Hong Kong's Wen Wei Po (Reporter Ngan Lun Lok,Chan Bo Ming) HKMA have 2 moves within 4 days in order to avoid property bubble,this goal is to finance company loans and second mortgages for buyers, "add spicy" against companies involved in mortgage finance market. HKMA yesterday issued guidelines to banks to borrow second mortgage to the buyers, if the total LTV is higher than the upper limit of the Council allowed if more than 20 percentage points, his "contributions to income ratio" (DSR) limit the need to reduce 5 percentage points. Such as the current HKD $7 million following property mortgagee bank only can have 60% mortgage,according to the buyer if only have second to eighty percent mortgage, the DSR ceiling fell by 50% to 45%, forcing buyers to reduce leverage.
HKMA have moves to tighten mortgage on Friday, there are voices said that market may appear a large number of second mortgages or mortgage insurance program (additional funding) situation. In response to this concern, contained a supplementary document on the HKMA yesterday, made it clear that if the mortgage applicants through additional financing, so the overall LTV higher than allowed by the HKMA normal maximum LTV over 20 percent AIs need to apply "contributory income ratio" (DSR) limit lowered 5 percentage points. Meanwhile, the authorities have to regulate for the fiscal Tsai, if there is a lending relationship with the bank, etc., at the time the mortgage lending guidelines are also subject to the HKMA.
The upper limit DSR of Stress Test fell to 55%
HKMA refers in the file, for example, with the highest LTV for 60% property, for example, the upper limit of the normal applicable DSR 50%, DSR cap pressure test under 60%. If the mortgage applicants to apply for additional funding, so that the overall LTV exceeds eighty percent, the applicable limit DSR must be reduced to 45%, DSR cap pressure testing should also be reduced to 55%.
In addition,if upper limit and stress test of applicants had applied for 40% and 50%, respectively (such as those involving non-occupied properties), and the applicant to apply for additional funding so that its overall mortgage LTV than the maximum limit of normal more than 20 percentage points, respectively, both should be reduced to 35% and 45%.
Second mortgage included in the regulatory burden ratio
If mortgage applicants through additional financing,so the overall LTV higher than allowed by the HKMA normal maximum LTV over 20 percent, the accreditation body needs to be applied to reduce the 5 percent limit DSR.
HKMA stressed that AIs should bear in mind, DSR upper limit should only be used for applying for a mortgage loan, and the borrower to apply to all the liabilities, including any additional income sources and mortgage financing for the purchase of property and other liabilities.
The mortgage of finance companies must comply with regulatory guidelines
In addition, the recent " finance companies ' lending problems of the market, the HKMA also in a press release yesterday, stressed the authorities have been asking the finance company providing banking and borrowing authorized institutions, financial companies are subject to the HKMA when mortgage financing guidelines, or otherwise terminate its business relationship with the bank credit industry. In the new round of counter-cyclical measures, if the bank fails to comply with the relevant provisions of the HKMA will no longer require banks to credit operations with the establishment of any mortgage finance company providing financing.
If so financial companies want to continue to participate in the mortgage business, is required to confirm their willingness and ability to follow the guidelines for the prudential supervision of the HKMA to the bank,the authorities also have to follow up with individual banks.
