Mortgage requirements will be softer than in the EU

Published on April 13th 2017

The banks will not be able to execute mortgages until the default has reached between 3% and 5% of the credit

The banks will not be able to execute mortgages until the default has reached between 3% and 5% of the credit, according to the draft of the draft bill of real estate contracts. The criterion set by the Government is much softer for banks than that set by the European Court of Luxembourg, which states that the amount must be significant. This European criterion has led Germany to place that band between 8% and 10%. In addition, the EU Court requires that corrective elements be introduced to protect vulnerable groups such as the unemployed, something that the Spanish text does not contain.

The new mortgage legislation prepared by the government and under discussion with parliamentary groups will make it more difficult to foreclose. The payment of three installments will no longer suffice to initiate the process that ends with the auctioned house, the so-called anticipated expiration. European jurisprudence required non-compliance to be significant. So this new regulation quantifies it. If approved, the draft determines that housing can not be executed until 3% of the credit has been defaulted if it is ten years or if the default occurs in the first ten years of the loan. If the mortgage is more than ten years and more than ten years have elapsed since it was set up, then the early maturity can not be carried out until the default has reached 5% of the credit, as anticipated The SER chain and is included in the document to which EL PAÍS has had access.

However, this criterion is tougher for consumers than the Luxembourg European Court has ruled. This has established that the default must be significant and that it must be taken into account if the mortgaged is in a situation of vulnerability. In the light of this doctrine, in Germany it has been determined that the default should amount to between 8% and 10% for the commencement of the foreclosure proceeding. Hence the PSOE is negotiating that these ratios are changed in line with what has been developed in Germany.

The Government has also stated that the amounts in arrears will triple the official rate of the money, that is, 9% according to the Budgets of 2017. However, this decision is against the rate that marks the Supreme, which consists of two Percentage points more than the agreed interest. Although the High Court has referred questions to Luxembourg concerning the moratorium interest and the foreclosure of mortgages, the Government has decided to advance and legislate tougher conditions for the client and therefore more favorable for banks.

On the other hand, the text obliges notaries to ensure that the mortgage client understands with examples and simulations the consequences of what he signs. In the end, attempts are made to provide legal security for mortgages and to avoid the proliferation of lawsuits against entities. "They are preforming a handwritten test in favor of the banks because Luxembourg ruled that the borrower has to internalize the consequences of the loan he contracts. It provides transparency and information to that act and makes notaries advisors when they are not, "explained several lawyers consulted. "It pours the burden of proof on the client, who will have difficulty challenging a notarial deed in which he signed it understood," says Fernando Zunzunegui, a lawyer specializing in financial regulation.

Finally, the draft decree that bank employees will no longer be able to collect incentives to grant mortgages, a positive measure in order to try to align the interests of commercials with those of customers.

Source: El País