China is increasingly counting on its banks to step up mortgage lending and help boost a sinking housing market. But there is a problem: Lenders are stuck with many mortgages from boom times that are at higher risk of not being repaid.
Chinese property developers wrote at least $300 billion of mortgage guarantees over the past few years for partially built apartments that they presold, according to regulatory filings. The real-estate firms promised that they would cover home buyers’ interest and principal payments to banks if the borrowers defaulted before their apartments were completed and delivered.
Source: https://www.wsj.com/articles/chinese-banks-lose-a-mortgage-safety-net-as-developers-slide-into-distress-11662715801?siteid=yhoof2&yptr=yahoo