Title：Interpretations for the Regulations Governing the Extension of Housing loans in Specific Areas and land loans by Financial Institutions Inactive Regulations
Date：January 20, 2011
1. With respect to a house where its title deed contains the wording "zhu (residential)" as mentioned in Subparagraph 2, Article 2 of the "Regulations Governing the Extension of Housing Loans in Specific Areas and Land Loans by Financial Institutions" (referred to as the Regulations hereunder) under the definition of "housing loan", if the registered use of the house purchased as shown on its title deed is "residential-commercial" or "residential-office", the house is indeed to be used for business and the business has been established and registered, and the lender has conducted site visit to verify the veracity of the stated purpose, such loan is not considered as a "housing loan" under the Regulations.
2. If a financial institution increases the amount of housing loan by asking the borrower to provide additional collateral, such practice shall fall under the situation of "increase the loan amount for other reasons or purposes" as mentioned in Subparagraph 3, Article 3 of the Regulations.
3. The "concrete construction plan for the land" specified in Subparagraph 1, Paragraph 1, Article 5 of the Regulations should contain a construction plan for the land, related financial plan, repayment plan and other particulars to be considered in extending a loan. Financial institutions should make sure the construction plan is specific and comprehensive, and should keep relevant documents for future reference.
4. The amount of "10%" of the loan mentioned in the latter section of Subparagraph 2, Paragraph 1, Article 5 of the Regulations is calculated based on the acquisition cost or the appraised value of land as determined by the financial institution, whichever is lower. Financial institutions should conduct site inspection before and after the disbursement of loan, follow up on whether the borrower is continuing the construction according to the proposed "construction plan", and keep the inspection records for future reference.
5. With respect to the appraised value of land for land loan provided in Article 6 of the Regulations, financial institutions should extend the loan in accordance with their internal lending rules, and in addition, observe the following rules:
(1)If the borrower acquired the land through inheritance, gift or any reason other than transaction, the financial institution may determine the loan amount based on the appraised value of land.
(2)If the borrower acquired the land through transaction with title transferred before December 31, 2009 but could not provide support documents to substantiate the transaction price, the financial institution may determine the loan amount based on the appraised value of land.
(3)Except for situations described above, the borrower who applys for land loan with land acquired through transaction must provide documents sufficient to show the transaction cost of the land.
6. When an existing land loan is renewed after December 31, 2010, the financial institution may not increase the loan balance and shall comply with the Regulations. But for an existing land loan that is due between December 31, 2010 and December 31, 2011 and the loan-to-value ratio is higher than that stipulated in the Regulations, the loan-to-value ratio upon renewal may be granted an adjustment period up to one year.
7. For the purpose of the Regulations, a financial institution should carry out the following:
(1)When the applicant (borrower) of a housing loan is not the owner of the house, the financial institution should heed whether the home owner is applying for a housing loan in another person’s name in an attempt to circumvent those restrictions under the Regulations. If the financial institution finds that such is the case, the loan application shall still be subject to the Regulations.
(2)If an individual already has a housing loan under his/her name and uses another house as collateral to apply for a new loan while claiming that such application does not fall under the Regulations, the financial institution should, at the time of granting the loan, ask the borrower to provide a statement undertaking that he or she will use the loan in accordance with the stated loan purpose and understand the consequence of violating the provision (e.g. paying penalty interest, loan recall or other adverse consequences). The financial institution should also check after extending the loan to make sure the borrower has used the loan as undertaken.