Circular No. 18/2009/TT-NHNN detailing the lending to individuals purchasing or leasing low-income housing in urban areas by commercial banks.

CIRCULAR

Regulations on loans provided by commercial banks to low-income individuals purchasing or leasing low-cost housing in urban areas.

Pursuant to Resolution No. 18/NQ-CP dated April 20, 2009 of the Government on certain mechanisms and policies to promote the development of housing for students and trainees at educational institutions and low-income workers in concentrated industrial zones and low-income individuals in urban areas.

Pursuant to Decision No. 67/2009/QĐ-TTg dated April 24, 2009 of the Prime Minister promulgating certain mechanisms and policies to develop housing for low-income individuals in urban areas.

The State Bank of Vietnam stipulates in detail the regulations on loans provided by commercial banks to low-income individuals purchasing or leasing low-cost housing in urban areas as follows:

PART I

GENERAL PROVISIONS

Article 1. Application of laws

Commercial banks providing loans to individuals purchasing or leasing low-cost housing in urban areas shall comply with the provisions of the law on lending by credit organizations to customers, the provisions of this Circular, and other relevant legal provisions.

Article 2. Interpretation of Terms

In this Circular, the following terms shall be understood as follows:

1. Loans for purchasing or leasing low-cost housing in urban areas (hereinafter referred to as loans for purchasing or leasing low-cost housing): refers to the provision of loans by commercial banks to low-income individuals in urban areas who meet the conditions to purchase or lease low-cost housing under state policy.

2. Purchasing low-cost housing on installment: Refers to the situation where low-income individuals purchase low-cost housing and must pay the house price in multiple installments.

3. Leasing low-cost housing: Refers to the situation where low-income individuals lease low-cost housing according to policy and become full owners of the house after fully paying the lease price as stipulated in the lease agreement.

Article 3. Scope of Regulation and Applicability

1. Commercial banks established and operating under the Law on Credit Organizations may provide loans for one-time payment or installment payments for purchasing or leasing low-cost housing to individuals eligible to purchase or lease low-cost housing under state policy.

2. Borrowers from commercial banks to purchase or lease low-cost housing include civil servants, public officials, employees, armed forces personnel receiving salaries from the state budget, and low-income individuals in urban areas.

Article 4. Principles for Providing Loans for Purchasing or Leasing Low-Cost Housing

1. In addition to the provisions of this Circular, commercial banks providing loans for purchasing or leasing low-cost housing shall operate under commercial credit mechanisms.

2. Interest rate subsidies for individuals purchasing or leasing low-cost housing shall be implemented in accordance with guidelines issued by the Ministry of Finance.

3. Commercial banks and borrowers shall agree on the loan term based on the borrower's income and debt repayment capacity.

4. Loans provided to borrowers for purchasing or leasing low-cost housing must ensure that the correct target group and purpose are met, and guarantee the recovery of both principal and interest upon maturity.

Chapter II

SPECIFIC PROVISIONS

Article 5. Conditions for Borrowing to Purchase Low-Cost Housing in One Payment, Installment Payments, and Leasing Low-Cost Housing

Individuals specified in Clause 2 of Article 3 of this Circular borrowing to purchase or lease low-cost housing must satisfy the following conditions:

1. Possess civil legal capacity and civil conduct capacity.

2. Meet the conditions to purchase or lease low-cost housing as stipulated in Clause 2 of Article 6 of Decision No. 67/2009/QĐ-TTg dated April 24, 2009 of the Prime Minister and the regulations of the People's Committee of provinces and centrally-administered cities; and have been approved by the developer to sell or lease low-cost housing.

3. Have a minimum self-funded amount for purchasing or leasing low-cost housing as follows:

a) 30% of the value of low-cost housing agreed upon with the developer of the low-cost housing project if the borrower takes out a loan for a one-time purchase of low-cost housing;

b) 20% of the value of low-cost housing agreed upon with the developer of the low-cost housing project if the borrower takes out a loan for installment purchase of low-cost housing or leasing low-cost housing;

4. Have financial capability and a suitable debt repayment plan consistent with the bank's repayment commitment period.

Article 6. Documents, procedures, and processes for reviewing and approving loans for low-income housing purchase and lease-purchase customers

Based on the provisions of this Circular and general regulations on lending by credit institutions to customers, commercial banks shall provide specific guidance on documents, procedures, and processes for reviewing and approving loans for low-income housing purchase and lease-purchase customers to be uniformly implemented within the commercial banking system.

Article 7. Loan amount and loan term for low-income housing purchase and lease-purchase

1. Loan for purchasing low-income housing to be paid in full:

a) The loan amount shall be agreed upon between the commercial bank and the customer but shall not exceed 70% of the value of the low-income housing as agreed with the project developer.

b) The loan term shall be agreed upon between the commercial bank and the customer, but shall be at least five years. In cases where the customer arranges finances to repay the loan ahead of schedule to the commercial bank, the commercial bank shall not charge the customer an early repayment fee.

2. Loan for purchasing low-income housing on installment basis, loan for lease-purchase of low-income housing:

a) The commercial bank and the customer shall agree on the loan limit but it shall not exceed 80% of the value of the low-income housing purchased on installment or leased according to the agreement with the project developer. The commercial bank may only charge interest on the actual outstanding balance of the customer and shall not charge a credit limit fee to the customer;

b) Based on the approved credit limit, the commercial bank and the customer shall agree on the disbursement plan and the amount of each disbursement, consistent with the loan term and the installment payment or lease payment made by the customer to the developer;

c) Based on the plan, the disbursement amount, and the financial plan of the customer, the commercial bank and the customer shall agree on the loan term, repayment plan, and the amount of each installment repayment, but the minimum repayment period shall be ten years.

Article 8. Interest rate for loans for low-income housing purchase and lease-purchase

1. The interest rate for loans for individuals purchasing or lease-purchasing low-income housing shall follow the commercial lending mechanism as prescribed by law.

2. The State's interest subsidy amount for low-income housing purchasers and lease-purchasers shall be transferred to the commercial bank to directly deduct from the customer's interest payments during each interest calculation and collection period.

Article 9. Collateral for loans for low-income housing purchase and lease-purchase

1. Based on the actual situation of the borrowing customer, the commercial bank may choose appropriate security measures for the loan in accordance with current laws.

2. In cases where the borrowing customer has fully paid the developer and received the Certificate of Ownership of the Housing, ten years from the date the borrower signed the contract with the developer, commercial banks are permitted to request the customer to supplement the purchased or leased house financed by the bank as collateral for the commercial bank.

Chapter III

IMPLEMENTATION

Article 10. Responsibilities of commercial banks providing loans for low-income housing purchase and lease-purchase

1. Issuing guidelines related to the special characteristics of lending activities for low-income housing purchase and lease-purchase and the interest subsidy mechanism for such customers to be applied within the commercial banking system.

2. Implementing loans for low-income housing purchase and lease-purchase in accordance with the provisions of this Circular and other relevant documents.

3. Implementing the reduction of interest on loans from State support funds in accordance with the guidelines of the Ministry of Finance.

4. Conducting pre-loan, during-loan, and post-loan inspections to ensure that the loans are provided for the intended purpose and to the intended recipients.

Article 11. Responsibilities of borrowers applying for loans to purchase or lease low-income housing

1. Provide complete information and documents related to the loan application for purchasing or leasing low-income housing as requested by commercial banks; bear legal responsibility for the accuracy of the provided information and documents.

2. Fulfill all commitments stipulated in the credit contract with commercial banks.

Article 12. Responsibilities of Units under the State Bank

1. Credit Department: Coordinate with units under the State Bank of Vietnam to handle issues related to lending for purchasing or leasing low-income housing.

2. Banking Inspection and Supervision Authority: Conduct inspections and supervision of commercial banks' lending activities for purchasing or leasing low-income housing for customers.

3. Branches of the State Bank of Vietnam in provinces and centrally-administered cities: Carry out inspections and supervision within their authority regarding lending for purchasing or leasing low-income housing. Report and propose solutions to the Governor of the State Bank of Vietnam and the Chairman of the People's Committee of the province or centrally-administered city on issues arising from lending for purchasing or leasing low-income housing in their jurisdiction.

Article 13. Information Reporting System

Commercial banks are responsible for compiling periodic reports (quarterly) on the situation of lending for purchasing or leasing low-income housing according to the forms attached to this Circular. Quarterly reports must be submitted to the State Bank of Vietnam (Credit Department) before the 15th day of the first month of the following quarter.

Article 14. Effective Date

1. This Circular shall take effect 45 days from the date of signature.

2. The Heads of the Office, the Director of the Credit Department, and the heads of units under the State Bank of Vietnam; the Chairmen of the Boards of Directors and General Managers (Directors) of commercial banks; and borrowers applying for loans to purchase or lease low-income housing shall be responsible for implementing this Circular.