The National House Buyers Association (HBA) applauds the recent directive from Bank Negara Malaysia (BNM) that banks must immediately cease charging “loan documentation fees” on housing loans (for conventional loans) and housing financing (for Islamic financing).
The move by BNM for Banks to cease charging these “loan documentation fees” shows that the new unity government under our current prime minister, YAB Datuk Seri Anwar Ibrahim, is caring and cognisant of the challenges faced by the rakyat in dealing with a slowing global economy and rising cost of living.
Dubbed either as “loan documentation fees”, “sale of pre-printed forms”, “administration fees” or other terms, here is a brief explanation of what it is all about.
A borrower who wants to apply for a housing loan will be issued an offer letter by the bank, setting out the key terms of the loan such as the amount, tenure and interest rate.
After the borrower has accepted the offer letter, the borrower needs to execute a loan agreement with the bank. The bank will then instruct its lawyer to prepare this loan agreement (hereinafter referred to as “security documents”), and this is where it gets interesting.
The bank will have its own standardised security documents and the lawyer only needs to input the details of the borrower and the property into this standardised security documents. Hence, banks do not incur any additional cost to prepare these security documents.
However, since 2013, banks have somehow been “selling” and “billing” the security documents to lawyers for prices ranging between RM100 and RM600 (depending on the requirements of the security documents). Note that this is not the cost of printing these security documents for the borrowers but only for the soft copies of such standardised security documents.
As a result, the appointed lawyers had no choice but factor this “purchase of pre-printed forms” that had been imposed by the banks in the form of “loan documentation fees” or guised by whatever names in their invoices to borrowers.
Although the amount may not seem a lot compared to the loan for the property, the savings of between RM100 to RM600 will lighten the burden of the borrower, especially on loans taken for affordable properties below RM300,000.
There is also the issue of fairness to the borrower. As the security documents have already been standardised, the banks do not incur any additional cost on such agreements and hence, should not be allowed to impose any additional fees to borrowers. Banks should not profit from sale of pre-printed forms. They are in the business of giving out loans and taking deposits.
Other unfair fees
Once again, HBA applauds BNM and our honorable prime minister for taking care of the interest of the rakyat and for finally disallowing banks from charging this “loan documentation fees”.
Special thanks too must be recorded to Datuk Dr Ir Andy Seo, co-chair of PEMUDAH (Special Task Force to Facilitate Business) and Datuk Pardip Kumar Kukreja in the technical working group on Efficiency and Accountability initiated by Malaysia Productivity Corporation (MPC) in making things happen.
HBA urges BNM and our prime minister to look into additional areas where banks are also charging borrowers unfair fees for items where the banks do not incur any cost, such as issuing redemption statements when borrowers wish to fully settle their housing loans. There are more areas that banks can be friendlier to their borrowers, who are their customers.