Regulatory Alerts1996-09-12
Added · Updated
Guideline on the Use of Personal Loans to Compete for Residential Mortgage Business
The Hong Kong Monetary Authority issued this guideline to address the growing trend of authorized institutions using personal loans as add-ons to residential mortgages, a practice that risks undermining the 70% loan-to-value integrity and lowering underwriting standards. The regulator requires that personal loans be treated as separate credit decisions based on normal unsecured loan criteria, ensuring they are not automatic add-ons, not used to finance downpayments, and have terms consistent with general institutional policies. Institutions must also avoid expressing loan amounts as a percentage of property value and must include personal loan servicing costs in the borrower's debt servicing ratio calculations for the mortgage.