The information released so far is just the tip of the iceberg. More info will come out in the course of the lawsuit, but right now, the ramifications are quite significant. My observations are as follows:
1) UOB should fire its lawyer Tan Kok Quan partnership. This lawsuit has no legs to stand on. The damages of $181 million is for the sum of all the mortgages that it loaned to the 37 buyers that defaulted. The number was arrived as follows: Average price of the 124 units in the development was $6 million. 80% loan amount of the 37 units based on $6 million each is approximately this number. But the damages cannot actually be determined until the units have been sold. If the units are sold at a loss, then UOB can direct its lawyers to recover the difference, but they cannot be directing their lawyers to recover the entire mortgage amount. If the properties were sold for a profit, there is no damages whatsover.
Currently, if the unit is defaulted by the bank, the bank essentially owns it. It has to sell it to recover as much as possible. If it sold the unit under default auction for only $3 million, and the mortgage given by the bank to the buyer was $4.75 million, then the bank is entitled to go after the buyer for the remaining difference of $1.75 million. This $1.75 million is the responsibility of the buyer to pay under the personal guarantee that he/she signed. If the bank cannot recover this, it can then allege fraud and go after other parties. In any case, the damages cannot be $181 million because the condos have not been liquidated yet. If using my example of a $1.75 million loss per unit, actual damages are 37 X $1.75 million or $64.75 million, not $181 million. UOB seems to have skipped a few steps and gone straight to the main action. Lippo's lawyer, Premier Law, will simply say that the $181 million loss is not proven as the units have not been sold, and they would be right. the lawsuit was "conspiracy to cause loss" by Lippo. But as far as I can see, no material losses have been caused.
2) UOB appears to be suing the biggest fish Lippo because the other parties involved (the buyers and the agents) do not have the money to pay them back. Not exactly a sound strategy as Lippo will not go quietly into the night, and they have the resources to hire the good lawyers and go many rounds with them.
3) Why isn't UOB suing the property valuators who did the appraisals on the properties to allow the mortgages in the first place? Its not conceivable to me that the bank did not use a valuator even though the property is new. The valuator can look at other comparables and arrive a valuation. Or they can look at other sales in the development and come to the price of $6million. without the valuators confirming the price, the bank would not have given the mortgage. SISV should have liability insurance for its property valuator members to cover such contingencies whereby one of their valuators caused a loss to be suffered through a grossly inaccurate report.
4) Why did UOB not sue the actual lawyers for the Lippo who issued a letter stating that the rest of the down payment had been received from the buyers? They can easily claim the lawyers lied to them. they cannot blame Lippo since lawyers employed by Lippo are not supposed to break the law on behalf of their clients.
5) It seems to me that its UOB's loan practices that are in question here. Did they not do a credit check, income and asset verifications, liabilities verification, TDSR calculations etc on these borrowers. It seems from the get go that these are not actual qualified buyers. But the onus is on the bank to figure this out. they declined people for mortgages all the time. They claim the buyers moved the downpayment money around so that each of them appeared to have sufficient deposit funds. But the onus on the bank is to request for 3 months of statements showing the money has been there for a while, or some other confirmation of where the funds come from. Lippo is correct in saying the mortgages and applications are strictly between the buyer and the bank, and they are right. Lippos lawyers will have a field day in court on this point alone.
What this means for all singaporeans whether local or foreign buyers is that the banks will tighten up their lending criteria. expect to see more onerous requirements for down payment confirmation, income verification, etc. In other words, it will be harder to get approved for private and higher end properties. If I were UOB, I would have just sold the units, and see what losses I suffered. Then sue the valuators, agents and buyers for the rest. However, Old man Wee and Old goat Lee Con You were very close buddies and golfing partners. Its possible that UOB expects the kangaroo courts to be rigged in its favour and received the go ahead from the power brokers to go after Lippo for the money. But still, I have not seen anything like this before. If actual fraud was committed, the police should be involved under commercial crimes and not become a civil court case that it is. Its possible the police investigated and found no grounds for a fraudulent prosecution.
