The outbreak of epidemic causes layoffs. The approval for aviation services halts.
(Journalist Lai Chi-Tin, Ma Chui-Mei)
The global spread of the COVID-19 epidemic, immigration restrictions, or quarantine in many countries, have severe hit the industries such as retail catering and tourism. There have been large-scale layoffs in hotels due to business shrinkage, and some banks have tightened mortgage approval conditions for employees in related industries. Yesterday, the market source pointed out that banks have tightened mortgage application review for practitioners in the industries most affected by the epidemic, such as aviation, retail, and tourism-related industries. It also includes sub-mortgage and further charge applications, and even some small and medium banks have directly rejected any mortgage application from employees of the aviation service industry.
Cho Tak-Ming, the Chief Vice President of mReferral Mortgage Brokerage Services, expressed yesterday that he understands the situation in the market that some small and medium banks have directly rejected any mortgage application from employees of the aviation service industry. He also know about that some banks have tightened mortgage application review for practitioners in the industries most affected by the epidemic, such as retail and tourism-related industries. He pointed out that at present, large banks require more date before the approval of the mortgages. For example, the applicant should supply payroll to prove the regular income, or add guarantor, and so on. The salary of high-risk industry employees would be discounted.
Asked whether banks would tighten further, Cho Tak-Ming said that the epidemic was unpredictable. At present, large banks are still reviewing and approving. But the approval for employees of tourism, service-related, and commission-based will be more strict.
The reviewing of further charge from SME bosses needs to add asset assessment.
As for the SME bosses, Cho Tak-Ming added that the bank still accepts SME bosses to apply for property further charge if they take asset evaluation. And they always can use for further charge mortgages to cash in if their properties are fully paid up. It is estimated the possibility of capital chain rupture due to no further charge is small. However, the applicant should repay the installment together if he or she buys a second property at the same time of applying for the further charge on the first property, which is a risky way. Some SME bosses have done this before. But there is no such application after the stock market crash.
Chong Kam-Fai, the Chief Executive Officer of StarPro Mortgage Referral Limited, said that more banks have recently imposed restrictions on the mortgage applications from employees of high-risk industries. He continued that some banks are also concerned about the level of employee liquidity and the monthly repayment burden if the salary of the employee is commission based. Traditionally, banks would consider the average of commissions over the past six months to measure the level of income of insurance agents or estate agents who rely on sales commission. Recently, some banks have asked applicants in the above categories to provide proof of commission income in the past 12 months to assess whether they can pass the installment-to-income ratio and stress test.
Applicants of lawyers, doctors, and professionals have not been affected yet.
In the past, when the SARS epidemic in 2003 and financial turmoil occurred in Hong Kong, some banks also made risk management and strengthened the control. People engaged in retail and catering would be more affected when applying for mortgages. I-BANK investment banking professionals were also affected at that time. Market source points out that banks are currently preparing a list of occupations whose mortgage applications need to be tightened. They involve more than a dozen occupations. Professionals such as lawyers, architects, and private doctors have not been included.
At present, banks generally require proof of income for the last three months from ordinary fixed-income people, and proof of income for six months from people with floating income (basic salary, bonus or commission). Some banks would require proof of income for the last year or even two years from people with floating income due to the change of recent market conditions. Also, some banks tend to grant higher interest rates or reduce concessions on higher-risk mortgage applications. But government civil servants are unaffected.
The approvals are mostly examined following the existing standards.
Besides, except to meet the requirements of the Hong Kong Monetary Authority, different banks will have different loan review criteria based on capital conditions and risk management strategies before the approval of the loan. They may have different measures on the approval of loans that particularly from risky industries. Many banks have stated that they will review loan applications according to existing standards. Among them, BOCHK follows its loan policies and guidelines, while Citigroup adheres to its internal risk management policy.
HSBC states that it will continue to take a prudent approach to review applications to ensure that the relevant assessments meet the guidelines and requirements of regulatory agencies. This bank will also consider mortgage loan applications based on factors such as the customer's financial situation, records, and ability to repay, depending on individual circumstances. Hang Seng will take into account a variety of factors, including the condition of the property and the solvency of the applicant.
