The Government´s mortgage reform to deflate the bubble of “abusive” mortgages is taking shape. The Ministry of Economy would like to underpin protection mechanisms for debtors who risk to be excluded socially. It intends to improve the draft which will be debated tomorrow in Parliament. But the Ministry also intends to “make the necessary requirements to access the Code of Good Practices more flexible”. That is, to be able to benefit from a debt restructuring or an assignment in payment (to cancel the debt by handing in the property).
Sources close to the Ministry of Economy assured that the Government is “ready to extend the scope of the code, so as to make it more accessible and to reform the conditions to access the assignment in payment”. The income threshold to access that Code will therefore be increased.
Nowadays, to benefit from this code the maximum level of income per family is 16.000 Euros per year, and all members of the family must be unemployed.
But these rigid requirements caused only 568 petitions during the first quarter of the Code´s existence, half of which were processed. Only 44 debt restructuring process and assignments in payment were signed during that period.
The intention now is to help citizens to avoid the foreclosure or to liquidate their debt with the handing in of the keys. This would converge with Royal Decree on evictions passed in November, which offers advantages (a moratorium of two years) for those who earn less than 19000 Euros per year, whether they are unemployed or not, if certain special social circumstances concur (families with children aged 3 or less, or with a handicapped member, among others).
The income threshold established at that time (three times the Public Income Indicator) is equivalent to 80% of the average salary, and therefore it would be more real to apply it to mortgage debtors who risk to be socially excluded.
The Government would also like the banks to warn citizens that they can benefit from the Code of Good Practice. (…)
Nevertheless, financial institutions are putting a stop to evictions of late payers. Not only those who comply with the requirements to benefit of the two year moratorium, but most of them.
The sector awaits the decision of the European Court of Justice, who could determine that the Spanish norms regulating evictions could be against the European norms for consumer protection against abusive clauses in mortgages.(…)
The Government is preparing more measures to protect debtors. They intend to reform the Mortgage Law, with a drastic decrease in interests for late payment in mortgages on usual residences, which cannot be higher than the legal money interest (currently 4%) plus a surcharge of two percentage points. A maximum of 6%, opposite to the interests being charged right now, which range from 18% to 29%, according to Adicae.(…)