House owners are still responsible for their mortgage loans after earthquake
After the 7.0 magnitude earthquake in Ya’an of Sichuan, many houses have been collapsed, resulting in a public hot topic: if houses have collapsed, will house owners repay their mortgage loans?
For this problem, there is a lawyer who indicates that, if the houses have been collapsed, the borrowers still are obliged to pay off the loan principals and interests that have not yet been paid back. The bank personages also give an explanation that the loan is the relationship between a bank and a borrower, and it amounts to that people who buy houses have borrowed some money from a bank and they give the money to people who sell houses for purchasing. The debt between the bank and the borrower is the money but not the house, for the house is just a mortgage. Therefore, even that the house is destroyed, the monthly payment shall not be stopped due to such a reason. If the disaster victims claim to refuse the repayment, even if the houses have collapsed, the bank may continue to demand the money, even require the auction for other assets of the borrower by law. Even if it is impossible to get back the money, the person who refuses repayment will also leave credit stains in the credit reference system.
Many people therefore scold that the government and banks are conscienceless, adding insult to injury, and strike the disaster victims again after the earthquake. In fact, the so-called double strikes do not exist. All the losses of the disaster victims in the earthquake are the houses, the money owed to the banks always exists, and it’s not the newly incurred debt due to the earthquake.
There is another misunderstanding that is what on earth a bank is? In fact, a bank is just an enterprise, and the money of the bank is nothing but the money of depositors and the profits of the bank. By making loans, the bank just plays the role of an agent to lend some people’s money to others. Supposing that a small bank goes into bankruptcy because it derates the house loans of the disaster victims, then how to compare the crying of those depositors who cannot even recover their capitals with the crying of the disaster victims?
If these two misunderstandings have been cleared up, then the problem is simple. However, though the truth is simple, yet the reality is complex, especially under the tradition of China’s big government, the relationship that should be clear has never been clear all the time.
A few days ago, Sichuan Bureau of China Insurance Regulatory Commission put forward the following requirements to the whole provincial insurance industry that even if the contracts were analyzed strictly, the insurance companies may not compensate, but from the angle of humanism, it “hoped” that insurance companies might make an exception in their favor and compensate. After Wenchuan earthquake in 2008, there were similar policies being released: the Central Bank and China Banking Regulatory Commission issued urgent notices after the earthquake and required all banks not to urge collections and payments, not to give interest penalties, and not to leave bad records for units and individuals of the disaster areas that failed to timely repay various loans. For the debts that were unable to be paid back should be regarded as bad debts and should be timely cancelled after verification. In short, banks were required to exempt partial or all house loans for the commercial residential buildings that had been destroyed by the earthquake.
Of course, some people will say that since the banks have lots of profits, it doesn’t matter for them to take a bit of money. Firstly we don’t say that such a saying will violate the rights of enterprises, even if the money should be taken out, why should the money only be provided by banks, but not by China National Petroleum Corporation, China Mobile and China Railway Engineering Corporation together? Other people will say that the banks belong to the country, and the country should aid disaster victims, so the banks should help the country to provide the money. Though in strict theory, many problems exist for such a saying, it fits the intuitive understanding of the public, and the country also indeed bears the obligations for aiding the disaster victims. However, even if the country should aid the disaster victims, yet the money should be expended through the government and finance in a channel that conforms to the procedures and the logic. Otherwise will unfairness and unreasonable phenomena will appear.
Firstly, it’s unfair for those who haven’t bought houses. If a person borrows the loan from a bank and consumes it for buying a car or investing a production line, when he encounters an earthquake, those who have bought houses get remission due to that there is strength in numbers, and remission can also be gained even for the increase in value gained from originally investment on house properties. But at the same time, those who haven’t carried out consumption or invested on production cannot gain the remission.
Secondly, it’s unfair for peasants. Either in Wenchuan or in Lushan, the situation of collapsed rural housing is quite general. These villagers mostly build their houses with their own savings, now the houses are collapsed, they have to bear all the losses, but people in cities who have bought houses only need to bear partial losses of the house value.
Thirdly, it’s unfair for depositors and shareholders of banks. The loans of banks that are derated under administrative instructions are actually the money of other depositors and the profits that are deserved for shareholders. It’s also unfair for a bank, just because it has the function of issuing loans, and it has to bear a heavier duty than those of other state-owned enterprises.
More importantly, in the cheers and applauses of everyone, the boundary between the government and an enterprise once again is blurred. When the hand of the government has taken out money from the pockets of state-owned enterprises, it’s passable to reluctantly say that it is taking out money from its own pockets, but how about when the hand then turns to other fields?
Originally published on The Beijing News | 2013-5-4
