Tuesday, 23 April 2013

New rules on mortgages?

Yesterday, the Economic and Monetary Affairs Committee MEPs and EU member state representatives reached a preliminary deal concerning new harmonised rules on mortgages, mainly aiming to increase the sustainability of the credit market.
From what can be read in the EP press release, it seems that the proposal, which builds on a previous Directive proposal by the commission, is based on supervision, promotion of better decision-making and a degree of attention to borrowers who encounter financial difficulties.
Under the first aspect, more attention should be paid to"mortgage sellers".
As concerns decision-making, not only pre-contractual information should be improved, e.g. by offering a range of clearly comparable and sustainable alternatives; the proposal also envisages a cooling-off period of seven days. 
Once the contract is signed, the possibility to switch provider and to repay early should be guaranteed against "tying" practices.
Finally, in the event of default the imagined piece of legislation would:
- promote the stipulation of agreements foreseeing repayment in kind; 
- require "arrangements for selling the property for the "best effort" price and for facilitating the remaining debt repayments".

So much for the moment, with the negotiators having left important issues (such as that of implementation) open. The first impression is that the proposal stays quite timid on at least one crucial point: if vesting of the immovable is enough to cover a debt  "provided that the lender and borrower expressly agree to this in the contract", how should lenders convinced to include such agreement? Post-eviction indebtedness probably needs to be addressed a bit more resolutely than this.

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