by Miichael Yeoh

Who shall we blame for loan rejections? Shall we blame Bank Negara (BNM), the banks or the borrowers? We are always puzzle why our loan can be rejected and you thought submitting a loan is easy as ABC. It you read articles on newspaper and magazines everyone is commenting it’s more difficult to get your loan approve by the banks. Yes, it on the rise and it’s here to stay.

I have spoken all over Malaysia and overseas in exhibitions and for developers. The questions and responds all always the same by participants.
a) How to get my loan approved?
b) Why the banks are rejecting me?
c) The banks seems not interested to lend anymore. They just rejected my loan.

Some participants are not buying even their first property because they feel rejected already. The negative news that they read is not helping either.

Do you know that the developers were telling me that they have to sell much more that the available units because of loan rejection. For your information, based on the statistic out of 10 cases been submitted to the banks, less than 5 being approved.

Shall we blame Bank Negara Malaysia?

When I did a research on other countries, I found out that our country is not the worst in tightening policies. There are counties far worse than ours. One of the reason why BNM are tightening the lending policies is because our debts to income ratio s as high as 146%. This means that every 1 dollar that we earned RM1.46 is the debts. We are one of the highest in the world. If BNM did not start the tightening policies we will suffer like United States during the subprime crisis.

Shall we blame the banks?

Many of us start blaming the banks when their loan is rejected. If we look form their point of view, they are a profit organisation in which they are accountable to the shareholders. They need to make profit for them to survive. Putting yourself in the shoes of the banks, would you lend money to someone where you know the likelihood of default is very high. If you will not lend how about the banks.

Shall we blame the borrowers?

When I was in the banks and when I started my mortgage consultancy many years ago, approval is so much easy. You don’t see borrowers with so many debts such as credit cards and personal loans. There is always a reason why the banks are not lending to the borrowers. The banks feel insecure in giving out loans. If you go to shopping malls especially weekends there are booth set up to sell you credit cards and personal loans. These are the culprits why most loans got rejected.

My Take

When BNM starts the tightening policies they targeted property investors but to the dismal it also affects the first home buyers also. I do hope that BNM really gets feedback from people like us before introducing policies. For instance, the abolishment of Developer Interest Bearing Scheme (DIBS) should be targeted to property investors only but the policy is for all purchase.

As for the banks, I would like them to be more lenient in approval for genuine home purchasers. Are you aware that in certain banks they have a minimum loan amount such as RM100,000 or RM200,00. To them the job for RM50,000 loan and RM1 million loan is the same. That is why they concentrate on the latter.

For the borrowers, one of the main reasons your loan is rejected is because your debts are too high or you too ambitious buying a house out of your budget. You will need to plan properly. Do read my article at http://www.miichaelyeoh.com/2015/08/mortgage-planning-the-way-forward/.

I feel that we should be blaming everyone for the rejections. It is not fair to blame on one party alone. If we cannot change the situation why don’t we change ourselves instead. Make ourselves loanable to the banks.

>> This guess article comes courtesy of my friend, Miichael Yeoh, who is currently the CEO & Founder of GM Training Academy PLT. He has over 19 years of experience in property, mortgage and investment industry. Miichael is also a regular speaker in public seminars, conducting mortgage courses, training developers sales staff and real estate agents.(Source)