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Mortgage regulation tightened

Mortgage regulation tightenedFOLLOWING many years of ‘devious’ practices by financial institutions and intermediaries throughout EU member states, the Mortgage Credit Directive sets out common standards to enhance the protection of consumers taking out loans to buy residential property.

The Directive, which has taken nearly twelve years of negotiation to come to fruition, is designed to ensure that borrowers have all the relevant information that will enable them to make informed decisions when reviewing the terms and conditions of a loan offer. It also requires financial institutions to undertake creditworthiness checks on potential borrowers before granting a loan.

The Directive includes a ‘European Standardised Information Sheet’ (ESIS); a five page form that lenders are required to complete free of change enabling borrowers to compare loan products from different lenders tailored to their specific requirements.

The ESIS explains the terms and conditions of the proposed loan agreement and how the interest rate is calculated. It also requires lenders to draw attention to the risks when taking a loan in a foreign currency.

Member states are required to transpose the provisions of Directive 2014/17/EU into their national law by March 2016 and it is likely to result in substantial changes to mortgage lending procedures in Cyprus.

Further Reading

Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property.

12 COMMENTS

  1. @UBoat on 2015/02/01 at 8:37 pm – If you read the Directive (link at the foot of the article) you will see that it covers ‘credit facilities’, which will include home loans, construction loans, etc.

    A mortgage is a special type of loan this is secured by the collateral of specified immovable property. If you buy a property off plan, it cannot be used as collateral because it doesn’t exist at the time the loan is granted. When the property is transferred to its buyer (i.e. the Title Deeds are registered in their name), the home loan is converted to a mortgage and lodged against the title of the property purchased (and the Land Registry charge the new owner 1% of the sum advanced under the loan).

  2. I would like to draw attention to how is the BOC allowed to change hosing loan agreements without consent on both parties to it. I took out a home loan for instance, in 2004 on the home loan “agreement” it states “BOC base rate 4.25 (variable) +1.75 margin FIXED”. after 2006/7 the statement rate changed to BOC home loan rate + a variable MARGIN!!!. therefore, since then, I have not benefited from the lower ECB rate currently nearer 0 % plus what I expected fixed rate margin. Very much like my UK Barclays bank mortgage tracker current Barclays bank base rate 0.5 % (variable) plus 0.5 %( fixed) rate margin making 1% I am currently paying at moment in UK (lucky me).

    When asking for an explanation from BOC I was told this was perfectly normal to alter the agreement loan details as “you would paying just the same” when joining the eurozone. I feel I have been scammed.

  3. Good news for some. Always welcome.

    But I must ask what if any protection there is in this for A Housing loan….? You might say that a housing loan is a mortgage ? But I have been told it is not, as in Cyprus you can get a housing loan with no title deed but not a mortgage. So already in the system there are provisions for alternate ways ….. ?

  4. Thousands of bolted horses loose on the highway. Some already run over – others causing accidents as they swerve to avoid being killed…

    Hundreds of unbolted stable doors…

    Enter a loan stable door bolt salesman…

    Timing is everything…

  5. Welcome news indeed but possibly of no consolation to those deceived into Swiss Franc mortgages. At least now people who are ignorant of the vagaries of foreign exchange may be better informed.

    Augean Stables – you have far more faith in the FCA in England than I. As for slaughtering “Emporiki/Alpha” and mortgage holders getting redress – decades of regulatory failure involving individuals indicates otherwise (Equitable Life) however to be fair they are now, it seems, finally growing some teeth and applying their charter and authority as originally intended as indicated in the Bank fines of late, £1.1 billion in the case of the 5 involved in FX irregularities. A good thing too but a shame they do not seem as able to protect individuals as keenly. We live in hope.

  6. To little to late for me !. The banks greed and colluding with developers with in house lawyers to create a property market designed purely for extortion has somewhat backfired. Now over half the loans are “npls” be they commercial or residential. I don’t call that good business. It will cost the earth to pursue and recover all the losses and will never get as much as half of it back. it simply won`t happen. Even though this has created another revenue stream from people trying to recover what`s left of their broken dreams by employing lawyers who dangle them on a string. I think the reality of what has happened is hitting home and they are trying to shut the gate long after the horse has bolted. If only they could have had the foresight when they joined the Euro to see the long term benefit`s of happily paying customers for 25 years or more as opposed to seeing an opportunity to make a quick buck whilst creating a huge mess.. The damage to Cyprus`s reputation is going to run deep with a lot of people for a very long time.

  7. I do not make this comment as an authority on matters financial – I make it as an ordinary guy in the street who has lived here long enough to say the the “Laws” and “Regulations” are all very good but it all comes down to someone having the backbone to enforce them. The snouts have been in the trough too long on this beautiful island and the slippery people in power will find an excuse/reason to ignore anything put in their path. Cynic that I am.

  8. It would be useful to see an article on how the Swiss Franc mortgages were mis-sold. Ideally, a response from the banks would be included. I have not seen any admissions by them of mis-selling, rather some denials, but without any facts.

  9. Too little too late! The Cypriot banks have raped and pillaged for too long now and it still won’t hold its hand up to acknowledge its crime. This devious part of society has ruined the good name of this once beautiful Island and with corruption underhand practices should never be trusted again. Hopefully Brits will see how this place is a million miles away from any legal practices that you may have in Great Britain and never ever be fooled into investing in this totally corrupt Island.

  10. It also requires lenders to draw attention to the risks when taking a loan in a foreign currency.
    Augean Stables was correct in the post. These regulations were in place but the lawyers and the banks just forgot to mention it at the point of sale. Even more worrying is the fact that there is no re-dress against these people. Pretty much a closed shop. Try getting a solicitor to sue another solicitor or a bank. It just doesn’t happen on this island.

  11. The regulation re Swiss Franc mortgages was already there. ‘ Four eye Principle’ etc.

    The issue in Cyprus is the lack of any credible enforcement.

    For its faults, the FCA here in England would have slaughtered Emporiki/Alpha and mortgage holders would get redress.

    Cyprus you are a small island in denial.

  12. We welcome the new regulation of tightening mortgage transactions and hopefully safeguarding future mortgage deals. This of course does not help existing Swiss franc mortgages who where miss sold this type of mortgage.

    It is about time that the EU and governments sort out the fiasco of existing Swiss franc mortgages and help people to move on and start a new beginning for everybody.

    Is this the new start ????

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