The Housing Department has admitted that HK$700 million paid to banks under a scheme that guarantees Home Ownership Scheme mortgages when buyers default, cannot be recovered.
Between 1997 and March last year, the department paid more than HK$700 million to meet shortfalls in loan repayments on mortgages on HOS flats.
The scheme guarantees mortgages for 25 years - to encourage banks to provide mortgage loans to buyers of HOS flats and to gain better mortgage terms for the buyers.
By March last year, the total amount of outstanding mortgage loans covered by the authority's mortgage default guarantee was HK$51.2 billion.
Responding to lawmakers' questions at the Legislative Council housing panel meeting yesterday, Housing Department acting assistant director Rosaline Wong Lai-ping explained that the authority had to pay banks for losses incurred when they sold flats repossessed from mortgage defaulters.
'If the HOS buyer fails to repay the mortgage, the bank can sell the flat and claim damages from the Housing Authority,' Ms Wong explained.
