantee period. For example, when a participating institution offers a mortgage for a HOS flat purchased from the HOS Secondary Market for which the mortgage default guarantee is to expire in five years' time, it may still offer a mortgage repayment period of a maximum of 25 years, though only the first five years will be covered by the HA's mortgage default guarantee.
My reply to the four-part question is as follows:
(a) The mortgage default guarantee periods of various HOS courts are set out at annex.
Since the mortgage default guarantee period of a HOS flat is counted from the date of the first deed of assignment, even flats in the same HOS court may have different commencement dates of mortgage default guarantee period. The Housing Department (HD) does not have a breakdown of the number of flats by the length of their remaining mortgage default guarantee periods.
(b) Recently, the HD was aware that some participating institutions had advised prospective buyers of surplus HOS flats or HOS Secondary Market flats that mortgage loans can only be granted with repayment periods not longer than the remainder of HA's mortgage default guarantee periods. The HD wrote to all participating institutions on 2 October 2007 to clarify that the restriction on maximum mortgage repayment period is not related to the expiry date of the mortgage default guarantee period, and call on the participating institutions to offer appropriate mortgage repayment periods on the merits of individual applications.
(c) & (d) As mentioned above, the HA only requires the participating institutions to provide mortgage repayment periods of not more than 25 years, but does not require that the mortgage repayment period should co-terminate with the mortgage default guarantee period of the flat concerned. The participating institutions may negotiate mortgage terms and detailed repayment arrangements with the applicants in accordance with commercial principles.
Ends/Wednesday, January 9, 2008
Issued at HKT 13:44
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