New rules to get a mortgage in Spain

The amendments to the new Mortgage Law have been developed based the conditions of “material transparency”.

This transparency  must be met between banks, clients and notaries when formalizing a mortgage. This requires a series of new obligations to be taken into account.

One of the most striking issues contemplated in the new article 13.2.c is the obligation of the notary to ‘ test’  the borrower, “which will aim to detail the documentation delivered and the information provided.”

This kind of examination performed by the notary, with each client, will be a required part in the act that the public notary must perform – and cannot be added as a cost – to demonstrate that throughout the process each user has been informed and advised with all the details.

According to the regulations that have been agreed upon in the amendment process, the bank that is lending  the money for the mortgage must send to the notary ten days in advance all the documentation. This must include  the complete project with the full details of the repayment installments, in other word when, and how much must be paid. It must also detail the expenses associated with the formalization. It must also include who pays what. The notary, for their part, must inform each borrower “individually” about all the clauses relating to the loan and the information contained in each of the mandatory documents involved..

Until now,  notaries were only obliged to ask if the borrower understood the mortgage. A simple yes or no answer was all that was required. Under the new regulations, no borrower needs to be too shy and admit they do not understand a mortgage as the responsibility is turned onto the notary to be satisfied that the borrower understands the mortgage fully.

For the entire process to have sufficient transparency, the rule includes a point in the article that requires the borrower to “appear before the notary, so that he can extend the time to understand the mortgage, as late as the day before the authorization of the public deed of the loan contract. ” If all these procedures are not covered in time and form, or the borrower does not appear before the notary to do so, “the public deed of loan may not be authorized.”

Dealing with abusive clauses

One of the reasons for all this change in the regulation on mortgages is marked by the recent change of jurisprudence in the tax of Documented Legal Acts (AJD) and by the case of the ground clauses that are overloading the courts. Legal  consultants involved in this type of processes justify the exhaustive zeal that has been put into the transparency factor.

In recent cases, the advice on mortgages as explained  in the recent jurisprudence of the Court of Justice of the EU (CJEU), has described as abusive many previous processes and in future to avoid even the  minimum suspicion that the client has been advised wrongly.

“The CJEU works on the principle  that there has been some type of abusive or similar clause in all the processes where the  consequences of having contracted one or another financial product but have not been sufficiently explained to the consumers”, assures a legal expert on issues of competence and rights in the EU. “If we add the power of some judges, eager to send a message to Luxembourg, this abuse of borrowers will not be tolerated..

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