Beijing says 'no' to sleazy agents' mortgage commissions
- Source: Global Times
- [01:07 February 09 2010]
- Comments
Photo: CFP
By Andrew Tait
With the effects of the credit crunch still rattling US President Obama's ratings and economists in China warning of an overheating economy driven, in part, by the rapidly inflating housing bubble, steps are being taken to try to cool the market.
In the latest move, simply called "Directive 138," the China Banking Association (CBA) has issued a list of steps that all banks in China are required to follow in an attempt to curb the "unhealthy development of the personal loan business," according to the directive's list. The move is set to curtail unethical relationships between real estate agents and banks offering home loans.
In the document, self-described as a "good guide to standard real estate mortgage loan business and self-regulation… in order to maintain market order and consensus," the CBA lists five points which need be adhered to.
"Recently, with (loans) growing rapidly in some areas, financial institutions compete to secure home loans and pay real estate agents high commissions." Such commissions, of course, attract unscrupulous banks and agents who push loans towards buyers who cannot afford them for short-term personal profit. It was the defaulting on such "toxic" loans by so many homeowners in the US that set off the banking crisis in 2008.
Talking to a representative of the CBA, who refused to give a name, Lifestyle was told, "These are not government orders, but what the CBA wants banks to start doing in order to strengthen the current commercial real estate situation."
Reacting to comments, the staff member said, "Simply pay attention to what has already been said. That's all we can say."
Commission payments to real estate agents, the main focus of Directive 138, is the practice by which banks offer "bonuses" to real estate agents who bring in high value mortgage requests by home buyers.
According to research by the CBA, real estate agents sometimes neglect to provide banks with correct infor-mation on customers who wish to buy homes, and even go as far as to provide false documentation to their customers to help secure the loans.
The report suggests that banks themselves are often lax or fail to complete the required checks into potential customers' credit histories and employment status.
Lifestyle's request for further information from banks and real estate agencies in Beijing were un-successful. Both the Bank of China and 21st Century Real Estate said that no comment could be made on the issue, while other companies did not return our calls.
According to China Net News, failure to meet mortgage repayments is an increasing phenomenon, resulting in rising instances of bank-initiated legal action, and nearly one million yuan in economic losses.
Court sources show that in Haidian district last year, late mortgage repayments took 400 people to court, while Changping and Shijingshan saw a fourfold increase in similar cases compared to the year before.
On a Chinese Internet forum about banks and loan issues, one user commented, "A crisis is coming, sooner or later. When you have less money and less time for entertainment, the quality of your life just gets lower and lower. Mental stress increases and sooner or later, you will simply collapse." Economists and officials are praying the same doesn't happen to the housing market.
