Hong Kong Monetary Authority - The Hong Kong Mortgage Corporation Limited Expansion of the Mortgage Insurance Programme to Cover Mortgages with Loan-To-Value Ratio up to 95%

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28 Jul 2004

The Hong Kong Mortgage Corporation Limited Expansion of the Mortgage Insurance Programme to Cover Mortgages with Loan-To-Value Ratio up to 95%

The Board of Directors of the Hong Kong Mortgage Corporation Limited (HKMC) approved today (Wednesday) an expansion in the Mortgage Insurance Programme (MIP) under which the maximum loan-to-value (LTV) ratio will be increased from the current limit of 90% to 95%. Mortgage loans on both completed properties as well as properties under construction (equitable mortgage loans) are eligible for coverage up to an LTV ratio of 95% for a maximum loan size of HK$5 million and a maximum loan tenor of 30 years.

The MIP is a comprehensive industry-wide programme catering for the whole of the banking sector and covering both the primary and secondary property markets," said Mr Henry Tang, Chairman of the HKMC. "I am pleased to see that the HKMC continues to play a useful role in ensuring that the benefits of mortgage insurance are available to a wide range of eligible homebuyers and mortgage lenders.

Mr Joseph Yam, Vice Chairman of the HKMC, said, "The HKMC pioneered the development of MIP in Hong Kong in April 1999. The programme now allows the potential home buyers to borrow up to 95% of the value of the property and at the same time enables the banks to keep their exposure within the 70% LTV level stipulated by the Hong Kong Monetary Authority, creating a win-win scenario."

The eligibility criteria and insurance premium levels for the new 95% LTV product are set out in the technical note at Annex A and the premium table at Annex B respectively. The HKMC will accept applications for the new product with effect from 29 July 2004. Interested home buyers can contact any bank listed in Annex C or visit the HKMC's website at www.hkmc.com.hk.

The Hong Kong Mortgage Corporation Limited
28 July 2004

Annex A

Technical Note

Eligibility Criteria for 95% LTV Loan

Description: Eligibility Criteria for Floating Rate Mortgages and Fixed Adjustable Rate Mortgages with a Loan–to-Value ratio above 90% and not exceeding 95% secured on private residential properties and properties under construction (equitable mortgage loans)
The Eligibility Criteria for the Mortgage Insurance Programme comprise the following: Core Eligibility Criteria; and Mortgage Conditions. The core Eligibility Criteria are summarized below:-
Product type	Floating Rate Mortgages Fixed Adjustable Rate Mortgages
Maximum loan size at origination	HK$5,000,000
Determination of Loan-to-value (LTV) ratio Maximum LTV ratio at origination Valuation Report	95% (may exceed 95% if the premium is to be financed with the mortgage loan). Written valuation report prepared by the bank's internal/external qualified valuers, or bank's internal valuer plus verbal valuation by an external qualified valuer including justifications on the appraisal value.

Debt-to-Income (DTI) ratio calculation Maximum DTI ratio at origination	In respect of: (a) 95% LTV Loans with an original term of maturity not exceeding 25 years, the maximum allowable DTI ratio at origination must not exceed 50%. (b) 95% LTV Loans with an original term of maturity exceeding 25 years, the maximum allowable DTI ratio at origination must not exceed 45%.
Maximum original term to maturity	30 years
Maximum sum of "remaining term to maturity” and “age of property" at origination and throughout the term of the mortgage	40 years
Employment Type	Self-employed persons are not eligible except for professionals such as medical practitioners, barristers, solicitors, certified accountants qualified to practise in Hong Kong or other professional categories acceptable to the HKMC.
Type of Property	For both completed properties and properties under construction.
Owner Occupancy	At least one of the income generating Borrowers/Mortgagors must physically live in the Property and use the Property as his/her primary residence while Cover under the Master Mortgage Insurance Policy is maintained, or until the requirement is waived at the discretion of the HKMC and its reinsurers.

Annex B

Mortgage Insurance Premium Rate Sheet

Mortgage Insurance Premium
Mortgage Type	Loan-to- value Ratio (LTV)	Loan Tenor (Years)	Single Premium Payment (% of the Original Principal Balance)	Annual Premium Payment
Mortgage Type	Loan-to- value Ratio (LTV)	Loan Tenor (Years)		First Year (% of the Original Principal Balance)	Renewal (% of the Original Principal Balance)
FLOATING RATE	Above 70% and up to 80%	10	1.00	0.50	0.24
		15	1.15	0.60	0.24
		20	1.40	0.70	0.24
		25	1.50	0.75	0.24
		30	1.65	0.85	0.24
	Above 80% and up to 85%	10	1.55	0.70	0.45
		15	1.80	0.80	0.45
		20	2.15	0.90	0.45
		25	2.30	1.00	0.45
		30	2.40	1.10	0.45
	Above 85% and up to 90%	10	2.15	0.90	0.63
		15	2.50	1.09	0.63
		20	2.98	1.28	0.63
		25	3.35	1.46	0.63
		30	3.55	1.65	0.63
	Above 90% and up to 95%	10	2.48	1.04	0.73
		15	2.88	1.26	0.73
		20	3.38	1.48	0.73
		25	3.78	1.68	0.73
		30	3.98	1.90	0.73
FIXED ADJUSTABLE RATE (FARM)	Above 70% and up to 80%	10	0.95	0.45	0.24
		15	1.10	0.55	0.24
		20	1.35	0.65	0.24
		25	1.45	0.70	0.24
		30	1.55	0.80	0.24
	Above 80% and up to 85%	10	1.40	0.65	0.40
		15	1.70	0.75	0.40
		20	1.95	0.85	0.40
		25	2.05	0.95	0.40
		30	2.20	1.05	0.40
	Above 85% and up to 90%	10	2.01	0.85	0.59
		15	2.34	1.03	0.59
		20	2.84	1.20	0.59
		25	3.18	1.31	0.59
		30	3.38	1.50	0.59
	Above 90% and up to 95%	10	2.32	0.98	0.68
		15	2.70	1.19	0.68
		20	3.27	1.38	0.68
		25	3.66	1.51	0.68
		30	3.89	1.73	0.68

Annex C

Mortgage Insurance Programme
List of Participating Banks

ABN AMRO Bank N.V.
AIG Finance (Hong Kong) Limited
American Express Bank Limited
Asia Commercial Bank Limited
Bank of America (Asia) Limited
Bank of China (Hong Kong) Limited
Bank of Communications
The Bank of East Asia Limited
Belgian Bank
Chekiang First Bank Limited
Chiyu Banking Corporation Limited
Citibank, N.A.
CITIC Ka Wah Bank Limited
Dah Sing Bank Limited
DBS Bank (Hong Kong) Limited
GE Capital (Hong Kong) Limited
Hang Seng Bank Limited
The Hongkong and Shanghai Banking Corporation Limited
Inchroy Credit Corporation Limited
Industrial and Commercial Bank of China (Asia) Limited
International Bank of Asia Limited
Liu Chong Hing Bank Limited
Nanyang Commercial Bank Limited
Orix Asia Limited
Pacific Finance (Hong Kong) Limited
Shanghai Commercial Bank Limited
Wing Hang Bank Limited
Wing Lung Bank Limited

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