29 September 2003

Dear Sir / Madam,

Model Mortgage Documents

I am writing to request your institution to consider, in consultation with your legal counsel, the adoption of the model mortgage documents developed by the Hong Kong Mortgage Corporation (HKMC).

Under the auspices of a Steering Committee comprising the major banks, the legal profession and credit rating agencies, the HKMC launched a project in 2000 with a view to standardising the mortgage origination documents in the market. The objectives of the project are two-fold:-

1. to develop a set of model documents that clearly prescribes balanced rights and obligations between the banks and the homebuyers and is easily understood by the contracting parties through the use of user-friendly language in drafting the documents; and

2. to reduce the lead time and cost for the issuance of mortgage-backed securities by removing the need for investors and credit rating agencies to conduct due diligence on the mortgage origination documents.

The HKMA fully supports this initiative. Having reviewed the Model Mortgage Deed and the Model Deed of Guarantee and Indemnity so far produced by the HKMC (“the model documents”), we are of the view that the provisions in these documents are in compliance with the Code of Banking Practice (including the new sections 21.3(A) & (B)).

To fully realise the benefits of this project, it is important that the model mortgage documents are widely used in the market. In this light, I would like to request your institution to consider the adoption of the model documents, if it has not already done so. I believe that you would no doubt consult with your legal counsel in this process.

Yours faithfully,

William A. Ryback
Deputy Chief Executive