"Personal Housing Loan Management Measures (Trial)" Issued: Monthly Mortgage Payment to Income Ratio Controlled Below 50%

On August 28, the National Financial Supervision Administration and the People's Bank of China issued a notice regarding the implementation of the "Interim Measures for the Management of Personal Housing Loans." The notice states that lenders should focus on assessing borrowers' repayment ability, reasonably setting the maximum ratio of monthly housing loan payments to income and the maximum ratio of total monthly debt payments to income based on local real estate market conditions, borrowers' incomes, and debt situations. The ratio of monthly housing loan payments to income should be controlled below 50% (including 50%), and the ratio of total monthly debt payments to income should be controlled below 60% (including 60%). For individual loan applications, the income referred to in the above calculation formulas means the borrower's disposable income. If the lender includes the borrower's spouse's income, it should be verified beforehand, and the spouse's debts must be included as well. For joint loan applications, the income refers to the disposable income of both the primary applicant and the co-applicant, and the debts of the co-applicant should be included. The notice also states that the interest rates for personal housing loans should adhere to market principles and be determined through negotiation between the borrowing and lending parties while complying with relevant national regulations and industry self-regulatory requirements. The pricing benchmarks and pricing methods should comply with applicable regulations. Lenders should establish a differentiated risk pricing management mechanism for clients, reasonably determining specific interest rates based on local real estate market conditions, borrowers' credit status, and repayment ability. Lenders should reasonably determine the loan duration, which must not exceed 40 years. The full text is as follows: Interim Measures for the Management of Personal Housing Loans Chapter One General Principles Article 1 To standardize personal housing loan operations, strengthen prudent management of personal housing loan businesses, protect the legitimate rights and interests of both lending and borrowing parties, promote the healthy development of personal housing loan businesses, and accelerate the construction of a new model for real estate development, these measures are formulated in accordance with the "Civil Code of the People's Republic of China," "Banking Supervision and Administration Law of the People's Republic of China," "People's Bank of China Law," "Commercial Banking Law of the People's Republic of China," and other relevant laws, regulations, and rules, as well as the "Opinions on Reforming and Improving Real Estate Credit Management to Promote the Acceleration of the Construction of a New Model for Real Estate Development." Article 2 The term "lender" in these measures refers to financial institutions established lawfully in the People's Republic of China that absorb public deposits, including commercial banks, rural cooperative banks, and rural credit cooperatives. Article 3 The term "personal housing loan" in these measures refers to loans granted by lenders to qualified borrowers for purchasing housing. Article 4 When engaging in personal housing loan businesses, lenders should adhere to the principles of legality, compliance, prudent operation, equality, voluntariness, fairness, and good faith. Article 5 Lenders should establish effective full-process management mechanisms for personal housing loans and develop loan management systems and operational procedures. Article 6 The National Financial Supervision Administration and its dispatched agencies shall supervise and manage personal housing loan businesses in accordance with the law. Chapter Two Loan Applicants and Conditions Article 7 Borrowers must meet the following conditions: (1) Be citizens of the People's Republic of China with full civil capacity or foreign individuals who meet national regulations; (2) Hold valid and lawful identification; (3) Have a good credit status; (4) Possess the willingness and ability to repay; (5) Have the ability to pay the down payment for the purchased property; (6) Provide effective guarantees recognized by the lender; (7) Meet other conditions specified by the lender. Article 8 The down payment ratio for personal housing loans must not be lower than the minimum down payment ratio determined by the People's Bank of China and the National Financial Supervision Administration. Lenders can reasonably determine the specific down payment ratio based on local real estate market conditions, housing project conditions, borrowers' credit status, and repayment ability. Article 9 Lenders must verify the authenticity of borrowers' down payments. Any deposits already paid by the borrower can be counted towards the down payment. If the lender discovers that the borrower has used loan funds to pay the down payment, they should cease disbursing the personal housing loan. Article 10 Lenders should focus on assessing borrowers' repayment ability and, based on local real estate market conditions, borrowers' income, and debt situation, reasonably set the maximum ratio of monthly housing loan payments to income and total monthly debt payments to income, with the monthly housing loan payment-to-income ratio controlled at below 50% (including 50%) and the total debt payment-to-income ratio controlled at below 60% (including 60%). The calculation formula is as follows: For individual loan applications, the income referred to in the calculation formula is the borrower's disposable income. If the lender includes the borrower's spouse's income, it should first be verified, and the spouse's debts must be included. For joint loan applications, the income referred to in the calculation formula is the disposable income of both the primary applicant and the co-applicant, with the co-applicant's debts also accounted for. Article 11 Lenders must require borrowers to use the purchased property as collateral for the loan. For purchasing existing homes or re-transactions, the mortgage registration should be completed prior to the loan disbursement. For purchasing pre-sold commercial homes, a pre-registration of the mortgage should be completed before loan disbursement, and timely registration of the mortgage should be conducted once relevant conditions are met. If mortgage registration or pre-registration cannot be completed before the loan is disbursed, alternative guarantees through other property collateral, pledges, or the introduction of guarantors should be used to provide temporary guarantees. Article 12 The interest rates for personal housing loans should adhere to market principles and be negotiated between the borrowing and lending parties while complying with national regulations and industry self-regulatory requirements. Pricing benchmarks and pricing methods should be carried out according to relevant regulations. Lenders should establish a differentiated risk pricing management mechanism for clients, reasonably determining specific interest rates based on local real estate market conditions, borrowers' credit status, and repayment ability. Article 13 Lenders should reasonably determine the loan term, which must not exceed 40 years. Article 14 Borrowers may negotiate the loan repayment plan with lenders. For loans with a term of one year or less (including one year), they can either repay the principal and interest in a lump sum at maturity or repay the principal and interest monthly; for loans with a term of more than one year, monthly principal and interest repayments are required. Chapter Three Loan Approval and Disbursement Article 15 Lenders must require borrowers to submit written applications for personal housing loans and provide evidence proving that they meet the loan conditions, including the following materials: (1) Identification materials of the borrower; (2) Materials proving the borrower's repayment ability; (3) A real estate transaction contract, agreement, or other approval documents that have been registered and recorded online; (4) List of collateral, proof of ownership, proof of value, and documents confirming consent to mortgage from the rights holder; written consent from the guarantor to provide a guarantee, along with proof of the guarantor's credit; (5) Any other documents or materials required by the lender. Article 16 After receiving the borrower's loan application, the lender must fulfill its due diligence responsibilities and conduct investigations through a combination of on-site inspections and off-site indirect inquiries. Various methods such as on-site verification, telephone inquiries, information consultations, and other digital electronic investigations should be employed to verify the authenticity, accuracy, and completeness of the loan application and related information, forming an evaluation opinion. Article 17 Lenders must establish and implement a loan interview system. Before making a final loan approval, the loan processing personnel must meet directly with the borrower at least once to understand the borrower's basic situation and the purpose of their loan. Article 18 Lenders must sign a written loan contract with borrowers while also signing a guarantee contract or terms. Lenders should require borrowers to sign the loan contract and other relevant documents in person. Article 19 Lenders must adhere to objective and prudent principles when assessing or valuing the collateral provided by borrowers, reasonably determining the value of such collateral. The value of the collateral shall be equivalent to the lower of the transaction price or the assessed value in that specific real estate transaction. Article 20 If the borrower is purchasing a property with an outstanding loan, the lender may provide loan services for transferring ownership with encumbrances, ensuring effective coordination of registration, loan issuance, repayment, and final settlement. Article 21 Matters not covered in this chapter regarding loan review and risk evaluation, approval and disbursement, contract signing, and mortgage registration, shall be carried out in accordance with Articles 19 to 21 and Articles 23 to 25, and Articles 27 to 31 of the "Personal Loan Management Measures." Article 22 For borrowers purchasing existing homes, lenders should disburse loans after sales registration, and loan funds should be paid to the developer's account opened at the main bank through a trustee payment method. For borrowers purchasing pre-sold commercial housing, lenders should disburse loans after completion registration, and loan funds should be paid into the pre-sale fund supervision account through a trustee payment method. For borrowers purchasing re-transacted housing, lenders should disburse loans after verifying guarantees (including necessary temporary guarantees), and the loan funds should be paid to the account specified in the loan agreement through a trustee payment method. If the National Financial Supervision Administration has special provisions regarding real estate loans for ownership transfers with encumbrances, those provisions shall apply. Article 23 Lenders must strengthen the management, monitoring, and evaluation of partner institutions involved in personal housing loans, clearly establish the qualifications for cooperation, create a list management system and a mechanism for preventing conflicts of interest, and regularly review and update the list, taking timely action against any violations or default behaviors by partner institutions, such as terminating cooperation or recovering losses. Lenders are prohibited from collaborating with illegal loan intermediaries. When personal housing loans involve partner institutions, the core risk control matters involved in credit approvals, contract signing, borrowers genuine intent, income levels, debt situations, and qualifications of external evaluation agencies must be conducted independently and effectively by the lender. If the lender delegates specific tasks to partner institutions, they must strengthen cost management, ensure that the borrower's legitimate rights and interests are not harmed, and ensure that related risks are manageable. The term "partner institutions" mentioned in the previous paragraph includes, but is not limited to, real estate developers, real estate transaction agencies, evaluation agencies, guarantee companies, etc. Chapter Four Post-Loan Services and Management Article 24 Lenders must track the changes in the borrower's credit and guarantee situations and conduct monitoring and analysis to ensure the safety of loan assets. Article 25 During the loan term, lenders must reassess the value of collateral at least annually and continuously monitor the status and ownership of the collateral, ensuring that risks are manageable. For personal housing loans already disbursed, lenders shall not increase purchase loans based on the net value of the mortgaged property after reassessment until the borrower has fully repaid the loan. Article 26 If a borrower applies for an extension of the loan, the lender must prudently assess the reasons for the extension and the feasibility of subsequent repayment arrangements. If the extension is granted, the lender must reasonably determine the extension period based on the sources of repayment and strengthen follow-up management of the loan, categorizing risk according to the actual risk situation. The cumulative extension period shall not exceed half of the original loan term, and the total of the original loan term and extension period must not exceed 40 years. Article 27 During the loan term, changes to loan contract elements must be agreed upon by both the lender and borrower and should be documented in a legally binding amendment agreement. Article 28 In the event of a dispute regarding the loan contract, both the lender and borrower should consult and resolve the matter promptly. If negotiation fails, either party may apply for arbitration or initiate litigation in a people's court in accordance with the law. Article 29 Lenders must collect loan principal and interest as agreed in the loan contract. For loans not repaid in accordance with the loan contract, lenders should take actions such as recovery, agreement restructuring, debt transfer, or write-off. Article 30 After the borrower has repaid all the principal and interest of the loan in accordance with the contract, the loan contract shall be terminated, and the lender shall timely release the guarantee as stipulated in the contract. If a real estate property is used as collateral, the lender must go to the original registration authority to carry out the procedure for canceling the mortgage. Article 31 If the borrower has any of the following circumstances, the lender may pursue default liability or corresponding legal responsibility against the borrower: (1) Failing to repay the loan principal and interest on time; (2) Providing false documents or materials that have caused or may cause loan losses; (3) Without the lender's consent, demolishing, selling, transferring, or gifting properties or rights subject to the mortgage or pledge; (4) Unilaterally changing the purpose of the loan or misappropriating the loan; (5) Refusing or obstructing the lender's supervision and inspection of the use of the loan; (6) Entering into contracts or agreements with other individuals, legal entities, or economic organizations that harm the lender's interests; (7) The guarantor violating the guarantee contract or losing the ability to assume joint liability, leading to a decrease in the value of the collateral due to the behavior of the mortgager, while the borrower has not timely restored the value of the collateral or provided new guarantees or new collateral (pledge); (8) Other relevant circumstances as stipulated by the "Civil Code of the People's Republic of China" and other laws and regulations. Article 32 Lenders must implement the responsibilities for personal housing loan management to specific departments and positions, establishing assessment and accountability mechanisms for each position. Chapter Five Supervisory Management Article 33 The National Financial Supervision Administration and its dispatched agencies may issue relevant prudential regulatory requirements for personal housing loan management based on the lender's operational management status, risk levels, and the situation of personal housing loan business development, as well as the operating conditions of the real estate market. Article 34 If lenders process personal housing loan business in violation of these measures, the National Financial Supervision Administration and its dispatched agencies should order them to correct the situation within a specified period and may take relevant regulatory actions or impose administrative penalties based on the "Banking Supervision and Administration Law of the People's Republic of China," "Commercial Banking Law of the People's Republic of China," and the "Personal Loan Management Measures," as the circumstances may require. Chapter Six Supplementary Provisions Article 35 Loans for the purchase of designated affordable housing shall be executed in accordance with these measures. Article 36 These measures shall be interpreted by the National Financial Supervision Administration and the People's Bank of China. Article 37 These measures shall take effect as of the date of issuance. The "Personal Housing Loan Management Measures" (Yin Fa [1998] No. 190) shall be simultaneously repealed. Other personal housing loan-related regulations inconsistent with these measures shall be governed by these measures. For projects that have obtained pre-sale permits before the implementation of these measures, the conditions for disbursing personal housing loans may follow the previous regulations. This text is compiled from the official website of the National Financial Supervision Administration; GMTEight editor: Huang Xiaodong.