Mortgage reforms: transparency, covered bonds, appraisals and reverse mortgages

Automatic summary, not yet reviewed

1. Credit institutions must give customers, before signing, minimum pre-contractual information on the essential features of mortgage products, so they can assess whether the product fits their needs and financial situation.
2. The regime for cédulas hipotecarias and bonos hipotecarios (Spanish covered bonds and mortgage bonds) is modernized: a special accounting register is created for the loans backing them, the issuance limit for cédulas is set at 80 percent, and administrative burdens on bonds are removed, such as the property registry marginal note and the mandatory bondholders' syndicate, which becomes optional.
3. Appraisal companies must guarantee their independence from credit institutions through an internal code of conduct and, in some cases, a technical committee that verifies compliance. In addition, institutions must accept any appraisal submitted by the customer if it was made by an approved appraiser and has not expired.
4. A specific sanctions regime is created for appraisal companies, with very serious, serious and minor offenses, and anyone acquiring a significant stake (at least 15 percent of the capital) in an appraisal company must previously inform the Bank of Spain.
5. For mortgage loans secured by a home signed after this law takes effect, the early repayment fee becomes a compensation and is capped: for withdrawal, at most 0.5 percent in the first five years and 0.25 percent after that; and no interest rate risk compensation may be charged if the early repayment produces a capital gain for the lender.
6. Notarial and property registry fees for deeds of subrogation, novation and cancellation of mortgage loans are reduced, applying the maximum 90 percent reduction.
7. Maximum mortgages (hipotecas de máximo) are regulated, allowing a single mortgage to secure present and future obligations, and the cases in which a mortgage loan can be modified by novation, without extinguishing the legal relationship, are broadened.
8. The reverse mortgage is regulated: a loan secured on the borrower's habitual home, for people aged 65 or over or with severe or great dependency, whose debt only becomes enforceable when the borrower or the last beneficiary dies. Private coverage of dependency through insurance contracts or pension plans is also regulated.

Words worth knowing

Cédulas and bonos hipotecarios

Spanish covered bonds and mortgage bonds: securities issued by credit institutions and backed by the mortgage loans in their portfolio.

Amortización anticipada

Early repayment: paying off the loan, in whole or in part, before the agreed term.

Subrogación

Moving the mortgage loan from one lender to another without creating a new mortgage.

Hipoteca de máximo

Maximum mortgage: a mortgage securing a maximum amount that can cover present and future obligations, not just one specific loan.

Hipoteca inversa

Reverse mortgage: a loan secured on an older person's habitual home; the person receives money from the lender and the debt is normally settled when they die.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries