Mortgage refinance scheme expanded

PUBLISHED : Tuesday, 24 June, 2003, 12:00am
UPDATED : Tuesday, 24 June, 2003, 12:00am

Homeowners with negative equity can benefit from an easing of restrictions

Boutique mortgage refinancing firm Pan Asian Mortgage plans to expand a scheme targeting homeowners with negative equity after attracting 1,200 clients in its first year.

Two partner banks - Asia Commercial Bank and Citic Ka Wah Bank - approved $2.5 billion worth of mortgage refinancing deals in the year to last month, with about 70 per cent of applications accepted, Pan Asian chief executive Leland Sun Li-hsun said.

With residential prices in Hong Kong still in decline, recent property buyers are looking to escape the trap of having mortgage debts that exceed the value of their properties.

'Our estimate of the number of negative-equity homeowners has increased substantially since the end of last year,' Mr Sun said.

'Specifically, we have seen applications from homeowners who bought property in 2000 and 2001. These particularly are homeowners who have bought property with a second mortgage or with mortgage insurance.'

Pan Asian's SuperFirst Negative Equity Mortgage Refinancing Programme, which was launched in May last year, allows negative-equity homeowners to refinance their mortgages by borrowing up to 140 per cent of the underlying property value.

Participants will now be allowed to refinance outstanding home loans of up to $12 million, compared with a previous cap of $8 million.

The programme has been expanded to include owner-occupied flats bought under the name of shell companies.

Successful applicants who apply before September 23 will receive a one-year premium waiver for an involuntary unemployment insurance policy provided by Eagle Star Insurance (Group).

The policy would cover up to nine months of mortgage payments, capped at $35,000 per month and $300,000 in all.

A 1 per cent principal rebate or a 0.5 per cent cash rebate on the refinanced loan amount will be offered during the three-month promotional period.

Mr Sun expects Wing Hang Bank's arrival as the third partner bank to increase market penetration of the programme, which is facing competition from banks' own growing mortgage refinancing business.

In compliance with Hong Kong Monetary Authority rules, the partner banks lend no more than 100 per cent of the amount, with Pan Asian providing the balance.