All to protect the bottom line

I AM writing to refute the “justifications” given by the Association of Banks Malaysia (ABM) in The Star Online Business News article “High debt ratio among reasons loans rejected” (July 22).

As a loans officer in a reputable local bank for more than 15 years and then serving as a property negotiator for the past seven years, I have received numerous complaints from my clients (especially those from the lower and middle income groups, namely those with a total household income of below RM4,500) that their loan applications were rejected even though their record is clean and they are buying their first house. This is especially so in the past two years, in the face of the uncertain local economy.

Over the past 24 months, many of my clients who had paid the earnest deposit for the purchase of houses had to “pull back” due to their so-called “ineligibility” for housing loans. Checks with some registered agents in other states also revealed the same pattern. So how can ABM imply that it’s all business as usual?

In fact, I have discovered firsthand from my many housing loan applicants (clients) that loans officers in the banks had apparently “confided” to them that in the past one to two years, they have received many circulars requiring them to tighten their in-house lending criteria.

Upon checking further, I also discovered that one bank has seemingly made it almost impossible to offer 90% housing loans to deserving applicants. How is that? By apparently “auto-deducting” a flat rate of RM1,000 for each housing loan applicant under their so-called living expenses, regardless of the reported income of the applicants. This means that the sum deducted for an applicant who earns RM2,000 a month and another applicant who earns RM10,000 a month is the same. Perhaps ABM or Bank Negara can help verify this.

See graphic of how this crude mechanism affects applicants’ “eligibility”:

Based on the graphic, the bank will then reject the loan due to poor repayment capacity (negative income).

Or to play safe, the banks (in most cases, their headquarters) will “deliberately” approve at a lower margin, say only 70%, knowing very well that the poor appli- cant will not be able to accept the offer due to lack of savings to pay for the higher downpayment or deposit.

I have been told that, in many cases, banks will impose a fixed deposit pledge as additional security for the loan, again knowing well that those in the lower income group would not have the funds.

Lately, some banks are also known to exclude overtime or other side income evidence furnished by applicants in lieu of which they are required to rope in a strong guarantor.

By imposing all these obstacles, aren’t they actually forcing the applicants to decline the loan on their own accord? By the way, by “approving” the loan at a lower margin, the banks are also able to “manipulate” their housing loan approval statistics which they report to Bank Negara. Is Bank Negara aware of all these practices or is it a party to them?

Anyway, due to the banks’ unreasonable criteria, many applicants from the B40 (the bottom 40% of households) group naturally cannot even afford to buy a medium-cost house or flat, which realistically is actually within their means. Now we know why there is so much hue and cry over this.

By arbitrarily fixing a sum of RM1,000 +/- for living expenses deduction and to make it worse by excluding the applicants’ “other side income”, the banks have effectively “banned” housing loans to applicants in the lower-income (B40) group. This is the stark reality on the ground.

Based on the above scenarios that many of my clients experienced, is it any surprise then that those in the lower/middle income groups can no longer obtain housing loans from the commercial banks in this country, and by virtue of which too they cannot own their own houses?

Like it or not, the general perception is that the banks here have now virtually shirked their social and corporate responsibility in their quest to protect and enhance their bottom line. It would be good if the banks “own up” and start playing their part in nation-building rather than be obsessed primarily with reporting multi-billion ringgit net profits annually.

A CONCERNED EX-BANKER & ORDINARY CITIZEN Melaka