Bill to stop evictions and help families in debt

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1. The bill seeks to balance the position of the mortgage debtor against the bank: it sets that the appraisal value used in foreclosure cannot be lower than the one used to grant the loan, and caps late-payment interest at 2 points above the regular interest rate, even by agreement.
2. It reforms the rules for auctioning a foreclosed home to prevent it from being awarded at very low prices. It distinguishes between a primary residence and other assets, and lets the debtor bring a third party with a better bid or keep the property by paying what is owed.
3. It promotes the out-of-court sale before a notary, a faster and cheaper procedure than going to court, with a single auction, and provides that if the buyer assigns the property for a higher price, the original owner receives 30 % of the difference.
4. It strengthens the independence of appraisal companies and limits over-indebtedness: for a primary residence, mortgage loans could not exceed 30 years or 80 % of the appraisal value, and it sets limits on interest rate variability.
5. It expands the Code of Good Practices of Royal Decree-Lawroyal decree-law A rule with the force of law that the Government passes because it is urgent. It applies from its publication, but the Congreso must validate it within 30 days or it lapses. 6/2012 to more families: it raises the income threshold to two and a half times the IPREMIPREM A public income indicator used in Spain to measure whether a family has low income., lowers to 50 % the share of income the mortgage payment must exceed, and requires banks with FROB stakes to join. It also reduces the annual rent paid by the former owner who stays as a tenant after handing over the home.
6. It creates an out-of-court procedure before a notary, prior to insolvency proceedings, for consumers with non-fraudulent over-indebtedness due to unforeseen causes, a kind of 'fresh start'. If the agreement fails, the judge could even release the debtor from unpaid debts after a period of three to five years.

Who it affects

• Families struggling to pay the mortgage on their primary home: They would get more protections in foreclosure, caps on late-payment interest, and access to the expanded Code of Good Practices.
• Consumers over-indebted due to unforeseen causes, such as unemployment or divorce: They could use a notarial payment agreement and, if it fails, insolvency proceedings with possible debt discharge.
• Guarantors of mortgage loans: They would receive improved notices and their liability would not be unfairly increased.
• Credit institutions, especially those with FROB stakes: They would be required to join the Code of Good Practices and the notarial agreement, and face stricter transparency rules.
• Appraisal companies: They would have to be more independent and face a tougher sanctioning regime.

Words worth knowing

Ejecución hipotecaria (foreclosure)

The process by which the bank takes the mortgaged home when the loan is not paid.

Dación en pago (deed in lieu of payment)

Handing the home over to the bank to cancel the debt.

IPREM

A public income indicator used in Spain to measure whether a family has low income.

Concurso de acreedores (insolvency proceedings)

A court procedure to divide the assets of someone who cannot pay their debts among all creditors.

Intereses de demora (late-payment interest)

Extra charge applied when a payment is made late.

royal decree-law

A rule with the force of law that the Government passes because it is urgent. It applies from its publication, but the Congreso must validate it within 30 days or it lapses.

decree-law

A rule with the force of law that the Government passes because it is urgent. It applies from its publication, but the Congreso must validate it within 30 days or it lapses.

It summarizes the text as it was introduced. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries