Feb.06.2006

Japanese Bankers Association

JBA Initiates Measure for Housing Loans Provided to Units in Falsified Building Structures

On February 6, JBA moved at the government's behest to initiate measures for banks to take regarding housing loans provided to units in falsified building structures. The agreement is in line with the earlier decision JBA made on this issue at a Board of Directors Meeting on November 30, 2005, and is more specific.

As a concerted approach by all financial institutions is asked for on this issue, JBA together with other trade groups including the National Association of Shinkin Banks, National Central Society of Credit Cooperatives, National Association of Labour Banks and Norin-Chukin Bank concluded the same agreement on February 14.


The JBA Measure

The concerned condominiums are vulnerable to earthquakes due to being calculated with falsified data and the vulnerability has become a societal issue. Consequently, banks will cooperate as much as possible in demolishing and reconstructing those buildings that are so ordered by the relevant governmental office (here-in-after described as unsafe buildings), in consideration of the request from the government.

Specifically, banks will seriously consider rescheduling the payment of loans and coordinating the mortgage rights thereupon for housing loans (here-in-after described as existing loans) made to the owners of units (here-in-after described as specific residents) in the concerned unsafe buildings. The banks will take the circumstances of specific residents into consideration.

1. Easing the burden of existing loans

In addition to the agreement in November 2005, banks shall deal with requests from specific residents as follows, using the support measures of the Housing Loan Corporation for reference.

(1) Introduction of a grace period
Introducing a maximum grace period of three years for the repayment of principal and interests

(2) Postponement of repayment period
Postponing repayment period for a maximum of three years (within the insured period of the group life insurance)

(3) Interest rate during the grace period
Reducing the rate as much as possible

(4) Handling charge for rescheduling
Exempting handling charges for rescheduling the payment of loans in question

2. Elimination and establishment of mortgage

Banks shall handle the elimination of mortgages on unsafe buildings and the establishment of mortgages on new buildings following the demolishing of unsafe buildings (reconstructed condominiums) as follows.

(1) Cooperate to ensure smooth elimination of mortgages on unsafe buildings
Banks will accept the elimination of the concerned mortgages in cooperation with mortgage holders (guarantee companies, etc.) provided that specific residents agree to allot the entire sum of money being paid by local governments and others when demolishing and reconstructing unsafe buildings to the payment of existing loans in accordance with the governmental support scheme.

In the case of mortgages established by multiple mortgage holders, the paid money shall be allotted as described below.

When the demolishing and reconstructing of unsafe buildings are conducted by local governments, mortgage holders shall allow for mortgage rights to not be established on claim rights for partial ownership transfers of reconstructed condominiums.

(a) When multiple mortgage holders establish a mortgage with the same priority
The paid money shall be allotted pro rata to the payment of existing loans of each mortgage holder by the outstanding of each loan (when a husband and his wife borrow loans from the same bank for the same residence, the banks will decide on the formula after taking the specific resident's intent into consideration).

(b) When multiple mortgage holders establish mortgages with different orders
The paid money shall be allotted to the payment of existing loans of mortgage holders by order of priority. The mortgage holders may adjust the allotment between them as is necessary.

(2)Setting rules for establishing a mortgage on reconstructed condominiums in the event of existing loans
When there are multiple mortgage holders on existing loans, the order of mortgages shall be preserved, in principle, when establishing the new mortgage.

3. Flexible treatment of loans for purchasing reconstructed condominiums (new loans)

When receiving applications for new loans from specific residents, banks shall hold responsive talks with the applicant and consider loan limits and other matters flexibly in line with each applicant's circumstances, so that specific residents can acquire reconstructed condominiums smoothly.

In the event of the placement of mortgages on new loans, banks shall allow for the first priority mortgage to be established on the new loans.