We refer to the article “Parliament: Take-up rate of reverse mortgages in other countries “quite low“” (Straits Times, Oct 8).
Countries with no name?
It states that “Without naming the countries under study, Mr Khaw said they “are also finding their take-up rates to be quite low”".
Don’t you find it rather strange that no countries were named?
- According to the article “Koreans Tapping Inheritances With Reverse Loans: Mortgage” (Bloomberg, Jan 30, 2013)
- “Reverse mortgages are repaid when the borrower dies or sells the house.
South Korea
The volume of loans jumped to 5,013, worth 6.9 trillion won ($6.5 billion), in 2012 from the previous year, the highest since the KHFC introduced the product in 2007, as home prices in Seoul and the surrounding metropolitan area fell by the most in more than a decade.
JooTaekYeonKeum, which literally translates as housing pension, was introduced in 2007 as the government sought to help senior citizens prepare for retirement. Lenders provide the loans and the KHFC guarantees the full amount of the debt. Homeowners have to be at least 60 years or older and need to have paid off their mortgages to qualify. They can keep the home until they die as the KHFC guarantees the loan for life.
U.S. Market
The U.S. is the biggest market in the world for reverse mortgages, with about $38 billion outstanding of bonds backed by the loans and guaranteed by the federal government. Home prices that have fallen by about a third since their 2006 peak mean homeowners have less equity, and issuance fell to 49,080 last year through November, down from a peak of 115,176 in 2008.”
No countries’ Governments make profits?
You can see from the above that in stark contrast, the South Korean and US Governments do not make any money on reverse mortgages (they guarantee the loans), and the homeowner retains the equity in his home, as the market value less the loan is paid on sale of the home or death – he also gets to live in his home for as long as he lives.
Our HDB Lease-buy back scheme is only for a 30 year stay, the flat cannot be sold and as earlier analysed – the HDB stands to gain about $1.1 million from each 4-room flat.
S Y Lee and Leong Sze Hian
P.S. Come with your family and friends to the 5th Return Our CPF protest on 25 October 4 pm at Speakers’ Corner https://www.facebook.com/events/446619505476438/