How Big Data algorithms can bolster Singapore's mortgage system

BIG Data algorithms give Singapore a unique opportunity to strengthen its home loans financing system.

Let me explain. In June 2013, the Monetary Authority of Singapore (MAS) introduced the total debt servicing ratio (TDSR) framework to strengthen the credit underwriting practices of financial institutions, encourage financial prudence among borrowers, and help cool the property market.

In 2012, an MAS review had concluded that the major banks had "adequate" policies for assessing the creditworthiness and ability of borrowers to repay. But the methodologies and practices of the banks varied to such a degree that MAS moved quickly to strengthen and standardise their credit underwriting practices by implementing the TDSR. All of this was done against a backdrop in which home loans, as a percentage of GDP, increased from 34 per cent in 2009 to 46 per cent in 2013.