Hong Kong to cut out lawyers’ role in mortgage transfers in pilot plan to protect buyers from insolvent legal firms

Hong Kong’s regulations, which require all mortgage payments to be transferred via legal firms, hurt clients when a law firm becomes insolvent

Some victims have had to wait for years to get their money back, while some have been unable to get a full refund, said HKMA’s deputy chief executive Arthur Yuen

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A construction site and residential buildings at Tak Long Estate in Kai Tak. Photo: Felix Wong

Published: 4:51pm, 20 Jul 2022Updated: 8:37pm, 20 Jul 2022

Hong Kong’s de facto central bank will formally cut out law firms as the middlemen in the transfer of residential mortgage payments, as it establishes a pilot plan to make remittances easier and faster and to protect property buyers.

Banks will be able to transfer approved mortgage loans directly, bypassing law firms through the Payment Arrangements for Property Transactions plan.

The pilot plan will commence immediately after the conclusion of a six-month public consultation and in-depth discussion with the city’s banks and law firms, according to Arthur Yuen Kwok-hang, deputy chief executive of the Hong Kong Monetary Authority (HKMA).

“The change will speed up the mortgage payment process, and most importantly, safeguard borrowers from suffering losses, lest their money gets frozen by legal firms that end up in [financial] trouble,” Yuen said.

Arthur Yuen Kwok-hang, deputy chief executive of Hong Kong Monetary Authority, at a media briefing on granting virtual banking licences, in March 2019. Photo: Xiaomei Chen

The pilot plan, coming at the end of a public consultation first unveiled in December, covers about 2,500 mortgage transfers valued at HK$10 billion (US$1.27 billion) every month, or 30 per cent of all mortgage lending cases, based on past five years’ data by the HKMA.