Tue, Mar 09, 2010 - Page 12 News List

Central bank asks for mortgage loan details from lenders

By Ted Yang  /  STAFF REPORTER

The central bank yesterday requested that local banks provide details on mortgage loans for regular borrowers and real estate investors within three days, including loan-to-value (LTV) ratios, loan interest rates, debt-to-income ratios and grace periods.

The move came after the legislature’s finance committee passed a proposal earlier yesterday that state-owned banks come up with regulations to widen the gap on mortgage loan rates and LTV ratios between luxury and regular homes within a week.

Chinese Nationalist Party (KMT) Legislator Lo Ming-tsai (羅明才) said during the committee meeting that state-owned banks dealing with mortgage loans represented 50 percent of the total number of local banks and should therefore review their lending strategies.

“Mortgage lending programs offered by public banks are not perfect and could help fuel speculation in the real estate market,” KMT Legislator Lai Shyh-bao (賴士葆) said at the meeting.

CRITICISM

In response to criticism from legislators across party lines, the heads of major state-owned banks said they would lower LTV ratios or raise mortgage rates for real-estate investors and speculators.

“We will reduce the LTV ratio by 10 percent to 20 percent for those who purchase more than two houses at a time,” Land Bank of Taiwan (土地銀行) chairman Wang Yao-shing (王耀興) said yesterday.

Taiwan Cooperative Bank (合作金庫) chairman Liu Deng-cheng (劉燈城) said his bank had been cautious about mortgage lending, defining houses worth more than NT$100 million (US$3.13 million) as luxury residences.

“The LTV ratio for a luxury home will be 60 percent at maximum and the mortgage rate will be increased by 0.5 percentage points,” Liu said.

SECOND HOUSE

A loan on a second house will see a LTV ratio at 70 percent and 65 percent for a third house, with an increase of 0.5 percentage points in the interest rate, Liu said.

Wang Rong-jou (王榮周), chairman of Mega International Commercial Bank Co (兆豐國際商業銀行), said individuals who purchase more than two houses will be regarded as property speculators.

“We will remain very cautious about providing home loans. The LTV ratio for the third house to be purchased will be reduced,” Wang said.

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