How to secure your mortgage on time if you end up in Hong Kong’s mandatory quarantine【星之谷專欄-南華早報】

  • If a borrower is subject to mandatory quarantine in Hong Kong and can’t get to the bank in person to complete the deal, it can be a major headache
  • Here are three steps that might help if you end up in quarantine before completing the deal to buy your home

Imagine – just when you are closing the deal and preparing to get the key to your new home, you are subject to mandatory quarantine or even a citywide lockdown. Bummer.

It could happen to practically anyone, as Hong Kong still sees thousands of people tested positive for Covid-19 on a daily basis, and many more subject to compulsory testing because an infected sample was scooped from their building sewage. While cases are dropping and the government is planning a phased relaxation, one cannot be too careful to brace for a surprise quarantine.

Now, you could have included pre-emptive terms to allow a delayed completion. Some banks could offer procedural flexibility when signing the loan facility letter.

Last year I wrote about the possible delay in closing deals by mandatory quarantine. I then proposed provisional agreements to include a designated term enabling an automatic extended completion should either party, buyer or seller, go into quarantine, so as to protect both sides’ interests.

The suggestion was met with significant, positive response. Now the said term is almost a must-have on most provisional agreements. Considering the still raging pandemic outbreak and thus possible mass testing or lockdown – big or small in scale, these protective terms are more important now than ever.

Deal or delayed deal – it all boils down to banks’ mortgage approval.

Normally, mortgage borrowers could apply for a loan online, and email the supporting documents to bank officers. But banks must request the borrower’s physical presence when signing the mortgage loan agreement, so that they can verify the true identity of the borrower in compliance with the “know your client” requirements set out by the regulators.

In Covid-19 times, it could be a headache if the borrower was to be subject to mandatory quarantine and couldn’t make their way to the bank in person on completion date, let alone to sign the mortgage loan agreement, or to authorise a next of kin or a friend to do so.

Given that remote signature or online signing is unacceptable to Hong Kong banks, unlike its mainland Chinese peers, deferring completion seems the only viable option.

What if you wish to rush to close the deal, instead of being forced to delay by Covid-19? Here I would like to share a lesser-known solution that might be of help.

There were recent cases where certain banks, of various sizes, exercised discretion on reading the rule. The key was that the borrower had physically visited the bank during the mortgage application process, and had seen a front-line staff member to submit the form.

In this case, the borrower could authorise a third party, with which the authorisation letter is notarised by a law firm, to act on their behalf to sign the mortgage contract in the case where he/she was locked up on completion date.

You may as well prepare the following three steps in case you end up in quarantine before completing the deal to buy a home:

First, ask your law firm to prepare an authorisation letter. Second, submit the mortgage application form in person at a bank, in lieu of applying online. You should also meet and greet the bank’s mortgage officer and open an account during that same trip. Third, get original documents ready for your designated authorisee, as the bank might need to inspect the original copies upon signing the mortgage agreement.

This way, you have a backup plan to keep the original transaction date, even if you are not able to sign the contract in person because of Covid-19, or being locked away for quarantine.

Still, one should note that the arrangement above is only available at certain banks. Some lenders still prefer the traditional way, requiring the borrower’s physical presence and rejecting authorisation to a third party.

Citywide mass testing is still a work-in-progress, without a clear timetable or details. It could happen any time. My final reminder to homeowners-to-be is to be extra vigilant – make sure your provisional agreement not only includes a term to enable an automatic extension of the transaction period in the case of mandatory quarantine, but also explicitly spells out the possible lockdown scenario.

Raymond Chong is CEO and founder of mortgage referral brokerage firm StarPro Agency


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