HBA: Allow EPF to offer home loans to members

PETALING JAYA (June 19): The National House Buyers Association (HBA) is urging the government to allow the Employees’ Provident Fund (EPF) to extend financing for home purchases – particularly of affordable units – to eligible members, reported Free Malaysia Today.

Its secretary-general Chang Kim Loong said this proposal would help members who are unable obtain financing without forcing banks to relax their lending guidelines.

“Our preliminary thoughts are for EPF to disburse 15 to 20-year loans to a member who has been contributing for at least five years and earning less than RM5,000,” he said.

To prevent abuse, the homes will be subjected to a 10-year lock-in period, he added.

“At the same time, to ensure the member still has some money for contingencies, the EPF can buy insurance with endowment policies like MRTA [mortgage reducing term assurance] or MLTA [mortgage level term assurance].”

The MRTA protects the banks in case the borrower is unable to service the loan whereas the MLTA protects the borrower’s dependents if they cannot repay the loan because of injury or death.

Chang suggested that the insurance premiums be paid through EPF contributions so that the bonuses from the insurance endowment plans can be accumulated in the member’s account.

The borrower can pay a monthly installment to be paid back to the fund, just like a regular bank loan.

“The issue of default doesn’t arise as the member maintains his or her EPF account, and should the borrower die or become physically incapacitated, the MRTA or MLTA kicks in.

“If a borrower decides to quit his or her job, then the EPF can deduct the remaining loan amount from the EPF account,” he explained.

Chang further suggested that if the borrower loses their job, the fund can offer them a moratorium period until they find a new one, while those who have reached retirement age can pay off the loan with the remaining amount in their EPF accounts.

Meanwhile, proceeds from homes sold before the repayment period is up will be deposited wholly or partly into the borrower’s EPF account.

He added that the EPF may consider allowing a full withdrawal of savings for first-time house buyers, subject to strict conditions.

“We understand that some may be against this idea as it deviates from the original aim of EPF, but we believe a home is a better form of savings or investment than cash in the EPF account, especially when it is hedged against inflation.”

He added that the HBA was interested in working the Ministry of Finance and Bank Negara Malaysia to develop the idea, with possible applications to other cash-rich funds such as Retirement Fund Inc (KWAP), the Armed Forces Fund Board (LTAT) and Amanah Saham Bumiputera (ASB).