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The Spanish Lawyer Online

Antonio Flores’ Blog

Thoughts about laws and regulations which affect foreigners in Spain

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Archive for June, 2019

Chaos ensues with new laws on Spanish mortgage loans

June 18th, 2019

BankLogoPicThe recently enacted Real Estate Credit Act 5/2019 has not left anyone indifferent; from those who applaud a reinforced protection for consumers -traditionally seen as the losers in the lender-borrower equation- to the more selfish who predict a sharp decline in real estate transactions due to the obvious hassle of formalizing an even more complex procedure.

A quick glance to last days’ national news headlines show little sympathy for a law seemingly written up to prevent bank abuses in the last boom-crisis cycle:

“El Mundo”: New Mortgage Law: Notaries in a mess, tougher lending criteria and… property sales dropping?

“El Economista”: The New Mortgage Law will make it more difficult for younger borrowers.

“Idealista”: Mortgage law madness: last-minute rush of banks and notaries to avoid a slowdown in sales.

“El Español”: First cock up with the new Mortgage Law: banks and notaries fail to synchronize their electronic register.

But what’s the deal with this law and why are so many reporters up in arms? The answer is not straightforward: whilst most recognize the underlying bona fide mission of protecting consumers, intensified credit checks on borrowers and the intricate pre-contractual stage of new loan agreements can only be deterrents for new business.

To qualify for a loan, any borrower will have to visit a Notary office 10 days prior to closing on the purchase sale to undergo a test; in it, the Notary public will have to evaluate the borrower and his understanding of the document he/she will be signing in 10 days’ time. More so, the Notary is to provide the borrower with two keys documents forwarded by the bank: the “FEIN”, which is the European Standardized Information Card and the “FiAE”, a standardized Warnings Card that includes mortgage parameters (opening commission, early maturity due to non-payment and what expenses are applied in this case) and a few other fairly elaborate items and mathematical formulas.

Not easy? Now think of a foreign buyer that speaks no Spanish, with a notary that equally does not understand foreign languages, and you have a deal breaker. Not to mention the unassumable 10-day wait period for busy investors and the yet-to-be defined role of lawyers here: advisers or just translators? Time will tell

Mortgages , , , ,