On March 16, the Official State Bulletin published Law 5/2019 regulating mortgage contracts, also called “new mortgage law” although its entry into force is delayed until June 16, given that its sixteenth final provision establishes three months for those affected to adapt to the new regulation. We can not speak of a new mortgage system, but of a new information system for consumers and clarification of rights and obligations of the parties.
There are several objectives pursued with the approval of this new Law, but the basic objective was to incorporate the Directive 2014/17 / EU into our legal system, which comes several years late. In addition, the legislator was aware of the need to promote legal security quite battered in the Spanish mortgage market. This insecurity has manifested itself above all in the huge number of judicial litigation in Spanish and European courts: land clauses, swaps, mortgage expenses, etc. Facts that have massacred the credibility of the Spanish banking system against its clients, and has put the judicial system on the verge of absolute collapse. It was essential to do something. Therefore, the legislator has foreseen clearer and more predictable rules in the assessment of the so-called material transparency, thus establishing a definitive legal regime.
However, Law 5/2019 hardly modifies the current Mortgage Law, focusing above all on the property registers and all different types of mortgages establishing certain rules for the protection of individuals who are debtors or guarantors, loans that are guaranteed by mortgage or other real right of guarantee on real estate for residential use or whose purpose is to acquire or retain property rights over land or the existing buildings or the ones to be built.
More specifically, the main novelties that propose the reform of the Law approved are:
- Distribution of initial expenses. The expenses related to the mortgage will correspond to the Bank (notaries, agencies, registers and Documented Legal Acts (AJD)). Only those expenses related to the appraisal will correspond to the mortgaged one.
- Costs by subrogation. The client can freely subrogate their mortgage without any cost. Between entities, a compensation mechanism will be established based on the interest collected and the pending collection linked to the cost for the mortgage constitution expenses.
- Floor clauses. The ground clauses are eliminated and an additional provision is established so that the new early termination clause doesn’t affect the attachments currently suspended and pending resolutions of the Court of Justice of the European Union.
- Commissions. For advanced early repayment, the Law approves reductions that will be different according to the interest rate agreed upon.
a) Variable interest. The client will have to pay a maximum commission of 0.25% of the capital repaid in advance if they amortize the mortgage in the first three, or 0.15% if they do so in the first five years.
b) Fixed interest. The commission will be 2% during the first 10 years of the loan and 1.5% from that moment.
- Eviction proceedings may only begin with the non-payment of 12 installments or 3% of the capital loaned in the first half of the life of the loan, or 15 installments or 7% in the second half of the loan.
- Protection to the client
The bank is obliged to offer the client 10 days so that they can analyze the pre-contractual information of the real estate loans before signing any documents and is also obliged to offer a file for which the client can compare the mortgage conditions offered by each entity. In addition to this right of the clients to analyze the information with time, the obligation of the parties to visit the notary prior to the signing of the contract is also added. In short, we see how the reforms established by the approved law focus on adding measures aimed at protecting the consumer and making a new distribution of the costs involved in the credit between the bank and the client.