Mortgage insurance loans plunge 36 pct in Hong Kong

HONG KONG Jan 11 (Reuters) - The Hong Kong Mortgage Corp said on Wednesday the amount of loans it made under its mortgage-insurance program plunged 36 percent in 2011 from the previous year, after the corporation adjusted the plan to ensure banks didn't overlend.

The amount of new loans drawn down under the plan fell to HK$26.3 billion ($3.4 billion), making it tougher for prospective buyers to stretch to get on the property ladder.

In Hong Kong, no single financial institution is permitted to loan more than 70 percent of a property's value to a borrower, and less on higher-priced homes. Buyers who don't have sufficient cash for a downpayment seek the extra mortgage insurance, and can get up to a 90 percent loan through the HKMC plan.

Executive director Peter Pang said the corporation has not planned any relaxation of its mortgage-insurance program after tightening it last June.

Both the government, which owns the Hong Kong Mortgage Corp through the Exchange Fund, and the Hong Kong Monetary Authority, the city's equivalent of a central bank, have acted to curb surging residential property prices.

"We have made some adjustment in line with the government's various measures in terms of enhancing-risk management for mortage loans," Pang said at a briefing unveiling the company's financial highlights for 2011. "Basically we would be moving in line with the government and the Hong Kong MA in this area."

Finance Secretary John Tsang has, however, suggested Hong Kong will relax its austerity measures if the economic situation worsens. Tsang is also chairman of the HKMC.

With home loans harder to come by, and terms for new mortgages less attractive, many analysts predict a tough year for Hong Kong residential property. A team of HSBC analysts this week forecast a 15 percent drop in Hong Kong home prices in 2012.

The Hong Kong Monetary Corp posted a record profit after tax of HK$1.26 billion last year, edging ahead 1.8 percent over 2010.

The company introduced a reverse mortgage program in July 2011, allowing elderly home owners to draw down on the value of their home in a sort of annuity.

The company said Wednesday that only 173 applications had been received for the plan by the end of December, with successful borrowers receiving an average monthly payment of HK$13,900.

The HKMC said it was the most active corporate debt issuer in the Hong Kong dollar debt market last year, issuing HK$28.5 billion ($3.7 billion) in corporate debt, more than three times its tally for 2010 of HK$8.3 billion. The 2011 total included 600 million yuan in yuan-denominated bonds. ($1 = 7.7661 Hong Kong dollars) (Reporting by Alex Frew McMillan; Editing by Kim Coghill)