Gov’t Approves New Mortgage Bill That Favours Borrowers

7 November 2017 – Inmodiario

The Government has approved the Mortgage Bill, which transposes the corresponding European Directive and seeks to increase the transparency of mortgage contracts, according to explanations provided by the Minister for the Economy, Industry and Competitiveness, Luis de Guindos (pictured below, left).

In terms of the transposition, De Guindos said that the legislation has opted for the alternatives that are most favourable for the mortgage holder in every case. In this way, commissions for the early repayment of variable rate loans will be reduced, and even cancelled from the fifth year onwards; a maximum commission (cap) will be set for fixed-rate loans, compared to the current situation where up to two commissions may be applied, one of which has no kind of limit.

Moreover, the legislation establishes the right of consumers to change the currency of a loan taken out in a foreign currency to the domestic currency or any other; plus it prohibits cross-selling – which obliges the consumer to contract a series of financial products as conditions to obtaining a mortgage – and it regulates the legal framework for mortgage brokers.

The Ministry of Economy has said that the bill is not limited to simply transposing the EU Directive, but also responds to legal rulings that have expressed the need for greater transparency in terms of mortgage regulation.

In this sense, the legislation facilitates the conversion of variable rate mortgages to fixed-rate products, for both new mortgages as well as those already underway. The commissions for making such a change will be cancelled from the third year and the notary and registration fees will be reduced.

Other changes mean that the lender must provide the client with detailed documentation about the mortgage, including the most “sensitive” clauses and scenarios showing the evolution of instalments. Moreover, the borrower will be entitled to receive free advice from the notary about the contents of the contract for seven days prior to signing.

The legislation also regulates the early repayment of loans, “in such a way that it avoids any kind of discretion when it comes to agreeing this clause”, according to Luis de Guindos. The requirement for a financial entity to be able to initiate the foreclosure of a mortgage is extended to nine unpaid monthly instalments or an amount that exceeds 2% of the capital granted during the first half of the mortgage term; and 4% or twelve unpaid instalments during the second half.

Original story: Inmodiario

Translation: Carmel Drake

Hispania Negotiates New Strategic Focus With Soros

29 December 2016 – El Confidencial

It hasn’t always been a Socimi. When it debuted on the stock market on 14 March 2014, Hispania Activos Inmobiliarios was an investment company owned by a Socimi, a structure that had chosen very carefully, given that the formula allowed it, amongst other things, to acquire assets by purchasing debt, like it did, for example, with Hotel Guadalmina, its first major operation in the most tourist segment of the real estate business.

But there was another more fundamental reason for adopting that structure: the limited life period that it was born with. Unlike the other three large Socimis – Merlin, Lar España and Axiare –which fired the starting gun from the get go in this booming sector, Hispania was created in accordance with a detailed timetable that included three investment years and another three divestment years, as the company explained in detail in its IPO prospectus.

Nevertheless, the company left the door open to expand this horizon, provided it received the green light from its shareholders at the General Shareholders’ Meeting, a date towards which the team at Azora, Hispania’s management firm, is now working. Azora is finalising a new proposal with the aim of receiving the approval of its investors in March, when the vehicle will celebrate three years of life.

According to several sources, the now Socimi (it adopted this company structure just before the summer) is negotiating with its main shareholders, led by George Soros, not only to extend the company’s life term, but also to adopt a new value proposition, based on specialising increasingly in hotels, to the detriment of offices and homes, and in modifying the management policy. Hispania itself has declined to make any comments in this regard.

The Hungarian magnate’s confidence in Hispania was underlined during the company’s latest capital increase, which he subscribed to in accordance with his proportional share, and in the messages that he has sent to the Azora team, in that he is willing to continue to back the company, but that he wants to make a series of changes that will directly affect the interests of the management company.

According to the same sources, Soros is interested in internalising Hispania’s management team in some way, rather than having it operating externally as it does currently, and in modifying the fee policy, which the management contract splits into a fixed part, the base fees, and a variable part, the incentive fees. The first is a commission linked to the investment percentage of the initial net funds raised through the IPO; and the second is a commission relating to the level of returns obtained from the investments.

Strategic change

Since its creation and until the third quarter of 2016, the last period for which official figures are available, Hispania has invested €857.1 million in hotels, €395.3 million in offices and €177.9 million in the residential sector, bringing its total investment volume to €1,430.3 million, almost three times more than the amount it raised through its debut on the stock market (€500 million).

It was then that Soros appeared as the company’s major shareholder and anchor investor, and that is a role that he continues to play today, controlling as he does 16.67% of the shares. (…).

In recent months, the company has undergone a major reorganisation of its structure, with the conversion of all of its subsidiaries into Socimis and the absorption of them. All of these steps are oriented towards the same purpose, to convince the shareholders of the appropriateness of continuing to back this vehicle. Albeit, with a new road map. The proof will be in the pudding in March.

Original story: El Confidencial (by Ruth Ugalde)

Translation: Carmel Drake