Chinese Regulator Allows Transferring Ownership of Property With a Mortgage

BEIJING, April 3 (TMTPOST) – In an effort to enhance the efficiency and convenience of existing home transactions and reduce transaction costs, the Ministry of Natural Resources and the China Banking and Insurance Regulatory Commission have jointly released regulations governing real estate transfers with mortgages.

The two departments announced on Friday the Notice on the Collaboration of Real Estate “Transfer with Mortgage” Services for the Convenience of People and Enterprises (the Notice), which allows for the completion of transfer, re-mortgage, and issuance of new loans without paying off existing mortgages in advance or revoking mortgage registrations in advance when registering the transfer of mortgaged real estate. This process, known as “transfer with mortgage,” is applicable when there are outstanding mortgage loans in banking financial institutions, and the loans are not currently overdue.

The notice instructs all regions to adopt local models and supporting measures for “transfer with mortgage,” and encourages them to explore the process to ensure its success. The implementation will start in provincial capital cities and cities with separate plans, before expanding to other cities and counties. Similarly, banking financial institutions will be encouraged to take the lead, with expansion to cross-institutional transactions. Residential real estate will be the initial focus, but the service will gradually expand to industrial, commercial, and other types of real estate. The goal is to achieve full coverage in terms of geographical scope, financial institutions, and types of real estate, and to conduct “transfer with mortgage” services on a regular basis.

Li Yujia, the chief researcher at the Guangdong Housing Policy Research Center, said that “transfer with mortgage” involved real estate management department transfer registration and mortgage registration, which might be done without the buyer’s loans being secured, causing risks and damage to both the buyer and seller’s interests. Banks are also concerned about the potential loss of loan business and the inability to protect their claims when handling this kind of transfer. Factors such as changes in home prices, variations in risk control among banks, and the inability of buyers to obtain loans because of personal credit issues may lead to non-performing loans if the implementation of “transfer with mortgage” is rushed. As a result, its implementation has not been fast since 2022.

The Notice summarizes three “transfer with mortgage” models that have been developed through local practice: a combination of old and new mortgages, segmentation of old and new mortgages, and an alteration of mortgages. Li explained that these models are feasible and designed to protect the rights of all parties by meeting various needs. By promoting “transfer with mortgage,” the regulator aims to increase second-hand house transactions and stimulate the real estate market. However, some market participants think that the new regulation is merely “icing on the cake” and does not address the main issue of boosting home buyers’ purchase demand. Consequently, it may not stimulate the market as expected.

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