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Go along with the law? People who boycott mortgages get their properties confiscated by court eventually, and if any developments suffer issues government shou
by thriftwy 4y ago
Go along with the law?
People who boycott mortgages get their properties confiscated by court eventually, and if any developments suffer issues government should aid developers to ensure any paid customers get their property done.
- pessimizer 4y agoBut the boycotts are rational, because even the Chinese government thinks that the developers are overextended and may fail. They seem to be taking the most careful, benign option.
- thriftwy 4y agoChinese government should offer hard guarantees that all properties would eventually be completed, and at the same time that bad lenders may lose theirs. In Russia it's quite common occurrence that a very late project by a failed developer is eventually completed and the lenders get their apartments at last, after regional government intervention. In China it should be even simpler as the money never leave the escrow account. I wonder if there are un-escrow provisions if developer fails to deliver - in theory there should be no risk at all.
- lazide 4y agoWhy should they?
- thriftwy 4y agoI assume they want to have their economy, their real estate market, their developers and their banks mostly intact. But if they don't, forget what I've said.
- lazide 4y agoThe Chinese gov't can have that (at some level) without doing a giant rescue of everyone. If they want it to keep growing, sure they can do that, but the problem is they let it keep growing too much already.
- thriftwy 4y agoWell, if Chinese government has set up this bubble it is its duty to figure out how to pop it safely.
- lazide 4y agoAh, well i’m not sure their idea of ‘resolved’ meets any definitely of safety for the parties involved. They also don’t seem like the type that has the same definition of duty you’re likely implying. It’ll be interesting to see what happens, that is for sure!
- naveen99 4y agoboycotting a mortgage on a secured loan with 40% down is a political statement, not economically rational. The numbers are probably minuscule and the “boycott erase story” is itself mostly political.
- dahdum 4y agoI think the main point was that these are not secured loans. The developers operate in a ponzi like fashion, so there is nothing to foreclose on and no cash to claw back by the bank. I’m not sure how big of a problem that really is, but I could see it toppling a number of local banks.
- naveen99 4y agoTypically banks release money as construction incurs expenses, not all at once before construction begins. Atleast in the usa.
- chii 4y agoi think this point is not clear to many people! Construction companies in the USA (and the west typically) don't get paid up front 100% for the full amount, but is often paid "pro-rata" based on milestones or % completed. The funds a released by an escrow (which the purchaser and the bank, if it's a mortgage, would choose). The situation described in china is not like that above - the developers got paid 100% of the cost of the build upfront, by the purchaser. The bank loans the funds to the purchaser for this purpose (at 60% LVR for example). The bank has the title as collateral - but since the property isn't built, there's no property to sell if it goes bad. It's just the land title. The reason the banks do this is because it's a politically driven mandate - the CCP in the past, wanted more construction, and this is one way to drive risk away from developers (so there'd be more developers!).
- naveen99 4y agoI think you can buy land at 50% LTV in the us also.