Recently, the State Bank issued Circular 22/2023/TT-NHNN amending and supplementing Circular 41/2016/TT-NHNN on the capital adequacy ratio of commercial banks and branches of foreign banks.
This Circular takes effect from July 1, 2024, with several new contents. There have been concerns that the new regulations might cause difficulties for homebuyers, specifically that commercial banks and branches of foreign banks will not be allowed to provide individuals with credit to purchase “commercial houses that have not been completed for delivery (i.e., commercial houses to be formed in the future)” secured by the houses themselves. Therefore, individuals who want to get credit to buy “commercial houses to be formed in the future” will have to provide other forms of collateral or secure the loan with other assets.
However, the State Bank recently clarified that the new regulations do not restrict the rights of individuals to buy houses to be formed in the future and are not in conflict with existing regulations (Civil Code, Housing Law, Real Estate Business Law, Investment Law 2020, Credit Institution Law 2024).
Specifically, Clause 10 Article 2 of Circular 41/2016/TT-NHNN states: “The collateral loan is a loan for individuals and legal entities to buy real estate, implement real estate projects, and secured by the real estate and real estate projects formed from the loan according to the regulations of the law on secured transactions.”
Circular 22/2023/TT-NHNN does not amend or supplement this content. Organizations and individuals who wish to purchase houses and secure them with the houses to be formed in the future must apply a risk factor ranging from 30% to 120% depending on the collateral ratio (LTV) calculated by the outstanding loan balance to the value of the collaterals. In case there is no information on the LTV ratio, the risk factor is 150%.
Furthermore, Clause 11 Article 2 of Circular 41/2016/TT-NHNN stipulates: “The mortgage loan is a loan secured by real estate for individuals to buy houses that meet the following conditions: a) The source of repayment is not the rental income from the loan; b) The house has been completed according to the house sale and purchase contract; c) The bank or foreign bank branch has full legal rights to handle the mortgaged house when the customer fails to repay the debt according to the regulations of the law on secured transactions; d) This mortgaged house must be independently valued (by a third party or by a department independent of the credit approval department of the bank or foreign bank branch) according to the principle of prudence (the valuation should not be higher than the market value at the time of loan approval) according to the regulations of the bank or foreign bank branch.”
Article 1 of Circular 22/2023/TT-NHNN stipulates: “1. Amend and supplement Clause 11 Article 2 as follows: ’11. The mortgage loan is a loan secured by real estate for individuals to buy houses, including: a) The mortgage loan secured by real estate for individuals to buy houses that satisfy the following conditions: i) The source of repayment is not the rental income from the loan; ii) The house has been completed for delivery according to the house sale and purchase contract; iii) The bank or foreign bank branch has full legal rights to handle the mortgaged house when the customer fails to repay the debt according to the regulations of the law on secured transactions and the law on housing; iv) This mortgaged house must be independently valued (by a third party or by a department independent of the credit approval department of the bank or foreign bank branch) according to the principle of prudence (the value should not be higher than the market value at the time of loan approval) according to the regulations of the bank or foreign bank branch.’ b) The loan for social housing, purchasing houses under government support programs and projects determined according to the regulations of the law on housing that satisfy the conditions in points a(i), a(iii), a(iv) of this provision.”
The mortgage loan will include the mortgage loan to buy houses that satisfy the conditions stipulated, including the condition of completion for delivery and the loan to buy social housing, purchasing houses under government support programs and projects. The risk factor applied to mortgage loans will range from 20% to 100% depending on the LTV and DSC ratio. For loans to purchase social housing, purchasing houses under government support programs and projects, the condition of completion for delivery is not required, and the risk factor is lower ranging from 20% to 50% compared to other mortgage loans, in order to implement the government’s policy to encourage social housing.
