Published July 28, 2009

Couple sue NTUC Income over reverse mortgage deal gone sour

By CHEW XIANG

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(SINGAPORE) A couple are suing NTUC Income - in what is seen as a test case - over a reverse mortgage deal in which their property was sold amidst falling property prices.

Sold: The couple said a 1997 reverse mortgage valued the property at $2.1m. In 2004, they said they were told the value had fallen to $1.1m

Derek Chua, who is in his 70s and his wife Colleen Ng, who is in her late 50s, claim they lost their matrimonial home at Upper Serangoon in 2006.

NTUC Income demanded repayment of a loan procured in 1997 under a reverse mortgage, and the couple claim they had to sell their home to repay it, according to a writ of summons filed earlier this month and seen by BT.

The company's chief financial officer Jeffrey Lee said in an emailed statement that NTUC Income had been 'more than reasonable' in trying to help the borrowers and that the couple had been advised on the terms of the deal.

The couple claimed that the 1997 reverse mortgage valued their house at $2.1 million, and based on a loan to valuation ratio of at most 80 per cent, they were given $495,000 cash to pay off their previous mortgage and payments of up to $2,000 a month.

In May 2004, the couple were told the value of their house had dropped to $1.1 million and they were in breach of the 80 per cent loan to valuation limit, based on the outstanding loan amount of $926,000.

According to the couple, they were told to top up $46,400 to bring the ratio down to the 80 per cent limit, and their monthly payments of $2,000 were reduced in steps to $1,500 from October that year.

A year later, in October 2005, NTUC Income said the outstanding loan, at $1.014 million, exceeded the 80 per cent limit based on the property value of $1.15 million. The couple were told they would get just $300 a month until June 2006, after which the company would 'exercise (its) right to recall the property for auction sale'. The couple could also procure a buyer on their own or find another place to stay, according to a letter from NTUC Income, the couple said.

By then, the couple owed $1,045,802.91. On June 30, solicitors for NTUC Income sent the couple a letter demanding repayment or else face legal proceedings

The couple handed over possession of their property on Aug 31, according to their writ.

The property was later sold for just over $1 million, leaving an alleged shortfall of about $55,000, which the couple were asked to pay.

They claim that if not for NTUC Income's letter, they would not have sold the property - which in 2008 was again sold for about $1.5 million, the writ says.

NTUC Income has yet to file its defence.

The couple have engaged senior counsel Michael Khoo through legal aid. NTUC Income is represented by Rodyk & Davidson.