What Is a Rural Development Mortgage?

Farm house mortgage loans refer to borrowers applying for loans from financial institutions with their legally owned farm houses in a way that does not transfer possession. When the borrower fails to perform his debts at maturity, the financial institution has the right to discount the farm house in accordance with the law, or to receive priority payment for the proceeds from auction or sale of the farm house.

Farm house mortgage

Farm house mortgage loan refers to the borrower's application of a legally-owned farm house as a guarantee to a financial institution in a way that does not transfer possession.

The mortgagor may apply for a mortgage on a farm house that has obtained a land use right certificate and a house ownership certificate according to law. The following farmhouses shall not apply for a mortgage:

(1) where the ownership is disputed;

(2) Failure to obtain a land use right certificate and a house ownership certificate;

(3) being sealed up, detained, supervised or restricted in other ways according to law;

(4) It has been listed in the scope of land acquisition and house demolition according to the law;

(5) Mortgage guarantee for others.

In addition, if a joint farmhouse is mortgaged, the mortgagor shall obtain the written consent of other co-owners in advance. In the case of a mortgage on a leased farm house, the mortgagor shall inform the mortgagee of the lease and inform the lessee of the lease, and the original lease contract shall continue to be valid. When setting up a mortgage on a farm house, the value of the mortgaged house can be determined through negotiation between the parties to the mortgage, or it can be evaluated by an intermediary agency with qualifications for appraising real estate.

After the rural house mortgage application is reviewed and approved by the financial institution, a mortgage loan contract is signed. The mortgage loan contract must be signed by both the lender and the lender, the mortgagor and the co-owner of the house. Mortgage loan contracts and related materials, if deemed necessary by financial institutions, may be notarized by a notary office. The term of the mortgage loan is reasonably determined by the financial institution based on the production cycle of the borrower or the use of funds. The mortgage rate of farm houses is determined by financial institutions based on their depreciation, price changes, and processing expenses during the mortgage period. The loan interest rate is implemented in accordance with the loan interest rate management measures prescribed by the People's Bank of China. Encourage financial institutions to offer concessions to the extent permitted by the policy. If the borrower repays the loan in advance, the interest shall be calculated according to the actual life of the loan ^[1]

(I) Rural houses generally have no title certificate

Article 17 of the Real Right Law stipulates that the real property ownership certificate is proof that the right holder enjoys the real right. In practice, rural houses generally only have collective land use right certificates and no house property right certificates. The collective land use right certificate is proof of the right to use the house site owned by the farm house, but it cannot prove that the farmer has ownership of the farm house.

(2) The legal effect of the mortgage on farm houses is restricted

House sites, self-reserved land, and self-reserved mountains belong to the collective ownership of farmers. Farmers only enjoy the right to use the house site, but do not have the right to punish. According to the second paragraph of Article 37 of the Guarantee Law, collective-owned land use rights, such as cultivated land, house sites, self-reserved land, and self-reserved mountains, shall not be mortgaged unless otherwise provided by law.

(3) There is no clear legal basis for registration of mortgages on farm houses

In addition to the signing of a mortgage contract, the establishment of the mortgage of a house requires the completion of mortgage registration. According to Article 87 of the "House Registration Measures", when applying for transfer registration of housing ownership of rural villagers, if the assignee is not a member of the rural collective economic organization where the house is located, unless otherwise provided by laws and regulations, the house registration authority To handle.

(IV) Difficulties in Realizing Rural House Mortgage

After the farm house is mortgaged, once the borrower is unable to fulfill the debt, the mortgagee needs to realize mortgage relief. However, there are two problems in the realization of farm house mortgage rights: one is the evaluation of farm house value; the other is how to realize the farm house mortgage right under the current legal framework.