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SINGAPORE: As many borrowers are expected to continue to face financial problems amid a prolonged COVID-19 pandemic, the Monetary Authority of Singapore (MAS) is expanding its support measures for various groups of borrowers, including the possibility that those With real estate loans, they request a temporary reduction in their monthly installment payments.
Those with renewal and student loans can also opt for a longer repayment period, while small and medium-sized businesses (SMEs) will be able to partially defer principal payments on some loans and receive customized restructuring options.
These were announced by the MAS on Monday (October 5) when the clock ticks until the end of the relief measures on December 31 of this year.
Since April, companies and individuals affected by the pandemic have been able to request the deferral of payments on various bank loans until the end of 2020. To minimize a “cliff effect” once the measures expire, the MAS said in July that it was speaking with banks and finance companies on how to make it easier for borrowers to gradually resume repayments.
READ: MORE in talks with banks to make it easier for borrowers to repay when COVID-19 relief measures end
The MAS, in its press release on Monday, urged borrowers who are able to resume loan payments in full to start doing so from January to avoid increasing their total debt.
However, he acknowledged that many individuals and businesses are likely to continue to experience cash flow pressures until early next year.
The extended support will allow more time to resume payments for those currently in loan deferral. Support measures will also be available to those who have not resorted to any deferral plans before but are now facing financial stress.
MAS Managing Director Ravi Menon said: “We want to continue to provide relief to borrowers facing cash flow challenges, while also encouraging them to resume loan payments to the extent they can so they don’t accumulate too much debt.
“A good outcome is one where individuals and SMEs can use support measures to help them overcome current economic difficulties and emerge with a sustainable debt burden as the economy recovers.”
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READ: People Can Defer Auto and Student Loan Payments in MAS’s Second COVID-19 Aid Package
INDIVIDUAL PROPERTY LOANS
Those with residential, commercial and industrial property loans can request a temporary reduction of their loan repayments to 60 percent of their monthly payments.
The reduced monthly installments will cover interest and partial principal payments for most people, MAS said, allowing them to pay off their principal amounts while facilitating cash flow.
Individuals will need to show that their income has been affected by at least 25 percent and that they are not more than 90 days behind on their home loan payments, regardless of whether they have accepted payment allowances before.
Those who meet the criteria can apply for assistance between November 9 of this year and June 30 of next year. Installment plans can be temporarily reduced for up to nine months, but not to exceed December 31, 2021.
Should borrowers require further assistance after the reduced installment plan ends, an extension of the loan tenure of up to three cumulative years can be discussed with banks, “on a case-by-case basis,” MAS said. People should approach their banks for information on the length of tenure being offered.
Those who cannot afford the reduced payments under the extended relief should also approach their lenders early to discuss alternative payment options, he added.
INDIVIDUAL STUDENT, RENEWAL LOANS
Individuals who provide student loan and renewal services can request an extension of their loan tenure for up to three years to lower their monthly payments.
This option is available to those who can demonstrate an impact on income and whose loan payments are not more than 90 days past due, regardless of whether they have previously accepted payment waivers. The application window for this is also between November 9 this year and June 30 next year.
MAS advised individuals to discuss alternative payment options with their lenders in advance if they cannot meet the reduced payments under this program.
For example, borrowers may exceptionally discuss the adoption of loan repayment plans with lower monthly installments or defaults with their banks, he said.
NON-GUARANTEED PERSONAL CREDIT, DEBT CONSOLIDATION PLAN
For those struggling to pay off their revolving unsecured lines of credit, they can request to convert their outstanding balances into term loans at lower interest rates.
Those in debt consolidation plans can request to extend the loan tenure of their plans for up to 5 years.
For both, people have until June 30, 2021 to do so if they can show that their income has been affected and they have payments due between 30 and 90 days.
MAS said those who continue to face repayment difficulties despite accepting these reliefs can contact their lenders or Credit Counseling Singapore to discuss restructuring plans.
LOAN AND RESTRUCTURING FOR SMES
There will be two support plans available for SMEs that need additional help.
The first is the Extended Support Plan – Standard (ESS-S), in which SMEs can request to defer 80 percent of principal payments on their secured loans from banks or finance companies, as well as loans granted under the Enhanced Working Capital Loan from Enterprise Singapore Plan and Temporary Bridge Loan Program for a specified period.
The deferral period will be determined by their sectors, classified in the Employment Support Plan.
For sectors defined as Tier 1 and Tier 2, which include the worst affected aviation and aerospace, as well as the tourism industries, they can opt for the partial deferral of the principal from January 1 to June 30, 2021.
SMEs in other sectors can choose to do the same from January 1 to March 31, 2021.
MAS said that this relief will be available to all SMEs that are “up to date” with their banks and finance companies, defined as not having arrears on all loan payments for more than 30 days. Those whose loans have been granted a principal moratorium should also not have past due interest payments on those loans.
Banks and finance companies are also developing an Extended Support Plan – Custom (ESS-C) to help borrowing SMEs restructure their loans at various financial institutions. MAS said more details will be provided in the coming weeks.
The new scheme will complement other restructuring assistance schemes, such as the new Simplified Insolvency Program (SIP) for micro and small businesses which is being proposed by the Ministry of Law and the Credit Counseling Singapore scheme for sole proprietors and partnerships.
Borrowers can apply for both ESS-S and ESS-C beginning November 2.
APPROVED RELIEFS
At the end of August, banks approved about 36,000 requests to defer payment of real estate loans until the end of this year. The notional amount of deferred loans is approximately S $ 29 billion, MAS said.
The number of mortgage deferrals has dropped in recent months, MAS said, noting that there were nearly 34,000 mortgage relief applications approved at the end of June.
“Generally speaking, the number of mortgage deferrals has decreased, from the peak in April to June 2020, when more people were affected by the circuit breaker measures,” said a MAS spokesperson in response to media inquiries. .
There were also more than 8,100 requests from individual borrowers who wanted to convert their outstanding unsecured loan balances into new loans with lower interest rates. The notional amount of outstanding loans is over S $ 200 million, MAS said in a fact sheet outlining the scale of its exemptions so far.
Meanwhile, there were also more than 5,400 requests from SMEs to defer principal payments on guaranteed loans. The total notional amount of deferred loans amounted to more than S $ 11.5 billion.
Separately, OCBC said it has approved more than 8,000 deferrals for mortgage, auto and renewal loan payments since April. This amounted to more than S $ 5 billion in loans.
It has also granted a moratorium on more than 2,000 applications for unsecured loans worth more than S $ 40 million during the same period.
Joseph Wong, the bank’s director of consumer credit risk management, said the additional support measures are aimed at “helping clients return to some form of normalcy.”
“We encourage customers who have accepted moratoriums but can now restart refunds to do so as soon as possible. This will help relieve them of future financial stress, ”he said, adding that clients who need help contact them to discuss alternative solutions.
OCBC did not provide a breakdown of SMEs, but noted that applications for new loans and defaults have slowed since the peak in the second quarter.
Requests have slowed as more SMEs see an improvement in cash flow from the resumption of business and the additional support of various relief measures, said its head of global commercial banking, Linus Goh.
SMEs in the most affected industries, such as the travel and construction sector, will benefit from the additional waivers, but OCBC does not see a significant proportion of its clients requesting an extension of the moratorium.
“We continue to actively engage with our SME clients, working with them to understand the evolving post-COVID business environment and support them as they adapt to the new regulations,” said Mr. Goh.
