Section 3 Effect of Mortgage
Article 46
The scope of guaranty of mortgage includes the principal debt and the interest thereof, default fine, compensation for damage and expenses for enforcing the mortgage, unless otherwise provided in the mortgage contract.

Article 47
If the mortgaged property is seized by a People's Court because of the debtor's failure to perform his obligation prior to the maturity of the debt, the mortgagee shall, from the date of seizure, be entitled to collect the natural fruits severed from the mortgaged property and the legal fruits which the mortgagor may collect from the mortgaged property. If the mortgagee fails to notify the person who has the obligation to pay legal fruits of the fact that the mortgaged property is seized, the mortgagee's right shall not extend to such fruits. The fruits provided for in the preceding paragraph shall first be used to offset the expenses for collecting the fruits.

Article 48
If a mortgagor mortgages leased property, he shall notify the lessee of the fact in writing, and the original contract of lease continues in effect.

Article 49
If a mortgagor transfers mortgaged property already registered during the period of mortgage, he shall notify the mortgagee and inform the transferee that the transferred property is mortgaged; if the mortgagor fails to notify the mortgagee or inform the transferee of the fact, the transfer shall be null and void. If the proceeds expected from the transfer of the mortgaged property are evidently less than its value, the mortgagee may demand that the mortgagor provide an additional guaranty; if the mortgagor fails to provide the additional guaranty, then he may not transfer the mortgaged property. The proceeds which the mortgagor obtains from the transfer of the mortgaged property shall first be used to liquidate the claim secured by the mortgage or it shall be deposited with a third party agreed upon by the mortgagor and the mortgagee. If the proceeds exceed the claim, the balance shall belong to the mortgagor; if the proceeds do not cover the claim, the difference shall be paid by the debtor.

Article 50
The right of mortgage may not be separated from the creditor's rights and transferred singly, nor used to secure other creditors' rights.

Article 51
Where a mortgagor's acts are likely to cause the value of the mortgaged property to decline, the mortgagee shall be entitled to demand that the mortgagor cease and deist from such acts. Where the value of the mortgaged property has declined, the mortgagee shall be entitled to demand that the mortgagor restore the original value of the mortgaged property or provide security corresponding to the amount of the lost value. If the mortgagor is not responsible for the decline in the value of the mortgaged property, the mortgagee may only demand that the mortgagor provide security to cover the loss resulting from the decline in value. The part of the mortgaged property whose value has not declined shall continue to serve as guaranty for the creditor's right.

Article 52
The right of mortgage shall co-exist with the creditor's right secured. If the creditor's right lapses, the right of mortgage shall also lapse.

Section 4 Enforcement of Mortgage Right
Article 53
The mortgagee, who is not paid at the maturity of the obligation, may, through agreement with the mortgagor, be paid out of the proceeds from the conversion of the mortgaged property or from the auction or sale of the mortgaged property; if they fail to reach an agreement, the mortgagee may bring a lawsuit in a People's Court. If the proceeds from the conversion of the mortgaged property or the proceeds from the auction or sale thereof exceed the claim, the balance shall be returned to the mortgagor; if the proceeds do not cover the claim, the difference shall be paid by the debtor.

Article 54
Where the same property is mortgaged to two or more creditors, the proceeds from the auction or sale of the mortgaged property shall be used for liquidation according to the following provisions: (1) Where a mortgage contract takes effect with its registration, the liquidation shall be made in the order of the time of registration of the mortgaged property; if the registration is in the same order, the liquidation shall be made according to the respective proportions of the claims; (2) Where a mortgage contract takes effect on the date of its execution and the mortgaged property is registered, the liquidation shall be made according to the provisions of sub-paragraph (1) of this Article; if the mortgaged property is not registered, the liquidation shall be made in the order of the effective dates of the contracts; if the order of the effective dates is the same, the liquidation shall be made according to the respective proportions of the claims. The claim secured by registered mortgage shall be satisfied prior to the claim secured by unregistered mortgage.

Article 55
After the execution of a contract in which urban real estate is mortgaged , the newly-built houses on the land shall not be included in the mortgaged property. Where it is necessary to auction the mortgaged real estate, the newly-built houses on the land may be auctioned, according to law, together with the mortgaged property, but the mortgagee shall have no right to enjoy the priority of having his claim satisfied with the proceeds from auction of the newly-built houses. Where the land-use right to contracted barren hills is mortgaged or the land-use right to the land occupied by the factories and other buildings of a township (town) or village enterprise is mortgaged in accordance with the provisions of this Law, the collective ownership and the uses of the land may not be altered without following the legal procedure after enforcement of the right of mortgage.

Article 56
The mortgagee shall be entitled to the priority of having his claim satisfied with the proceeds from auction of the land-use right to the allocated State-owned land after payment of the granting fees for the land-use right.

Article 57
The third party who provides guaranty of mortgage for the debtor shall have the right of recourse against the debtor after enforcement of the right of mortgage by the mortgagee.

Article 58
The right of mortgage shall lapse due to loss or destruction of the mortgaged property. The compensation obtained for the loss or destruction shall be used as the mortgaged property.