The new mortgage regulation
30 July 2017
Social pressure, European Union Court of Justice “activism” and the European Commission insisting on the necessary transposition of Directive 2014/17/EU have forced the Spanish government to ammend the current regulation of mortgages and pass a new act on Real Estate backed Credit Contracts.
It adapts the Spanish regulation to European regulation regarding loans given to purchase a home, increasing consumer protection. Among others, the basic lines are:
1.- It reinforces the formation stage of the contract, establishing a 7 day period in which the consumer is entitled to access to the draft of the contract provided by the bank.
2.- Notaries role is also enhanced, establishing their obligation to inform throughly of each and every aspect of the contract to be signed. They will make clients sign a handwritten declaration stating they fully understand the financial implications of the contract.
3.- Banks will not be able to evict and repossess properties unless default reaches at least 3% of the full debt.
4.- It fixes the late-payment interest in the legal interest plus two points.
5.- It allows the possibility to shift from variable interest rate to fix interest rate at a low cost.
But the government has tried to use this act to also smuggle in some provisions that actually protect the banks against consumers. By transforming notaries in consumers’ advisors, it excludes the bank’s liability in the marketing of mortgage loans. However, notaries also have an interest in keeping banks happy and bringing more business.
Purchasing a property with bank financial assistance is an important moment in someone’s life, considering the financial consequences and duration of the link it creates with a bank. Despite the new obligations of the notaries, we strongly recommend you hire an independent lawyer to guide you, help you, assist you, revise the documents, and fight for your rights if neccesary.
At GCLA we are expert in banking law and real estate and contracts law. We devote to defending our clients’ interests when obtaining a mortgage loan and purchasing a property. Your peace of mind is our reward.
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