As reported on this page last week, the National Pension Commission (PenCom) recently issued Guidelines on Accessing Retirement Savings Account (RSA) Balance towards Payment of Equity Contribution for Residential Mortgage by Retirement Savings Account (RSA) Holders. Key highlights of the Guidelines, such as eligibility for participation, the maximum amount to be applied as equity contribution for residential mortgage and the general ground rules for the implementation of the pension for mortgage policy, were covered.
This second part focuses on the application and documentation process and remittance of the equity contribution.
Application and documentation process
The Guidelines provide that an interested applicant is required to obtain an offer letter for the property from the owner or approved agent and approach a Mortgage Lender to fill an application form. The Mortgage Lender reviews the application form and verifies the genuineness of the property offer. The burden of due diligence is on the Mortgage Lender to ensure that the property is genuine and has a valid valuation report. When the property offer letter is confirmed, the applicant approaches their PFA and request for their RSA Statement for the purpose of accessing the 25% of their RSA balance for payment of equity contribution. In a joint application, each party shall apply to their respective PFA’s with copies of the verified property offer letter.
The PFA is required to issue a duly endorsed RSA statement to the applicant, which the applicant forwards to the Mortgage Lender. Upon receipt of the duly endorsed RSA statement, the Mortgage Lender verifies if the 25% of the applicant’s RSA balance will be sufficient as equity contribution. Where 25% of the RSA balance is sufficient as equity contribution, the Mortgage Lender issues a mortgage offer letter to the applicant. If on the other hand 25% of the RSA balance is not sufficient, the Mortgage Lender is required to request for the payment of supplementary equity contribution from the applicant. Upon confirmation of the payment of the supplementary equity contribution, the Mortgage Lender shall offer a mortgage loan to the applicant. Consequently, within two working days of the issuance of the mortgage offer letter to the applicant, the Mortgage Lender must forward to the applicant’s PFA copies of the mortgage offer letter, the mortgage application form, and verified property offer letter. Additional information required include the loan amount, equity contribution required, bank account details of the Mortgage Lender and indemnity by the Mortgage Lender to the PFA on the use of the equity contribution. In addition, the Mortgage Lender is also required to provide evidence of payment of difference where 25% of RSA cannot cover the equity required.
After two working days of receiving a mortgage offer letter, the applicant is required to approach his PFAs to request for payment of his Equity Contribution. The applicant shall obtain and fill an Application Form for 25% of his RSA balance and provide an indemnity to the PFA. In a joint application, each party shall apply to their respective PFA with a copy of the mortgage offer letter. The PFA also computes and validates that the requested amount is not more than 25% of the RSA Balance. All Applications that pass the PFA review shall be forwarded by the PFA to the Commission within two working days of successful review and validation. The PFA reviews the application form and the supporting documents received from the Mortgage Lender and the details supplied by the RSA holder in his application form. If any exceptions or discrepancies are identified during the documentation review, the PFA shall communicate the exceptions to the Mortgage Lender within two working days of identifying such exceptions.
Remittance of approved equity contribution
After the notification of readiness for disbursement, the PFA issues a payment instruction to its Pension Fund Custodian (PFC) to remit the approved amount to the Applicant’s account with the Mortgage Lender within two working days. The PFC is required to remit the approved amount for equity contribution to the account within two working days upon receipt of the PFA’s instruction. For a joint application, the PFA of each applicant issues a payment instruction to its PFC to remit the approved amount to the applicant’s account with the Mortgage Lender within two working days. Upon receipt of the equity contribution, the Mortgage Lender shall issue a confirmation letter to the PFA, confirming receipt of the equity contribution within one working day of the receipt of the equity contribution.
In Part III, we will continue our presentation on the key highlights of the Guidelines on Accessing Retirement Savings Account (RSA) Balance towards Payment of Equity Contribution for Residential Mortgage by RSA Holders. In the meantime, the Commission has invited interested RSA holders to contact their PFAs for more information and guidance.