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Home > Mortgages > Chaos ensues with new laws on Spanish mortgage loans

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

About Antonio Flores

Antonio Flores is the head lawyer at Lawbird, a Spanish law firm specialised in property and litigation. More on .

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  1. June 18th, 2019 at 11:38 | #1

    How many more obstacles can the authorities put in the way of potential purchasers
    The resales properties with no Licencia primera occupacion which can only be bought with cash (if a buyer is prepared to accept a property without this licence) Also tourist rentals requiring this for registration. Marbella’s planning department also in chaos with granting of build licences and habitation licences combined with Endesa who appear to struggle getting the paperwork correct. We will drive foreigners away with all these delays and restrictions, along with the vast amount of revenue they produce. Will history repeat itself with the new builds not being sold (and still many older off-plan complexes lying empty up and down the coast).

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