Couple sue NTUC Income over reverse mortgage deal gone sourBy Chew Xiang
(Taken from the Straits Times on 29th July 2009)A couple are suing NTUC Income - in what is seen as a test case - over a reverse mortgage deal in which their property was sold amidst falling property prices.
Derek Chua, who is in his 70s and his wife Colleen Ng, who is in her late 50s, claim they lost their matrimonial home at Upper Serangoon in 2006.
NTUC Income demanded repayment of a loan procured in 1997 under a reverse mortgage, and the couple claim they had to sell their home to repay it, according to a writ of summons filed earlier this month and seen by BT.
The company's chief financial officer Jeffrey Lee said in an emailed statement that NTUC Income had been 'more than reasonable' in trying to help the borrowers and that the couple had been advised on the terms of the deal.
The couple claimed that the 1997 reverse mortgage valued their house at $2.1 million, and based on a loan to valuation ratio of at most 80 per cent, they were given $495,000 cash to pay off their previous mortgage and payments of up to $2,000 a month.
In May 2004, the couple were told the value of their house had dropped to $1.1 million and they were in breach of the 80 per cent loan to valuation limit, based on the outstanding loan amount of $926,000.
According to the couple, they were told to top up $46,400 to bring the ratio down to the 80 per cent limit, and their monthly payments of $2,000 were reduced in steps to $1,500 from October that year.
A year later, in October 2005, NTUC Income said the outstanding loan, at $1.014 million, exceeded the 80 per cent limit based on the property value of $1.15 million. The couple were told they would get just $300 a month until June 2006, after which the company would 'exercise (its) right to recall the property for auction sale'. The couple could also procure a buyer on their own or find another place to stay, according to a letter from NTUC Income, the couple said.
By then, the couple owed $1,045,802.91. On June 30, solicitors for NTUC Income sent the couple a letter demanding repayment or else face legal proceedings
The couple handed over possession of their property on Aug 31, according to their writ.
The property was later sold for just over $1 million, leaving an alleged shortfall of about $55,000, which the couple were asked to pay.
They claim that if not for NTUC Income's letter, they would not have sold the property - which in 2008 was again sold for about $1.5 million, the writ says.
NTUC Income has yet to file its defence.
The couple have engaged senior counsel Michael Khoo through legal aid. NTUC Income is represented by Rodyk & Davidson.
This is an interesting landmark case which will serve as a reference for those who are considering taking up a reverse mortgage. It is unfortunate that the couple took up a reverse mortgage when the property market was buoyant and had to be forced to sell their property when property prices are depressed. For a product that was marketed as a retirement tool, it is definitely not as safe as what was supposed to be. Additionally, NTUC Income is a co-operative and it is surprising that this can happen. What if the valuation of the property went up after the reverse mortgage was signed ? Will NTUC Income pay out a larger sum ? The couple would have done much better by downgrading from their property and use the proceeds to fund their retirement.
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No surprise. Ever since NTUC Income decided to engage the ex-prudential salesman as their CEO NTUC Income has been going downhill. Greed and lack of integrity is the hallmark of failure and it is definitely no surprise that NTUC Income under the new leadership has simply forgotten about their co-operative role. What is more important is that the present PAP leadership will be dragged down by it too if the PM does not intervene soon.
ReplyDeletePolicyholder
Hi,
ReplyDeleteInterestingly, NTUC Income has been proclaiming on its advertisement that since it is a social enterprise, its interest is aligned with its policyholders.
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