With a significant delay and after a rocambolesque processing, on June 16, 2019 the new one entered into force Law 5/2019, regulating Real Estate Credit Contracts, Also known as Mortgage law. The law, planned for 2016, adapts our mortgage credit legislation to the standards of the European Community. Let's look at the lights and shadows of the new regulation.
The fundamental premise of the law, for its inspirers, is to give greater guarantee to the mortgaged and to the mortgage market itself and to break the asymmetry or imbalance between consumers and financial institutions.
However, in practice already perverse effects are anticipated. So let's go first with the shadows. Unfortunately, financial institutions will not delay the cost of the few benefits that the law may entail for consumers (an increase in rates has been detected only justifiable by the entry into force of the law), and banks will find Easily how to condition the hiring of linked products. As always, the protection measures will end up being a stumbling block for the consumer that will result in a greater bureaucracy, the lengthening of the deadlines for granting the deed and greater difficulties for access to the financing of the acquisition of a home for the average consumer, because of “risks”, which we have already faced.
In any case, these are the foundations of the new law. For starters, the rule is mainly applicable to mortgage loan agreements on residential properties, built or to be built, whose borrower, guarantor or guarantor, is a natural person (consumer).
The main novelties of the new Mortgage Law are:
- Financial institutions will bear the mortgage constitution expenses, such as the first copy of the deed, Tax of Documented Legal Acts, registration, agency. The client will assume the second copy of the notary and the appraisal expenses. It is foreseeable that the transfer of this cost to the banks will lead to an increase in the cost of financing.
- In the pre-contractual phase, the financial institution must verify solvency of the client checking his credit history in the CIRBE (Central of Information of Risks of the Bank of Spain).
The notary must attest that the entities have delivered the contractual documentation, at least, ten days before signing; and also verify information Product and his knowledge by the borrowers through an "understanding test."
To this end, entities must dump the conditions offered on a technological platform available to notaries, managed by the General Council of Notaries, to which all Spanish notaries, agencies and financial institutions are connected. This is also intended to ensure the free choice of notary by the client, since they will have online access to the complete list of notaries.
Both the borrower, as the guarantor or guarantor, must appear before the notary as late the day before to the authorization of the loan deed, not being able to authorize it otherwise. There, the notary you choose, will inform you free and in detail of the contractual conditions, without the presence of the representative of the financial entity. And after such information and “comprehension test”, it will grant the minutes prior to the formalization of the mortgage loan. I make a nuance here: it will surely be a management challenge and a very significant effort for the notaries, which can be overwhelmed by these new requirements.
- Se eliminates the obligation to contract related products, enabling the borrower to contract home, life, etc. insurance with other financial entities, provided that the rest of the contractually stipulated requirements are met. The financial institution may not incur any costs for analyzing these policies contracted with other insurers. However, it is more than foreseeable that, as up to now, entities will implement formulas to condition the granting of the mortgage to the contracting of these related products.
- Se eliminate subrogation and novation costs of the mortgage loan, and the possibility of collection of the opening commission is limited to one time.
- Se eliminate the controversial "ground clauses", by excluding the possibility of establishing a limit to the decrease in interest.
- The limits are limited early repayment commissions which will vary depending on the moment in which it is amortized: for fixed-rate mortgages, they will be 2% during the first ten years and 1,5% after said period. In variable rate mortgages, the commissions will be 0,25% in the first 3 years and 0,15% the rest of the credit.
- El delay interest It is limited in the remuneration interest plus 2%.
- More demanding and long time requirements are established for financial institutions for the execution of the loan to delinquent debtors: In the first half of the total term of the contract, it can only be executed if there is a default of more than 12 months or 3% of the principal of the mortgage. In the second half of the term, it can only be executed if there is a default of more than 15 months or 7% of the principal of the mortgage.
- Contract transparency will be monitored through the creation of an independent Authority, which will also resolve disputes through extrajudicial claims.
- Appraisers will be eligible by borrowers, will be independent, and may be natural persons.
- Payment dates will be voluntary if the parties stipulate it in the contract.
On the positive side, the new mortgage regulations, in addition to providing consumers with greater security, will allow the different agents involved in the financial sector, not only banks and clients but also courts, professionals and lawyers, to have clearer rules that will govern from now on the financing for the acquisition of the house and the consequences in case of non-payments and of resolution or execution of the loan agreements.
Law 5/2019 will be applicable for loans that are formalized as of June 16, those that are novated or there is a subsequent subrogation, and those that are declared due early after the law comes into force.
En ATTORNEY RIBELLES We are convinced that the new regulation will be a useful tool to provide greater clarity to the system. There will be less discussion as to who bears what expenses, or if the information has been provided or not. Predictably, there should also be greater clarity in relation to the terms and criteria of defense, in case of having to face the client or the entity, a situation of default or foreclosure in case of default. However and recapitulating, the new system will also bring discontent over the rise in mortgages and greater bureaucracy and slowness in a market that demands increasing speed. The need to ensure longer management and preparation times will in turn lead to problems associated with the foregoing private sale and foreclosure contracts or those that bring mortgage loans, so their study and forecast by a lawyer specialized, it seems even more necessary now.
