A Study On Undermined Hypothec Of Banks In Real Estate Expropriation

Loan is the core business of commercial banks,but it also presents relatively large legal risks.Improved mortgage security system,especially hypothec fulfillment,is seen as one of the most effective measures to guarantee the creditors’ rights.Use rights of houses and land have traditionally been the main collateral for loans that banks are after.The ultimate purpose of banks creating collateral rights is not for possession of the property,but rather to protect the realization of creditor claims when a debtor fails to repay the loan normally,by disposing of the collateral.Therefore,the stability of the collateral is an important reference condition for the safety of bank credit assets.Through an empirical examination of relevant cases published on China Judgements Online,it can be found that the number of dispute cases occurring after the expropriation of collateral for loan security is high in China.Even though relevant banks have completed legal and compliant mortgage registration procedures,the credit risks and hidden dangers caused by the expropriation of collateral have led to the serious impact on the banks’ mortgage rights and claims.At present,the relevant legislation on the expropriation and compensation of houses on state-owned land in China focuses on the protection of the rights and interests of the expropriated,rather than on the rights and interests of the mortgagee.Banks,as mortgagees,don’t have their right to information,participation and subrogation duly protected,and disputes between mortgages and leases occur frequently.Courts in various places easily making different judgments in the trials of the above-mentioned dispute cases.This not only makes it more difficult for banks to realize their mortgage rights,but also greatly undermines the stability of the law and even induces systemic financial risks.In order to safeguard the rights and interests of banks as mortgagees and to minimize the occurrence of credit risks,it is necessary to improve the legal mechanism of credit risk prevention and rights remedy to ensure that the state-owned assets are not lost.Specifically,to ensure the safety of banks’ claims when loan collateral is levied,not only should banks themselves take corresponding risk prevention and control measures,but also involve the improvement of system design and addressing specific regulation issues.In terms of the system,it is necessary to improve the government expropriation information disclosure and clarify the notification obligations of the expropriation agency,and the pre-registration agency should standardize the mortgage registration procedure.In designing specific regulations,a set of reasonable and feasible procedures for the realization of subrogation rights of security interests should be established,and coordination path of the conflict between mortgage and lease rights of the bank should be made available,while in practice,banks must be required to strengthen their own pre-loan investigation,loan maintenance and review,as well as post-loan supervision,and other measures,with timely access to up-to-date information on collateral.