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Published September 25, 2007

Only 20% of US sub-prime mortgages at risk

No plans to scrap such mortgages as they democratise credit: US official

By ARTHUR SIM

ABOUT 5 per cent of all US mortgages are sub-prime but only one fifth of these are at risk of default, US Department of Housing and Urban Development (HUD) assistant secretary Darlene Williams said yesterday.

Ms Williams was speaking at the inaugural Asia-Pacific Housing Forum held in Singapore yesterday where she said that there was no intention of abolishing sub-prime mortgages.

'Sub-prime mortgages democratise credit, and so we don't want to throw that option away,' she said.

Instead, the HUD's Federal Housing Administration is expected to help an estimated 240,000 families avoid foreclosure by underwriting refinanced loans of those still creditworthy.

Ms Williams maintained that some of those who defaulted on their sub-prime mortgages had poor financial literacy. 'Many did not even read their contracts,' she said.

Also speaking at the forum was Minister of National Development Mah Bow Tan who said that affordability in the public housing sector was not a problem in Singapore as people serviced their loans through their Central Provident Fund (CPF) savings, with little cash outlay.

With over 80 per cent of Singaporeans living in Housing and Development Board (HDB) flats and 95 per cent of these owning their homes, Singapore has one of the highest, 'if not the highest', home ownership rates anywhere, Mr Mah said.

Speaking to representatives of housing authorities from around the world, Mr Mah explained that there were two key government policies that helped make public housing in Singapore so successful: the Land Acquisition Act, and the use of CPF savings to pay for flats.

On public housing, he said: 'Over the years, this has developed into an implicit social contract that has laid a firm foundation for Singapore's economic, social and political stability.'