Yesterday, June 16, the new Law 5/2019, of March 15, regulating real estate credit contracts came into force, which modifies in very significant aspects the regime of the granting of a mortgage loan by banks to consumers. Obviously, this Law will not apply to previously formalized mortgages, except in the case of novation and/or subrogation or early maturity.
The regulation represents an adaptation of our positive law to European Union law with a three-year delay and is of mandatory application to mortgage loan contracts for residential real estate whose borrower, guarantor or guarantor is a natural person.
It is a regulation that comes to protect consumers, by requiring greater transparency in the previous phase of mortgage contracting in order to eliminate any defect in the consent given by the consumer, increase legal certainty and limit, to a large extent, several of the costs and commissions that the mortgaged party had to assume until now. In order to be practical, the most relevant modifications are detailed below:
a) Elimination of floor clauses, also prohibiting negative interest rates.
b) Limitation of the expenses and taxes to be assumed by the consumer to the cost of the appraisal of the property. That is to say, the bank assumes the payment of the Tax of Documented Legal Acts (AJD), in addition to the expenses of the registry, notary’s office and of the agency, that yes, of the mortgage loan not of the purchase-sale that subscribes simultaneously financed with that one.
c) The client must have the necessary information to know the product he/she is contracting at least 10 days in advance, in order to understand what he/she is signing and to resolve any doubts that may arise. To this end, the mortgaged consumer will have to go twice to the notary’s office: once without the bank’s company to resolve any possible doubts and the second time to sign the loan.
d) The role of the Notary, who must be chosen by the consumer, is reinforced by this double control, since he must verify that the consumer has received all the legally required information, which includes complete information on the characteristics of the loan (interest rate, commissions, expenses, etc.) and, in the case of variable rates, a simulation of the variation of the mortgage payment in different scenarios of interest rate evolution.
e) The bank may only initiate foreclosure proceedings for non-payment if there are twelve unpaid installments or 3% of the loan capital in the first half of the term of the loan, or fifteen installments or 7% in the second half of the loan. In addition, evictions are prohibited in cases of persons without a previous housing alternative.
f) With respect to the linking of products, such as insurance or cards, the law prohibits obliging the client to contract other products in order to obtain a loan, although it does allow bonuses for those who do so.
g) Finally, early repayment fees, partial or total, are halved for fixed-rate mortgages (2% for the first 10 years and 1.5% after this period), while the mortgagor must choose the three or five-year repayment rate for variable-rate mortgages, whose fees will be 0.25% or 0.15%, respectively.
Pablo Solá Martí.