Home Loan Borrowers Cheer as NHB Introduces Independent Mortgage Counselors

By Dr Suvrokamal Dutta

It was long overdue, but can set the trend for borrowers to get educated. Prospective home loan borrowers can now take the services of independent mortgage counselors to be introduced by the National Housing Bank (NHB).

The best part about these counselors is that they are going to guide borrowers through the maze of financial terms and the implications of various loan terms on offer by banks and housing companies. In addition, they will help borrower prepare a budget, which they can afford.

Point to be noted here is that in an increasingly complex market, home loan borrowers are floundering, unable to comprehend the nuances of various products and are looking for a authentic source of information to assist them negotiate a proper deal.

It has come into the notice of The India Street that the National Housing Bank has sought to introduce a system of mortgage counselling and the first batch of Certified Independent Mortgage Counsellors (CIMC) should hopefully come in towards the end of this year.

In my opinion, a CIMC will help bring in fairness and transparency and would be of value to both the borrowers and mortgage originators. Lots of industry observers feel that plenty of housing finance companies are not transparent in the way they word their agreements or the loan conditions and complaints galore from borrowers who have felt cheated and let down.

Keeping all these things into perspective, home loan activists and participants in the industry have welcomed the move by NHB. “Customers should not shy away from having to pay the mortgage counsellor’s fees as taking their advice would help them save much more over a period of time,” pointed out Bhumi Veerani, investment and property advisor.

No one will argue with the fact that there are plenty of financially illiterate people in India, who need the services of a professional. On the downside, it is of paramount importance that counsellors should not act as agents of home loan players. That is where, professional counsellors found to be acting as agents should be blacklisted and disqualified.

For ensuring the success of the concept, NHB has laid down the criteria for eligibility of CIMC, the procedure for accreditation, renewal of accreditation and suspension of accreditation. The grievance redressal cell would be the key to the success of the scheme. Over a period of time, the NHB expects the counsellors to become a self-regulatory body, which would conduct itself with fair practices.

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India’s National Housing Bank studying home loan defaults

By Vipin Agnihotri

It has come into the notice of The India Street that the National Housing Bank (NHB) is keeping a close watch on the possible defaults that could take place due to increase in the EMIs on the home loan borrowers. Though, there is not much concern on the housing finance companies but in case of housing loans offered by banks.

If experts are to be believed, around 85 to 90 percent of home loans borrowers have taken loans on the basis of floating rate. Home loan financiers such as HDFC, ICICI bank and State Bank of India (SBI) also have about 90 percent of their existing home loan clients on floating rate of interest.

In 2006, housing finance regulator NHB released a study projecting that 93.5 percent of home loans are floating rate loans. “We are thinking that the people who own single house for accommodation purpose should not feel the pinch of the rise in EMI. Rather the burden should be borne by the people who own two or more houses, most of time, which is for speculation purpose of selling when the price of the property appreciates,” pointed out NHB official in conversation with The India Street.

NHB at present are studying the data to assess the impact on the hike in EMI on defaults. Similarly, the Government has on its part been keen that the impact of high interest rates should somehow be softened on the small and medium borrowers. According to sources, Indian finance minister, P Chidambaram has asked the chief executives of public sector banks to protect the interests of borrowers in the Rs 8-10 lakh category to the extent possible.

It is worthwhile pointing that the last fiscal witnessed a steep surge in the interest rates. For example, in case of HDFC, the floating interest rate for home loans has gone up to 11.25 percent from 8.5 percent in the starting of fiscal year 2006-07.

Officials is of the view that number of housing finance companies say that in case a borrower is well below the retirement age, the loan period gets extended while EMI remains constant. Though, customers may well opt for a higher EMI without changing the loan tenure. A customer may also prepay part of the loan to keep the EMI and tenure unchanged. But there is an increasing fear of default in case the tenors are extended for the customers.

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