Mortgages: “The new rules will make irresponsible lending more difficult”
Better protecting and informing property buyers taking on a mortgage is the aim of the directive to be debated and voted this week by MEPs during the September plenary. Antolín Sánchez Presedo, a Spanish member of the S&D group, is responsible for steering the new rules through the Parliament. He explained us how Parliament wants to help curb the irresponsible lending that has compounded the crisis.
How will these new measures protect people from housing bubbles such as the ones that took place in Spain and Ireland?
These measures will make irresponsible lending more difficult. Credit institutions will have to give much more information to consumers and will have to carry out an in-depth assessment of the borrowers. There will also be higher requirements on the valuation of the residential property and on the risk analysis of the market.
There will be a seven-day reflection period, which could be longer if member states so decide. Consumers will be able to assess their decision and have a right of withdrawal.
How could this help consumers that find themselves in a situation where they cannot pay back any longer the mortgage and risk losing their homes?
There will be a higher degree of flexibility during the mortgage. And to protect borrowers better in case of crisis and default, there are principles to avoid the termination of the contract and foreclosure. The door is open to sell the property for the best effort price, protecting consumers to avoid over-indebtedness and repaying the loan by returning the property.
How will this reform affect the economy?
Setting a common legal framework on the EU mortgage market will help to develop it and make it more dynamic and will boost growth and employment. It will also help families to have access to decent housing in fair financial conditions.
Source: European Parliament
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