Brussels, 07/06/2012 (Agence Europe) - On Thursday 7 June, the European Parliament's economic and monetary affairs committee decided to give consumers taking out mortgages greater protection by voting through a draft report by Antolín Sánchez Presedo (S&D, Spain) and going further than initially suggested by the European Commission when it unveiled the legislation in 2011. MEPs want to give consumers a fortnight to change their minds after signing a mortgage deal. “The Parliament has given a qualitative breakthrough regarding the initial text. We introduced a new chapter on financial education, strengthened information to consumers, established a reflection period and the possibility to receive good advice”, said Sánchez Presedo.
Going further than the initial proposals, MEPs want any advice to would-be mortgage borrowers to be impartial and ensure the customers understand the financial consequences of mortgage borrowing over the long-term. Consumers must be able to easily compare deals available on the market and be informed of any financial incentives to sellers connected with any mortgage products they sell. The financial solvency of would-be borrowers must be carefully studied, say the MEPs, as recommended by the European Commission. If they wish, consumers must be allowed to pay off their mortgage early without penalty, although the draft report suggests lenders should get some form of compensation. It will no longer be allowed to force consumers to take out specific mortgage-related products (life insurance etc), but it may require them to take out insurance with certain characteristics and indeed refuse to grant a mortgage if suitable insurance is not taken out.
The committee wants to protect consumers against their own errors of judgment. If borrowers fail to make their mortgage payments, lenders must do all they can to find another solution before repossessing the property. If the borrower and lender made this clear in advance, then the sale of the property on which the mortgage is taken out should suffice to pay off the loan. If not, the bank will have to take account of the borrower's financial situation (monthly income, for example) when deciding on monthly mortgage payments. (MB/transl.fl)