Guard against property bubble build-up

In the horror film Drag Me To Hell, an old gypsy woman was so angered by a loans officer’s refusal to extend her mortgage payment that she attacked her in the bank parking lot and later placed a curse on her.

The young officer, Christine Brown, could have chosen to help Sylvia Ganush but she wanted to impress her boss and get a promotion over her co-worker.

Ganush had knelt before her, begging her not to take away her home. But Brown decided to call security, which was when Ganush lost her head.

Such incidents may only appear in films and one’s imagination but it dramatises the point that foreclosure is a cruel and extreme measure.

In the United States, reports of foreclosures and lately, mistakes, speak of untold suffering and confusion among homeowners.

According to Bloomberg, attorneys general in 50 states last week announced an investigation into whether employees of lenders such as Ally Financial Inc, JPMorgan Chase & Co and Bank of America Corp falsified documents used in foreclosure proceedings.

Lenders were also said to have suspended foreclosures in many states after court documents revealed that people working for some large mortgage firms signed papers without checking their accuracy.

Although the problem is serious in the United States, which is at the heart of the action following the burst of the huge subprime housing bubble, it cannot be assumed that problems of a smaller scale will not appear elsewhere.

In Malaysia, the fact that property loan curbs and taxes did not surface in Budget 2011 should not be taken to mean we should let our guard down on any potential property bubble.

Although talk has subsided on discussions between the authorities and industry, it is believed that the intention to impose some kind of curbs is still very much on the cards.

It was earlier reported that a loan-to-value ratio of 70% to 75% for the purchase of third and fourth homes was being considered as a major step to deal with any potential speculative activities.

We should not wait until the authorities clamp down on the market. Instead, proactive monitoring and self-restraint play an important role in the collective consciousness to stem any occurrence of runaway prices.

Bidding up the prices is another practice that should be looked into against fundamental reasons and proper data collection.

In the current build-up of funds into emerging markets, care has to be taken to avoid excessive speculation in the property market as we do not want our people to lose out in any way should the bubble burst.

Senior business editor Yap Leng Kuen believes that prices for a sound investment should not crash overnight.

By The Star (by Yap Leng Kuen)