Notes on the new mortgage regulations in Spain
New mortgage regulations
The Act 5/2019 of March the 15th 2019 of the Spanish Parliament approved the new mortgage regulations. You can check the official journal here. Its complete name is Act of real estate contracts. The Act should be in force three months after its publication in the official journal. The publication was on March the 16th. The Act should be in force then on June the 16th 2019. Due to technical issues between some banks and the notaries systems its full implementation has been delayed until July the 31st 2019.
Basically the aim of the regulation is the consumers’ protection. The consumer protection as either a borrower or a guarantor of any contract guaranteed by a residential property. Also, the Act wants the bank industry to be responsible lenders to avoid future debt crisis.
So the Act aims to protect the consumers against abusing contracts and practices used by the bank industry during many years. It does so making some stipulations imperative so no discussion can arise from those issues. The Act wishes by the way to stop the massive litigation from consumers to the banks. The Act wishes to make the mortgage contracts transparent and therefore more clear and easy to understand. And this will the end of the litigation.
These are the good intentions of the Act.
Some notes on the new mortgage regulations
- My opinion is that a complete regulated contract would have been better. This way lenders and borrowers will have no liberty apart from the basic points of the contract: type of interest, interest rate, length. The rest of the stipulations should be fixed by law. This would avoid all discussion at all. And only this would stop the banks abuses once and for all. The reputation of the banking system in Spain is rather low actually.
- The regulation on how the banks have to check the solvency of potential borrowers is so vague. This means that it will be very difficult to demand liability from the banks if they do not fulfil their duty.
- The Act regulates the loads of information the bank has to give to the borrowers before signing a mortgage contract. But loads of information does not mean clear information in my opinion. The general principle is still that the bank have to make sure the client understands the contract. Transparency pure and simple.
- Following the previous point the Act requires that any notary chosen by the future borrower has to give free advice to them and prepare a document where the aforementioned borrower declares that they have received all the required information from the bank. That they have been given that advice and have discussed all the queries they had on the contract. I do not like this point at all for several reasons. First, nobody has to work for free. Not even notaries. Second, this meeting with the notary has to take place between the 10 days following the receipt of all the information and documentation from the bank. And this causes already big delays on signatures. Third, the notary involvement looks like the banks are trying to put the responsibility on the information to provide on the notaries and not on themselves. This is a general feeling I think. Finally, because the borrower can fulfil the imperative meeting with the notary throght a representative which does not help the borrower really understands the mortgage contract.
In future posts I will try to explain in detail some of the new regulations procedures and requeriments. My experience so far is that when a mortgage is involved a transaction takes more than a few months now and this is not good. Also, as the banks cannot protect themselves now with many abusive stipulations as they did before they are protecting themselves before they sign the mortgage contract. And the banks require many more information and details from all the people involved in the transaction to secure their position. The outcome is that a property purchase with the new regulations it takes longer than before. It might be just because everybody is getting used to the new regulations and it will improve with the time. I really hope so.
Thank you for your time and attention and I hope this information is of use. You are very welcome to share if you liked it.
Please, note that this is general information. This is not specific legal advice. It is advisable to seek legal advice for any specific legal issue.