The Spanish Government has approved the Royal Decree-Law 19/2022 of 22 November which adopts several structural measures in order to improve the Spanish mortgage market. In particular, the measures are structured into three areas: (i) a new Code of Good Practices to alleviate the rise in interest rates on mortgage loans on habitual residences; (ii) restructuring the debt of the vulnerable families; and (iii) structural measures aimed at improving and increasing the transparency of the Spanish mortgage market (the “RDL 19/2022”).
New Code of Good Practices for debtors at risk of vulnerability
A new temporary Code of Good Practices is proposed to provide some relief to middle-class debtors at risk of vulnerability due to the increase in mortgage payments (due to the increase of the Euribor), so as to facilitate a more gradual adaptation of families to the new interest rate scenario.
This new the Code of Good Practices will apply to:
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natural persons who are holders of loans or credits secured by real estate mortgages on the debtor's or the non-debtor mortgagor's habitual residence;
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mortgage loans when the purchase price does not exceed EUR 300,000; and
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loans granted until 31 December 2022.
The particular measures to be included in this New Code of Good Practices will be developed by an agreement of the Council of Ministers and will consist, inter alia, in the extension of repayment periods, the setting of temporary fixed instalments or a special arrangement for the applicable interest rate and the provision of offers for the conversion of fixed-rate loans. Furthermore, it is not clear yet the applicable conditions and requirements to be met by debtors in order to benefit from the Code of Good Practices.
The New Code will apply to those entities who voluntary adhere to the Code of Good Practices. The adherence shall be open to credit institutions and other institutions or natural persons who, on a professional basis, carry out the activity of granting mortgage loans or credits in Spain.
From the moment the institution or lender adheres to the Code of Good Practices, it shall apply the measures set out therein. In order to do so, however, the debtor shall first prove that he/she meets the eligibility conditions for transactions and debtors set out in the Code of Good Practices.
Institutions or lenders shall notify the General Secretariat of the Treasury and International Finance (Secretaría General del Tesoro y Financiación Internacional) of their adherence.
The novation transactions covered by this New Code of Good Practices may not, inter alia:
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lead to a change in the agreed interest rate, unless this corresponds to one of the measures of the New Code of Best Practices;
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be marketed together with any other new bundled or combined product; or
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require the granting of additional security, whether personal or in rem, not covered in the original contract.
Extending and reinforcing the existing Code of Good Practices for vulnerable families
The RDL 19/2022 also amends the existing Code of Good Practices for vulnerable mortgage debtors (which was approved in 2012) in order to adapt it to the current interest rate situation. In this way, the treatment of these situations is calibrated with the following measures:
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When the increase in mortgage effort exceeds 50% – a grace period (período de carencia) of the loan principal of 5 years and a reduction of the applicable interest rate to the Euribor minus 0.10 % from the current Euribor plus 0.25 %.
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When the increase in mortgage effort is less than 50% – a grace period (período de carencia) of the loan principal of 2 years and a term extension of up to 7 years.
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The introduction of a new obligation for adhering institutions to ensure that debtors' rights are safeguarded in the event of the assignment of credits to third parties.
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Other improvements are:
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the possibility for debtors to request a payment in kind (dación en pago) for 24 months (doubling the current period of 12 months) from the request for restructuring; and
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requesting the institution to study a second restructuring if, at the end of the first restructuring, the debtor remains in a situation of vulnerability for the same or other reasons.
Supplementary measures
Additional improvements are introduced through the RDL 19/2022, which include:
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no fees shall accrue for the conversion from variable to fixed rate mortgage loans and credits until 31 December 2023;
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tax measures to avoid the tax burden on novations;
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measures for the promotion of financial education; and
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the monitoring of the implementation of both Codes will be strengthened.
Additional remarks
The aim is for the adopted legislative package to be available from 1 January 2023.
Authored by Alejandro González Álvarez and Carlos Carbajo Amigó.
