Since the onset of the economic crisis, the number of foreclosures has been increasing exponentially. So much so that, in order to protect the interests of property buyers through a mortgage loan, the legislator has been regulating the requirements necessary to proceed to foreclosure. The first major reform protecting the rights of debtors was introduced by Law 1/2013 as a result of the response of the European Court of Justice (ECJ) in the “Aziz case” which considered that the Mortgage Law infringed upon consumer rights.
As a change, said Law introduced the requirement of a minimum of 3 unpaid instalments to to become due in advance and the limitation of the moratorium interest, acquired due to the delay in the payment of the mortgage, to three times the legal interest.
Taking the opportunity to implement Directive 2014/17 through the “Law regulating real estate credit contracts” that will enter into force in the coming months, the Government has introduced changes inspired by other legal frameworks of the EU, such as the German and Italian ones, to initiate the mortgage foreclosure procedure in case of non-payment. In this way, it has considered the life of the loan in two halves, during the first one the default must be equal to 3% of the granted capital or 12 instalments. In the second half, it amounts to 7% and 15 instalments respectively. It also regulates default interest, which is limited to the interest on the loan plus 3 points..
This reform will undoubtedly provide greater guarantees for the purchaser, but it will also bring legal certainty to the bank, since at present the criteria of the Provincial Courts with regard to the early maturity clause is very uneven, since most of them are awaiting a response from the Court of Justice of the European Union on a preliminary ruling regarding the current early maturity clause.
As for the foreclosure procedures currently in force in the courts, they will not be able to benefit from this reform, so the vast majority will continue to be suspended pending the decision of the European Court, whose decision will be binding on the approximately 80,000 procedures in progress in the Spanish courts. If the decision is contrary to the interests of the entities, they will have to explore new mechanisms outside the new regulation to exercise their collection rights as debt claimants.
In short, it is a long-awaited law because it provides a regulatory framework that gives legal certainty to all actors. On the one hand, consumers, since it will represent a new generation of rights due to the guarantees that are established at the level of banking contracts and which should lead to the restoration of consumer confidence. And on the other hand, for the financial institutions themselves to whom this law offers a framework of stability and legal certainty that, at least from the moment it comes into force, will put an end to many issues (not all of them) that have suffered from the vagaries of jurisprudence such as early termination.
Ana Enguix. Director of the Judicial Dept. – Iván Martinez. Lawyer.