A local court has ruled that two men were both responsible for repaying the mortgage that one obtained on behalf of the other in a scheme to get a cut-rate bank loan.
The Shanghai Hongkou District People's Court determined that one of the defendants in a civil lawsuit, Chai Honggen, breached his loan contract with the bank as his friend Feng Jie was the actual borrower, according to a news release the court issued Friday.
The plaintiff in the case, a bank whose name the court did not release, filed the lawsuit against Chai after his mortgage became six months overdue, according to the news release. During a court investigation, Chai denied that owed money to the bank. He explained that he applied for the mortgage at the request of Feng, an unemployed local resident who had lost a lot of money in a pyramid scheme.
According to the court, the two men had a deal in which Chai applied for a 100,000 yuan ($15,722) mortgage so he could "buy" Feng's apartment. However, Feng, after receiving the money, would repay the mortgage through Chai's bank account. The property would remain in Chai's name until the loan was repaid.
Chai was only a middleman who served to help his friend obtain and repay the loan. He told the court that he didn't live in the apartment for even a day.
The judge in the case pointed out that these kinds of deals were common before 2010, when mortgage rates were 30 percent lower than other lending rates.
At some point, Feng's wife found out about the deal and pushed him to sign a contract with Chai that stipulated he return the property after the mortgage was repaid.
The couple later sued Chai to another court after they found out that he had taken out a second mortgage on the apartment with another bank. Through mediation, Feng claimed his property rights and pledged to repay the loan.
The district court added Feng's name as a defendant in the bank's lawsuit, ordering that both men repay the mortgages with interest.