Loan scheme for unqualified home buyers violates EPF Act...

Putrajaya’s plans to use RM1.5 billion from the Employees Provident Fund (EPF) to give home loans to unqualified buyers is in breach of the EPF Act 1991, which sets out permissible investment activities for the fund, Tony Pua said today.

The DAP publicity chief said that while the EPF may lend to money to federal and state governments, corporate bodies and even members of the fund to buy or build a house, it cannot provide loans to individuals for the purposes of acquiring low-cost apartments using the property as collateral.

“The fund is committed to preserving and growing the savings of its members in a prudent manner in accordance with best practices in investments and corporate conduct. 

“Therefore, the EPF is not a lender of last resort for the poor and neither is it a social welfare organisation,” he said in a statement.

Pua also dismissed Federal Territories Minister Raja Datuk Nong Chik Raja Zainal Abidin’s assurance that the transaction was guaranteed by Kuala Lumpur City Hall (DBKL), noting that the loans would be made out directly to property owners who may or may not have contributed to the EPF.

The Petaling Jaya Utara MP said that if the low-cost properties were collateral-worthy due to their market price being higher than the purchase price — as the prime minister has claimed — the loans could easily be made via commercial banks instead.

“If DBKL is able to provide the guarantee, and the guarantee is even ‘better than normal corporate property’, then surely, banks will be rushing to provide the loans and not shy away from them...,” he said.

In a separate statement, PKR vice-president Nurul Izzah Anwar questioned if the high “guaranteed returns” of 5.5 per cent from the proposed home loans were commensurate with the risks of lending to individuals who could not secure loans from commercial banks.

Nurul Izzah said the EPF is not the personal piggy bank of the BN government

“Because of their very limited repayment capability and falling under a category of high probability of default, it would be risky for the EPF to assume that they would suddenly be able to repay their home loans under this scheme without hiccups,” she said. 

The Lembah Pantai MP also asked if DBKL could offer guaranteed returns if a large number of lenders failed to service their debt in timely fashion, saying that the easy home financing risked creating a situation of “serious moral hazard” like the US sub-prime crisis.

She added that the government should instead make full use of existing financial institutions with a social welfare agenda such as Bank Rakyat, Malaysia Building Society Bhd or Bank Simpanan Nasional to implement the “noble initiative”.

“The EPF is not the personal piggy bank of the BN government. After all, the EPF is a social security organisation for the protection of workers’ retirement savings as opposed to a social welfare organisation...,” she said.

“The government can channel its own funds or specific government allocations for housing purposes under the federal government’s annual budget’s ‘social services’ bracket to these financial institutions that will act as a conduit to extend government soft loans to the underprivileged for home purchase purposes.” - malaysian insider

cheers.