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Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.
By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
21st of November 2018
Over the course of the next weeks a new Mortgage Act will be enacted by Congress. In the wake of the property bubble collapse, which has resulted in hundreds of thousands of bank repossessions and a deluge of litigation against lenders due to the widespread inclusion of abusive clauses in mortgage loans, a new bill is going to be passed that is going to alter significantly how mortgages work in Spain going forward.
The urgency on ratifying this new law comes about because Spain is already two years behind passing it, and the European Commission is threatening to levy fines of up to €100,000 per day if Spain does not pass the bill before the end of this year.
The draft bill is in its last stages, so few changes are to be expected. I have collated below the major highlights worth noting:
This new bill is indeed very welcome for a number of reasons.
The new law will protect families, bolstering consumer rights, should they fall into arrears allowing them more time to get up on their feet and service their mortgage repayments. Over the last decade in Spain we have gone from lenders having the enormous power of instigating a repossession procedure on a borrower missing a single quota to lenders having to wait a full year before filing a repossession. In the aftermath of the property bubble collapse, hundreds of thousands of families lost their homes.
It will also bolster credit. Lenders, beset by hundreds of thousands of litigation procedures under way, are reluctant to lend, which severely impacts the credit supply. This new law will clear the path and hopefully alleviate the problem contributing to open up the credit supply which is fundamental, as credit underpins any major property recovery. Without credit, there can be no market recovery.
All in all, a good law.
I would like to end this post on a positive note, thinking that we have all learnt a collective lesson from the property bubble. Unfortunately, history is a stubborn mistress and teaches us that we always trip over the same stone, more than once.
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