From Caixin:
Shanghai has further tightened home-purchasing rules by demanding lenders scrutinize the sources of funds used for down payments — a move that will likely curb the surge of divorce filings among couples seeking to purchase second homes.
A document laid out Thursday by the local market interest-rate-pricing self-discipline mechanism, a group of banks under the guidance of the central bank, highlighted the need to inspect the authenticity of a resident’s proof of income in relation to home purchases, requiring commercial lenders to step up efforts to check the income of both the borrower and their spouse.
The document also placed emphasis on the principal source of mortgage repayments, strictly prohibiting adult children, parents or parents-in-law, former spouses or any other third party from jointly fulfilling repayment obligations, in a bid to circumvent housing-loan policies.
Despite seeing a number of home-purchasing restrictions being introduced, including a mandatory down payment of at least 50% of the property price for second-time homebuyers, Shanghai residents have still found ways to get around policy curbs. Filing for divorce and transferring a house to a spouse in return for a 30% down payment and zero property tax — benefits of first-time homebuyers — is a common way around recent restrictions.
Caixin has learned that since mid-October, mortgage managers of several banks in Shanghai, including China Mingsheng Bank and Industrial Bank, have told property agents that they will not grant loans to people who divorced within the past year.
This won’t stop until the eastern city bubble is popped.
