Mortgage loan – will the new law strengthen the client’s position?
The Sejm accepted, the president signed. In summer, a new law on mortgage loans will come into force. A ban on tying, the possibility of early repayment or an accelerated credit decision are only part of the changes offered. We took the proposed regulations under the microscope.
The purpose of the regulations being introduced is to increase the comparability and transparency of mortgage offers. Taking into account the amount of potential debt, the regulation of some areas seems to be fully justified . In the perspective of a dozen or even several dozen years, because usually mortgage contracts are concluded for such periods, the financial and economic situation of the borrower may change dramatically.
The proposed solutions are also intended to strengthen the position of clients in relations with banks. Lawmakers have decided to put a clear emphasis on the unambiguity and precision of the provisions in force. And it must be admitted that they have some experience in this matter. It is enough to mention the liquidation of the bank enforcement title (BTE) or the amendment of the act on consumer bankruptcy. This time, the legislators decided to solder several solid fuses in the circuit connecting the mortgage debtor with the bank. Check out the most important ones.
Credit restructuring in a new version
No one, including risk analysts and the bank’s scoring system , is able to predict in what life situation a potential borrower will be in a dozen or so years. In the network you can find stories of people whose loans were put in immediate payment due to minor underpayment or due to a drop in earnings. You do not need to approximate the situation of the client, who was obliged to repay several hundred thousand dollars of debt within 7 days or, at best, 30 days. In a word – Mexico!
Currently, before termination of the mortgage contract or before the reduction of its amount, the bank should allow debt restructuring, if it is justified by the consumer’s financial situation . The bank’s activities may be manifested in the form of temporarily suspending loan repayment, reducing the installment amount or extending the loan period . If the imposed plan does not bring results, the borrower receives six months for independent sale of the apartment and the allocation of funds received for the repayment of the loan. And this six-month buffer, effectively separating the borrower from the bailiff, gives the prospect of a collision-free exit from the hole.
After a mortgage only to banks and Skokow
In order to effectively supervise the mortgage market, a ban on offering such funding by institutions that are not under the supervision of the Polish Financial Supervision Authority will be introduced. This means that only the banks and SKOKi will remain in the game. Loan companies and non-bank institutions will have to get around with the taste, but what they do not do to strengthen the protection of consumer rights.
Since we are already at the limits, it is worth mentioning that not everyone will be able to borrow in foreign currency . After unpleasant experiences related to loans denominated in Swiss francs, many people have repeatedly repeated the well-known rule – indebt in the currency in which you earn. You can see that the legislators have listened to these voices, because consumers who earn income in dollars can forget about mortgage loans in foreign currency for good.
Tying in the back
Also cross-selling, a popular phrase in the banking jargon meaning cross-selling, in the light of the new law will lose its power. The sale of additional products or complementary services allows for a stronger attachment of the client to the given institution. The proposed provisions will not allow dependence of a credit decision on the necessity to use a range of additional products. Goodbye, therefore, credit cards, insurance policies and paid bills sold in a package with a loan .
So it was not that tying is not excluded checking account, which serve a proper and efficient service a mortgage. The problem is that this type of account must be completely free . The matter seems simple, but each of the banks can shape its pricing policy in an independent manner. Therefore, we will probably have to face a choice between a “naked” loan with a higher margin and a cheaper solution garnished with a wide range of additional products.
Early divorce without consequences
Under the new law, banks will only be able to collect commission for early repayment of the loan for the first three years . It is worth noting that many banks charge an additional payment for early repayment of the liability at the same time, so the new provision does not change much in this respect. Other institutions will have to adapt to the new rules.
The legislator also specified the amount of compensation for premature termination of the contract. This fee can not be greater than the amount of interest that would be counted on the whole or part of the mortgage loan paid in advance within one year from the date of actual repayment. This amount can not be more than 3% of the repayment amount of the mortgage. Thanks to this unification, no one will have any doubts whether it pays to pay off the obligation before the deadline.
Decision in three weeks
Some people who took out a mortgage in the past are well aware that it is a time-consuming process , requiring the collection of a substantial list of documents. In the end, significant amounts are involved, so the assessment of creditworthiness must be carried out with due diligence. Under the new provisions, the credit decision will have to be forwarded to the customer 21 days after the application is submitted. It is also worth quickly assessing whether the proposed loan terms correspond to us, because the validity of the decision is 14 days from its transfer.
Are we heading in the right direction?
Some people get the goosebumps just for the word “regulation”. It seems to us, however, that the subject matter should be looked at with an appropriate distance. Mortgage loans, as high-volume and long-term liabilities , should be subject to special control. The consequences of over-indebtedness and the often unpleasant debt recovery can be severe not only for the borrower , but also for his immediate family.
By closing the topic, we will use a quote, perhaps for some literary, but accurately reflecting the threats related to the uncontrolled spiral of debt: “Time given for credit and the world given for credit, and eyes for credit to mourn them.”