The new mortgage law.

[:en]Beyond incorporating European guidelines on mortgages, measures are also included to improve the market and make it easier for consumers to understand the conditions they sign in the mortgage.

These are the main changes that the Ministry of Economy has announced and that will affect mortgages signed after its approval, as well as the renewal of current loans:

Contractual stage.

When the bank gives the client all the documentation, the client must go to the notary to verify that the contractual conditions comply with the law and to resolve any doubts that the text may generate. This visit will not cost the client, even if the loan is not formalized, and its objective is to give the consumer the tools to be able to delve deeper into the content of his mortgage before the day of signing. The notary may be chosen by the client, without the bank being able to intervene. All notaries and registrars who do not carry out this task of information and supervision may be sanctioned.

Late payment interest.

The late payment interest will be 9%, and in the event of non-payment, banks will not be able to charge the interest they have agreed with the client. The regulations provide that the late payment interest will be three times the legal price of money, which currently stands at 3%.

Early termination clause.

Until now, a bank could reserve the right to activate early repayment, to write off the entire loan before the agreed term if the debtor defaults on his payment obligation, if he has missed three monthly payments. Under the new law, higher minimum thresholds are established.

According to the Ministry of Economy, “the duration of the contract will be divided into two parts, and each of them will be subject to a threshold. In the first half, non-payment of at least 2% of the amount borrowed will be necessary to activate this clause, while in the second half, this minimum will increase to 4%. For a 20-year mortgage, for example, each half would be 10 years.”

Changing a variable mortgage to a fixed one.

Provided that both parties agree, the cost of changing a variable rate mortgage to a fixed rate one is considered to be reduced. There are two ways to achieve this change: negotiate with the current entity or go to another one. This last option is the most expensive and, therefore, the one that will experience the main change: the reimbursement fee that a bank can charge as compensation will be 0.25% and can only be charged during the first three years of the life of the mortgage to be changed. In addition, notary and registry fees will be subsidized by 90%.

Reduction of early cancellation fees.

The penalty that the mortgagor must pay if he/she pays off the loan early, either partially or totally, is reduced. In the case of variable mortgages, the commission will be 0.5% if the repayment is made in the first three years, a percentage that is reduced by half between three and five years and disappears after the fifth year.

For fixed mortgages, the cancellation fee will be 4% in the first three years. After that, the mortgagor will have to pay 3% if he cancels early.

In both cases, the Ministry of Finance makes it clear that the commission will be applied to the amount advanced by the client, not to the total outstanding capital as is currently the case.

The typical mortgage model.

The law provides for the creation of a mortgage model that is very simple, so that anyone, even those with no knowledge of finance or the mortgage market, can understand the contract.

The contract should reflect who pays what.

Mortgage contracts signed from now on must clearly state who is responsible for the costs. That is, what the bank is going to pay and what the client is going to pay when formalizing the mortgage. The regulations simply require that it be stated who is going to be responsible for the costs, without assessing who pays what.

Problematic clauses.

A 'black list' of abusive clauses will be included that cannot be applied in any mortgage, such as floor clauses. Not all the clauses that could be included in the list have been detailed, but it has been made clear that all those that have been considered abusive by the courts will be included. In the event that an abusive clause appears, the notary can request the entity to remove it from the contract.

Without retroactive effect.

The Ministry of the Economy has also insisted that the changes included in the regulations will only affect mortgages signed after their approval, except in the case of the early maturity clause, which will be available to all loans. The novations of a pre-existing mortgage are considered a new contract.

In the case of the new limitations on the early repayment fee, the date to be taken into account will be the approval of the bill, which will occur before the law itself. In this case, therefore, its application will not have retroactive effects either.

 

Complete information on additional products.

Another of the new features that future contracts must include is detailed and additional information on the products that the bank offers to the client outside of the mortgage, such as the use of cards or the contracting of home insurance. In this sense, and unless it has a benefit for the client (for example, reducing the interest on the loan), banks will not be able to 'force' the client to contract additional products. The offers, in addition, must have the approval of the Bank of Spain, according to the Ministry of the Economy.

Protects the self-employed.

The text is intended to benefit all individuals, including the self-employed.

 

This Draft Law, which aims, among others, to protect consumers and increase transparency, does not make any reference to dation in payment, nor to who should be responsible for the expenses involved in formalizing the mortgage, for For example, the notary, the registration of the deed in the Property Registry or the payment of the Documented Legal Acts tax. [:ca]In addition to incorporating the European directives in mortgage matters, they also include measures to improve the market i make it easier for consumers to understand the conditions they sign in the mortgage.

These are the main changes that the Ministry of Economy has advanced and that will affect the mortgages that are signed from the approval, as well as the innovations of the current loans:

1. Contractual stage.

When the bank sends all the documentation to the client, it takes time to go to the notary to verify that the contractual conditions comply with the law and resolve all the doubts that generated the text. This visit will have no cost for the client, since it is not possible to formalize the loan, and the objective is to donate the money to the consumer so that he can delve into the contingut of the new mortgage before the day of signing. The notary may be triat to the client, unless the bank can intervene. All notaries and registrars who do not carry out this information and supervision work may be sanctioned.

2. Late payment interest.

The late payment interest will be 9%, and in the event that there is a default, the banks will not be able to charge the interest that has been agreed with the client. The regulations contemplate that the late payment interest will be three times the legal price of the diners, which is currently 3%.

3. Anticipatory maturity clause.

Finally, a bank can be reserved-the right to activate the early maturity, donate to pay all the loan without the term agreed when the debtor does not complete the payment obligation, when a default of three monthly payments is produced. With the new law, they are established at higher minimum boundaries.

According to the Ministry of Economy, “the duration of the contract is divided into two parts and each of them will be subject to a limit. In the first month it will be necessary to pay almenys the 2% of the import loan to activate this clause, while in the second month this minimum will go to 4%. For a mortgage of 20 years, for example, each month is 10 years.”

4. Change a variable mortgage for a fixed one.

Whenever both parts are agreed, it is contemplated to reduce the cost of exchanging a variable mortgage for a fixed type mortgage. There are two ways to achieve this change: negotiate with the current entity or leave for another. This last option is the most expensive and, therefore, the one that is mainly affected by the change: the reimbursement fee that can collect a bank as compensation will be 0.25% and will only be able to collect during the first three years of life of the mortgage that is volcanvia. In addition, notary and registration fees will be discounted in a 90%.

5. Reduction of early cancellation commissions.

The penalty that the mortgage has to pay is reduced if the loan is repaid early, partially or totally. In the case of variable mortgages, the commission will be 0.5% if the amortization is carried out in the first three years, a percentage that is reduced to the average between three and five years and that disappears from the fifth year onwards.

For fixed mortgages, the cost of cancellation will be 4% in the first three years. From now on, the mortgage will have to pay 3% if you cancel it early.

In both cases, Economia made it clear that the commission will be applied to the amount advanced by the client, not to the total capital pending payment with funds.

6. The typical mortgage model.

The law contemplates the creation of a mortgage model that is very simple, so that any person, even those who have no knowledge of finance or the mortgage market, understands the contract.

7. The contract must reflect who pays what.

The mortgage contracts that are signed from now on have clearly included what is the right to disbursements. That is to say, what the bank has to pay and what the client has to pay to formalize the mortgage. The regulations simply force us to reflect who has to pay for what.

8. Problematic clauses.

It will include a 'black list' of abusive clauses that cannot be applied in the mortgage, for example the sol clauses. Not all the clauses that could be included in the list have been detailed, but it has been made clear that all those that have been considered abusive by the courts will form part of it. In the event that an abusive clause appears, the notary may request that the entity remove it from the contract.

9. Without retroactive effects.

Economy has also insisted that the changes included in the regulations will only affect the mortgages that are signed after approval, except in the case of the early maturity clause, which will be available for all loans. Novations of a pre-existing mortgage are considered a new contract.

In the case of the new limitations to the commission for advance reimbursement, the date to be taken into account will be the approval of the draft law, which is produced by the material of the law. In this case, therefore, the new application will also not have retroactive effects.

 

10. Complete information on additional products.

Another of the news that includes future contracts is detailed and additional information on the products offered to the client apart from the mortgage, such as the use of targets or the contract of a security of the llar. In this sense, if there is a benefit for the client (for example, reducing the interest of the loan), the banks will not be able to 'oblige' the client to contract additional products. The offers, moreover, are expected to have the approval of the Bank of Spain, according to the progress made in the Economy.

11. Protects the self-employed.

The text is intended to benefit all natural persons, which also includes the self-employed.

This Avantprojecte de Llei that has the objective, among others, to protect consumers and increase transparency, does not cover the dació en pagoment, nor does it cover what should be avoided from the disappointments that the formalization of the mortgage, for example the notary, the registration of the deed in the Property Registry or the payment of the impost of Legal Documents.[:]

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