Study On Legal Issues Concerning With Residential Mortgage Insurance

With the rapid development of Chinese market economy, the housing price andthe commodity price has been soaring up at all time high. The demand for funds hasfar exceeded era of the planned economy. In particular, how to raise large sum ofmoney to buy house has become ordinary people’s imminent problems waiting to besolved. The introduction of the housing mortgage loans has become the only way formany people to realize their “house dreams”. According to conventional personalhousing mortgage loans mechanism, when applying to the lender for a mortgage loan,the borrower must first be required to pay a certain percentage of down payment, andwith the purchased house as collateral to obtain the loans. After getting the loan, theborrower shall agree to pay the principal and the interest by amortization. Otherwise,according to the law, the lender has the right to auction or sell off the house as theprioritized primary recipient for repayment. As a result, many people could avoid thebleak situation of "working hard young for decades before they can afford a house”.However, research shows that if the buyer places their down payment less than acertain proportion (20%in America,30%in Taiwan), the probability of loan defaultswill increase. For the low-and middle-income earners and young people with lesssaving, even if they can get the loan for the house, it is still difficult for them to paythe one-time down payment of such large amount of money, not to mention themortgage loans occupies a dominant proportion of all the bank loans. So, either the borrowers or the banks need to find a layer of reliable protection. The existence ofmortgage insurance reduces the banks’ concerns in this regard. When the default lossoccurs, because insurers bear some or all of the loss, it effectively reduces the risk ofbanks, which also makes the banks willing to accept a less ratio of the down payment.In the U.S., the mortgage insurance makes home buyers able to use the5%or3%down payment to buy a house, a substantial increase in the purchasing ability of thepeople. Currently, In Chinese real estate market, there exist a large amount of unsoldhouses built by developers who go bankrupt due to their inability to repay the hugeloans to the banks; on the other hand, the ordinary people works hard for decades, butstill unable to afford to buy a residing house. In such a situation, does China need todevelop the housing mortgage insurance? How to define the identity of the parties inthe relationship in mortgage insurance? How to develop the mortgage insurancebecome the problems the related sectors and scholars must think about. Thisarticle gives a relatively detailed analysis and discussions on the related contents ofmortgage insurance:The first part introduces the definition of the mortgage system and itsdevelopment process; the second part presents the history of the development of themortgage insurance system, and the regional development models of North America,Western Europe and Australia with the focus on the United States. The third partdescribes the housing mortgage insurance development of our country, its meaning,its significance and its classifications; involved in the fourth part are the complicatedlegal relationships in the Chinese housing mortgage insurance, especially the detailedanalysis of the legal status of the lender (bank) in the mortgage insurance contract; thefifth and sixth part analyzes and discusses the problems of mortgage loan insurancesystem in China and their corresponding solutions.