The draft Real Estate Credit Law has passed its first examination in Congress on Thursday after the Congress rejected the amendment to the whole submitted by Unidos Podemos, with which the confederal group sought to replace the Government’s legislative initiative.
To overcome the debate of totality and reject the amendment of the left coalition, the Government has had the support of PP, Citizens, PDeCAT PNV, UPN, Canary Coalition and Asturias Forum, while PSOE and Nueva Canarias have opted to abstain. The proposal of Unidos Podemos has only had the support of Esquerra Republicana, Compromís and EH Bildu.
However, the opposition has forced that the parliamentary procedure of the norm must end in the Plenary Session of the Congress before being sent to the Senate, and not in the Economy Commission, as PP, Citizens, and CC wanted. This will require the PP to seek more support given the different parliamentary arithmetic of the two instances.
A LATE TRANSPOSITION OF THE DIRECTIVE
The Government proposal extends the limit of the banks when executing a mortgage (now it can do it with three months of non-payment), facilitates the conversion of the loan with variable interest to fixed and obliges the entity to communicate in detail all kinds of clauses, such as floor clauses, and to ensure that the client, notary through, declares himself aware of its nature and behavior in different scenarios.
The regulation, which involves the transposition of the European directive on mortgage loans, had to have been approved before March 2016. Since this procedure has not been completed, Spain has opened an infringement procedure, although the Government hopes to approve the regulation before of the end of the process in order to avoid a possible fine.
Guindos already announced during the presentation of the initiative in November that the Government had enough support to overcome the different parliamentary procedures, the same ones that had made possible the approval of the 2017 Budgets: Citizens, PNV, UPN, Asturias Forum, Canary Coalition and New Canary Islands.
LIMIT TO RECHARGES WHEN MORTGAGE IS CONVERTED
The Government’s proposal establishes new terms for the early expiration of a mortgage, limits interest on late payment – three times the current legal interest and will be applied to the outstanding principal – and facilitates the conversion of the mortgage loan in foreign currency to another currency , as well as the change of mortgage loan with variable interest to fixed interest.
Currently, banks can decree the early expiration of a loan and execute the mortgage from the third month of default, a threshold that the Government raises up to 2% of the loan, including interest, or nine installments during the first half of the contract, and 4% or twelve months in the second.
To change a mortgage loan with variable interest to a fixed one, the maximum commission for early repayment for a novation or change of entity in which a fixed rate is agreed will be 0.25% in the first three years, and thereafter it will disappear.
In the case of variable-rate mortgages, the commission for early repayment will be zero from the fifth (0.25% limit) or the third year of the effectiveness of the opponent (0.5%), depending on the agreement. As for fixed-rate loans or this one, the early repayment fee will be 4% maximum in the first ten years and 3% thereafter.
KNOWLEDGE OF ALL CLAUSES
On the other hand, the standard includes the possibility for both parties to voluntarily adhere to a standard contract in which the fundamental clauses of the contract are established, and obliges the entity to send seven days before signing the contract a file with the main characteristics of the contract, including floor clauses, with estimates in different scenarios of interest.
In these seven days, the consumer must go to the notary to answer the questions that he poses and where he will explain all the sensitive clauses, having to sign a record, free for the borrower, in which he will manifest knowledge of all the necessary information.
BINDING SALES ARE PROHIBITED
In addition, it is prohibited to offer the linked sale of products with mortgages, as in the case of home insurance, except for exceptions authorized by the Bank of Spain or if it proves that they benefit the consumer. That is, operations in which it is only possible to contract the mortgage loan if it is done together with a series of products are not allowed.
However, combined sales are allowed, which are those in which the consumer has the option to contract the mortgage loan separately or with a set of products. In this case, the entity is obliged to submit two budgets, one that includes the products that are marketed with the mortgage and another without them.