REPORT on Mortgage Credit in the EU
19.10.2006 - (2006/2102(INI))
Committee on Economic and Monetary Affairs
Rapporteur: John Purvis
Draftsman (*): Manuel Medina Ortega, Committee on Internal Market and Consumer Protection
(*) Enhanced cooperation between committees - Rule 47 of the Rules of Procedure
MOTION FOR A EUROPEAN PARLIAMENT RESOLUTION
on Mortgage Credit in the EU
The European Parliament,
– having regard to the Commission Green Paper on Mortgage Credit in the EU (COM(2005)0327),
– having regard to the White Paper on Financial Services Policy 2005-2010 (COM(2005)0629,
– having regard to the response of the Governing Council of the European Central Bank (ECB) to the Green Paper on Mortgage Credit in the EU, 1 December 2005,
– having regard to the Second Council Directive 89/646/EEC of 15 December 1989 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions and amending Directive 77/780/EEC[1],
– having regard to the directives of the European Parliament and of the Council relating to the take-up and pursuit of the business of credit institutions[2] (Capital Requirements Directive) and on the capital adequacy of investment firms and credit institutions[3],
– having regard to Directive 2002/65/EC[4] concerning the distance marketing of consumer financial services,
– having regard to Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce in the Internal Market[5],
– having regard to the modified proposal for a directive of the European Parliament and of the Council on credit agreements for consumers amending Council Directive 93/13/EC (COM(2005)0483),
– having regard to the Commission's amended proposal for a directive of the European Parliament and of the Council Directive on the freedom of establishment and the free supply of services in the field of mortgage credit (COM(1987)0255),
– having regard to Rule 45 of its Rules of Procedure,
– having regard to the report of the Committee on Economic and Monetary Affairs and the opinions of the Committee on the Internal Market and Consumer Protection and the Committee on Legal Affairs (A6-0370/2006),
A. whereas mortgage credit represents a large and rapidly expanding market and is a vital part of the EU's economic and social structure,
B. whereas some European Union countries have experienced unprecedented growth in the property market, which has succeeded in making the construction sector an anti-cyclical one, a key factor in achieving growth and employment during the economic recession experienced in Europe during the period 2000 to 2005,
C. whereas historically low interest rates have resulted in much extended mortgage borrowing, particularly in those countries where it has been based on a confidence which has brought about economic growth,
D. whereas the protection of European consumers must be a paramount feature of any legislative action on mortgage credit, which for most EU citizens represents the biggest financial commitment in their lifetime, with long-term implications for their standard of living and financial stability,
E. whereas enhanced transparency on key features concerning available mortgage products will not only improve market efficiency, but also increase the confidence of EU borrowers looking at mortgage credit deals in other Member States and enable them to take an informed decision,
F. whereas consumers need to have access to the fullest and simplest information possible, provided on a case-by-case basis in standard forms lending themselves to comparative study across Member States, in order to enable them to exercise their freedom of choice more effectively when taking out mortgage credit on a cross-border basis,
G. whereas targeted measures for an improved product and services range, wider availability and an integrated funding market could enhance market efficiency, economies of scale and diversification, reduce borrowing costs, and thereby benefit the European economy,
H. whereas creating access to client credit databases for mortgage service providers in case of cross-border lending is a crucial contribution to boosting competition in mortgage-based lending activity and creating a single European mortgage market,
I. whereas an integrated mortgage market will facilitate workers' mobility,
J. whereas, surprisingly, there is little pressure from mortgage lenders or consumer organisations to develop cross-border lending other than by physical establishment in the separate national markets,
K. whereas considerable market barriers have so far hindered the increase of cross-border mortgage credit offers, so far amounting to less than 1% of the overall EU mortgage market,
L. whereas on a number of important issues the Community has no competence, or only a limited competence, and whereas the principles of subsidiarity and proportionality must be respected,
M. whereas mortgage brokers can play an important role, drawing on their expertise with mortgage products on their domestic market but also in markets across Member States, supporting cross-border activity and acting as a bridge between consumers and both foreign and local financial institutions,
N. whereas significant variations in the range and characteristics of products, distribution structures, loan durations, and funding mechanisms exist between Member States, due to differing legal, fiscal, regulatory, and consumer protection conditions,
O. whereas mortgage credit markets display an extremely high degree of complexity; whereas legal systems and financing cultures, property law and land register systems, law of rights in rem, law governing credit agreements, valuation issues, forced sales procedures, refinancing markets, etc. differ considerably from one country to another while at the same time an internal coherence exists among the various fields,
P. whereas there still exist tax obstacles of a discriminatory nature which impede the exploitation of a single market for mortgage credit and may in some cases even contravene EC legislation,
Q. whereas there is a direct link between the mortgage market and macro-economic policy and the conduct of monetary policy in particular,
R. whereas mortgage market volatility can affect housing and economic cycles and thus cause systemic risk,
S. whereas, in order to bring more efficiency and competitiveness to the EU mortgage credit market, it may be preferable to look first at the implementation and effectiveness of the Commission Recommendation of 1 March 2001 on pre-contractual information to be given to consumers by lenders offering home loans[6] (Code of Conduct) and the use of the European Standardised Information Sheet (ESIS), aiming to ensure that consumers obtain transparent and comparable information on housing loans,
T. whereas the above-mentioned Code of Conduct appears to have been implemented with varying degrees of success across Member States, yet without solving the overall problem of the lack of a common legal framework,
Introduction
1. Recognises the consumer benefits that would be brought by further well-focused integration of the EU mortgage market;
2. Considers that any action at EU level regarding the European mortgage credit market must, first and foremost, benefit the public directly as mortgage borrowers and that the mortgage credit market should be accessible to a larger number of potential borrowers, including those with a low or incomplete credit profile, workers with fixed term contracts and first-time buyers;
3. Welcomes the Commission’s wide consultation and insists that any specific proposals should be preceded by thorough economic and social impact assessments;
4. Welcomes the Commission's efforts to date to comply with better regulation requirements; however, reminds the Commission that any conclusions reached should always be the result of an extensive consultation process;
5. Notes the numerous obstacles to a single EU retail market for mortgage credit highlighted in the Green Paper and urges the Commission to focus on targeted measures offering the greatest benefits, encouraging market-led initiatives wherever possible;
6. Cautions the Commission that attempts to harmonise products themselves might lead to legal inconsistencies and thus produce a negative impact on the sector;
7. Insists that any EU action should not hamper competition and innovation, in particular regarding products, ancillary services and funding techniques;
Code of Conduct and pre-contractual information
8. Calls for moves towards the harmonisation of provisions on pre-contractual information, which are necessary to enable borrowers to take informed decisions on potential mortgage contracts;
9. Insists that such pre-contractual information must be accurate and comprehensible to allow an informed choice, and that it should give the consumer as comprehensible and global a picture as possible in the light of the available information on which the mortgage contract is based; stresses that, in the event that the lender takes the initiative of offering a credit in another Member State, such information must be supplied to the borrower as quickly as possible in the official languages recognised in the borrower's Member State of residence;
10. Considers the Code of Conduct and the ESIS to be important yet insufficient instruments for the protection of the economic interests of citizens moving between Member States and likely to acquire property in other Member States; encourages the Commission to consider making the Code of Conduct, which is currently voluntary, mandatory in the future;
Funding
11. Considers that the development of a single, open and compatible funding market is a first priority as it will boost efficiency, allow international diversification of credit risk, optimise funding conditions and capital allocation, and reduce borrowing costs; recognises the importance of and the potential for integrating market-led initiatives in this area;
12. Points out that the creation of a single secondary market for mortgages can not be achieved without a gradual convergence of national contract rules;
13. Welcomes the setting up of the Mortgage Funding Expert Group and calls for an in-depth analysis of variations in national regulatory and legal practices affecting mortgages;
14. Considers that provisions in the Capital Requirements Directive on covered bonds and mortgage-backed securities offer important funding options;
15. Suggests that a range of standardised packages of European mortgages could be traded on the capital markets with credit ratings according to their characteristics, thereby enhancing secondary markets in securitised mortgages;
16. Calls on the Commission to consider the growing market of mortgages compliant with sharia law and to ensure that any legislation does not exclude the requirements of that market;
17. Recognises the important role of mortgage insurance in reducing the risk exposure of lenders and allowing access for a wider range of borrowers;
Retail
18. Calls on the Commission to investigate barriers which impede lenders' rights to free provision of services or freedom of establishment in other Member States and whether the 'general good' clause is being used to discourage cross-border activity;
19. Supports Commission action to facilitate cross-border mergers and acquisitions in financial services, while ensuring that distribution networks take into account the requirements of regional situations and smaller markets, but notes that cross-border mergers and acquisitions alone will not promote integration of the market in this area;
20. Considers that opening up the mortgage credit market to non-credit institutions, with an equivalent supervisory regime, will increase competition and the range of products;
21. Recognises the beneficial role that credit intermediaries, such as mortgage brokers, can play in helping customers access competitive mortgage credit from domestic and non-domestic lenders and urges the Commission to consult on an appropriate regulatory environment for such operators and prepare a proposal;
22. Calls on the Commission to investigate impediments to the transfer of loans across borders and to explore further the potential of the Euromortgage as a collateral instrument, including consideration of the accompanying guarantees;
23. Calls on the Commission to investigate impediments to the transfer of loans across borders and define measures facilitating the portability of mortgage loans;
24. Considers that any proposals to this effect should, if necessary, be accompanied by an impact assessment, including legal aspects, with detailed studies of comparative law, as well as economic and social aspects in line with the approach advocated under the guide to impact assessment approved by the Competitiveness Council on 29 May 2006;
25. Calls on the Commission to encourage the development of mechanisms for rechargeable mortgages and life annuity mortgage loans with full guarantees in terms of public information, with due regard to issues of confidentiality and effects vis-à-vis third parties;
26. Considers that lenders are more likely to enter a market if national rules allow them to offer early repayment terms at a price proportionate to costs or to vary interest rates in line with market conditions and risk and that restrictions in these aspects are likely to impair development of the market in terms of funding, new products and lending to higher-risk borrowers;
27. Considers that an EU standard, defining the scope and calculation of the annual percentage rates charged, should comprise only the costs borne by the lender and should ensure their comparability with products offered in other Member States, which have the same maturity; believes, however, that borrowers should also be informed in advance of any other relevant costs when information on such costs is publicly available, such as notary and land registration fees and the costs of any judicial processes and valuations; considers that where such information is not publicly available, an indication of the estimated costs should be provided;
28. Maintains that lenders ought to be in a position to supply consumers with any other information related to transactions and the legal obligations to be entered into by the borrower, such as legal fees, registration and administration fees, handling charges, etc.;
29. Believes that in addition to providing exact information on the annual percentage rate, the lender must provide information on any other types of charges or costs likely to arise from its activities, for example the expenses incurred in examining applications, commitment fees, penalties for early full or part repayment;
30. Recognises the potential of the internet as a means for mortgage credit marketing, and recommends that the Commission study this further;
Legal, fiscal and operational barriers
31. Urges the Commission to examine legal and regulatory barriers hindering a market-led development of a pan-European funding market for mortgage credit;
32. Calls on the Commission to define the scope of its future proposals and to restrict it to mortgage contracts and their guarantees (fixed charges on real estate), so as to avoid any overlapping with COM(2005)0483;
33. Calls on the Commission to take steps to ensure the smooth running of the secondary mortgage market and establish a legal framework for conducting effective portfolio trading, in particular by identifying the factors preventing the available legal refinancing facilities from meeting the desired objective and allowing for the differing legal traditions and the different models for collateral security in re;
34. Supports the Mortgage Credit Forum Group's view that the law applicable to mortgage credit contracts, which will be covered by the future regulation on the law applicable to contractual obligations (Rome I) (2005/0261(COD)), does not have to be aligned with the law applicable to mortgage deeds and that, in the case of mortgage deeds, lex rei sitae applies;
35. Agrees with the Commission that the issue of the law applicable to mortgage credit contracts should be addressed within the context of the revision of the 1980 Rome Convention on the law applicable to contractual obligations;
36. Stresses the importance of comprehensive and reliable client credit databases and urges the Commission to promote the development of a process of transition to a consistent format in all Member States;
37. Urges the Commission to facilitate cross-border access to client credit databases on a non-discriminatory basis as a priority for encouraging lenders to enter new markets;
38. Recognises that, subject to justifiable privacy protection, access to both positive and negative credit data is desirable;
39. Welcomes efforts to bring about improvements and adjustments in the law governing forced sales procedures;
40. Supports the Commission's proposal of a scoreboard for the length and cost of forced sales procedures;
41. Suggests that valuers' professional bodies should combine to adopt common EU property valuation standards of high quality and comparability;
42. Stresses the importance to lenders of easy access to full and accurate information on mortgage collateral and ownership rights;
43. Favours encouraging access to land registers, where this is not prevented by existing legislation, and supports all efforts to harmonise the informative value of these registers by means of national measures and encourages the enhancement of the current European Land Information Service (EULIS) system;
44. Supports action to abolish tax obstacles of a discriminatory nature, such as differential fiscal treatment of local and foreign lenders and government fees;
45. Urges the Commission to consider, in the case of cross-border mortgages, how to reconcile the varying approaches to the tax deduction of mortgage interest across the EU;
Systemic, macroeconomic and prudential issues
46. Urges the Commission and the ECB to monitor and analyse the potential risks of increasing levels of mortgage debt and of mortgage credit funded from capital markets;
Conclusion
47. Concludes that there is potential for consumer and economic benefits by some further, well-considered integration of the EU mortgage market;
* *
*
48. Instructs its President to forward this resolution to the Council, the Commission, the ECB and the governments of the Member States.
EXPLANATORY STATEMENT
Mortgage credit markets
Mortgage loans outstanding at the end of 2004 amounted to €4.7 trillion, or 45% of the EU's GDP[1]. Over the past 5 years the average annual growth in mortgage lending has been 8.5%. This has financed a burgeoning housing market and, in some countries, released equity to fund, for example, shortfalls in retirement provision. Mortgage finance is one of the sectors expected to grow most over the next 15 years.
The case for integration
Among the several potential benefits of greater integration of EU mortgage markets, mortgage lenders and funders would realise economies of scale and opportunities for diversification. This should improve competition, efficiency and consumer choice and reduce costs. There should be more opportunities for people currently unable to enter the housing market to do so. A more integrated EU mortgage market could help labour mobility and retirement financing.
A home represents the largest lifetime purchase for many and the related mortgage is often their largest financial obligation. Mortgage debt impacts consumer demand and the general economy via household spending. Hence greater integration could affect the EU economy overall and the balance between housing expenditure and other consumption and investment choices. By improving capital efficiency and lowering credit risk, there is a link to the Lisbon agenda's economic and social targets.
Lack of integration
The Green Paper says the EU mortgage credit markets are poorly integrated, pointing out the lack of cross-border lending and the variation in range of products from country to country. Previous endeavours have made it easier for banks to operate cross-border (for example, when setting up branches), but retail market integration is limited. The Financial Services Action Plan has focused primarily on wholesale markets.
There are significant differences between member states, which reflect the different social, cultural, legal and fiscal conditions. Owner-occupier rates tend to be higher in the Southern and Eastern countries[2]. Mortgage borrowing in the new member states is relatively small, although a dynamic housing market appears to be developing. Mortgage debt outstanding as a share of GDP (EU-25) ranges from 111% in the Netherlands to 2.3% of GDP in Slovenia[3].
The London Economics study highlighted the problem of defining mortgages or home loans in a satisfactory way for all member states. Some countries define mortgages as loans secured on a property, while others use personal sureties to guarantee loans for house purchase.
The range of products, distribution structures, loan durations and funding mechanisms vary. Incompatible fiscal conditions, as well as additional regulatory or prudential requirements from national regulators, make entering a new market complex and costly. Furthermore, national housing markets have developed with marked social and cultural differences.
Funding
There is currently no pan-European funding market. It is fragmented because of legal, tax and regulatory obstacles. Mortgages are funded mostly by retail savings. Less than 40% are financed via capital markets, even though this has grown fast recently[4]. Sweden and Germany have substantial mortgage bond markets and in Denmark mortgage institutions issue mortgage bonds against the entire value of mortgage loans. Mortgage backed securities (MBS) markets are strongest in the Netherlands, Spain, Italy, UK, Ireland and Belgium, but do not exist in some countries[5].
The FSAP has provided a good basis for a more dynamic and competitive European financial services industry with improved and more up-to-date rules on investor protection and transparency. The eurozone provides a currency zone where exchange risk is eliminated for borrowers and lenders and the capital markets have quickly developed to be substantial, flexible and liquid.
The Green Paper
The Green Paper examines the potential benefits of further integration and focuses on four main areas highlighted by the Forum Group report: consumer protection, legal issues (including taxation), collateral and funding.
The Commission intends to publish a White Paper in early 2007, setting out its consultation findings and any proposed initiatives. Any proposals would aim to increase competition and market efficiency. It will not favour particular funding systems, products or institutions.
Your rapporteur's opinion
It was clear from the Committee's Workshop of 22 February that there is no strong appetite from either industry or consumer groups for greater cross-border provision of mortgage credit. Borrowers are unlikely to shop abroad or take out a mortgage with a foreign-based lender, unless their products are being promoted in or subject to the familiar protections of their home country. Lenders show little interest in cross-border lending, stressing the importance of local market knowledge.
There is also no real appetite for a single, harmonising directive. Local culture and traditions have helped shape the type of products available on national markets and consumers are unlikely to want a massive overhaul of the market and certainly no reduction in choice or consumer protection standards, which harmonisation might entail. From an industry perspective, full harmonisation would be expensive, especially in areas such as consumer information and advice. There is also resistance to basing integration on mutual recognition without a more level playing field. 20 years ago the Commission proposal for legislation, which aimed to bring about a free market for mortgage credit based on mutual recognition, was never adopted due to disagreement in the Council.
The London Economics survey[6] found that lenders were, however, interested in expanding into foreign markets by using brokers or establishing subsidiaries or branches. Nevertheless, technical barriers dissuade lenders from exploiting the single market even in this way.
Any EU action must benefit the general public, either directly as mortgage borrowers or via an improved economy. We should aim to establish the conditions which will encourage greater competition between lenders established in different member states, in order to develop a European mortgage credit market with a broad range of products at competitive prices. We must be careful not to act in a way which could be detrimental to this booming sector. Only when there is a strong prospect of real improvement and where the benefits outweigh the costs should we favour legislative action. Further impact assessments should therefore be carried out on any specific measures proposed in the future.
Your rapporteur would favour targeted measures aimed at removing specific barriers to lenders entering other EU countries' markets. Where possible, self-regulation is preferable to legislation and both industry and consumer groups should be fully involved in any initiatives.
Funding
The secondary mortgage securities market should be a priority for action at EU level. Achieving a single market in funding would have quick and significant results and seems to be widely supported. There is large potential for growth in funding from the capital markets, especially in certain member states. Greater scale, liquidity, range and sophistication would result in cheaper mortgages and more flexible and varied products.
The Mortgage Funding Expert Group has started work already and is expected to present its conclusions in November 2006. One of its tasks should be to determine to what extent national regulations prevent the emergence of a pan-EU funding market. The growth in recent years of covered bonds and mortgage backed securities shows that the market is already moving in this direction. However, action at EU level could spur greater use of the capital markets. The rapporteur would suggest that the expert group look at how to develop standardised packages of mixed European mortgages with known characteristics, which could be credit rated and traded on the capital markets.
Retail
Currently in some member states only "banks" can borrow on the capital markets and/or offer mortgage products. Your rapporteur considers that regimes should be liberalised to allow non-deposit taking institutions to enter the market. In the UK they have had a positive impact on the level of competition and market completeness. While prudential concerns do need to be taken into account, any rules must be proportionate and non-discriminatory.
The "Euromortgage" offers the possibility to weaken the link between the mortgage collateral and the mortgage contract. It could be developed as an optional pan-European tool to facilitate cross-border lending and cover multiple properties. Its feasibility should therefore be assessed in more depth.
Early repayment conditions and costs vary from country to country. Rules, which limit the lender's and borrower's freedom to agree terms and charges for early repayment, could impede competition and hinder the development of a pan-European funding market. Caps on interest rates and variable rates could also restrict the development of new products or lending to higher risk borrowers.
Borrowers need to know the true cost and conditions in order to compare products. Directive 2002/65/EC on distance marketing of consumer financial services requires the supplier to provide the consumer with the total price as well as notifying him of any additional costs not paid via or imposed by the supplier. Agreement on an EU standard APRC for mortgages should be a priority.
Internet banking is developing rapidly. Its role in mortgages has been limited so far, but this will probably accelerate. Therefore, we need to be aware of any legal barriers which could hinder future development. For example, the E-Commerce Directive requires national authorities to ensure contracts concluded by electronic means are legally effective, but excludes contracts that create or transfer rights in real estate.
Legal, tax and operational barriers
There needs to be greater clarity about the law applicable to the credit contract and the mortgage deed. In the case of the mortgage deed, lex rei sitae applies.
Lenders are more likely to enter a market if they have access to client data as well as better access to and clearer information on mortgage collateral and ownership rights. Non-discriminatory access to both positive and negative client credit data needs to be facilitated subject to justifiable protection of personal privacy.
Delays in forced sales create problems for lenders and therefore the encouragement of shorter and less expensive forced sales procedures is extremely important. A scoreboard system could have a salutary effect.
Good quality property valuations according to a consistent standard are essential for lenders. Therefore reaching common valuation standards would be the optimal solution. The relevant professional bodies should be invited to develop them on an EU-wide basis.
Tax obstacles to the cross-border provision of mortgages need to be identified and addressed. Prominent among the differences is the deductibility from taxable income of mortgage interest. If agreement cannot be found on the fundamental issue, then at least the tax benefit should be extended to mortgage interest paid to lenders in other member states on property located in the primary member state.
Systemic, macroeconomic and prudential issues
The current scale of mortgage finance, let alone its potential scale, makes it a significant factor in the EU's economic and social fabric. It is clear that the relevant authorities (e.g. the ECB, Commission, member state governments and regulators) need to monitor developments, which might cause systemic difficulties of a financial or social character. Nevertheless, any such oversight should look primarily to an efficient market to maintain the requisite balance. Bureaucratic and legislative interference should be restricted to the essential minimum.
OPINION of the Committee on the Internal Market and Consumer Protection (6.10.2006)
for the Committee on Economic and Monetary Affairs
on the Green Paper on mortgage credit in the EU
(2006/2102(INI))
Draftsman (*): Manuel Medina Ortega
(*) Enhanced cooperation between committees - Rule 47 of the Rules of Procedure
SUGGESTIONS
The Committee on the Internal Market and Consumer Protection calls on the Committee on Economic and Monetary Affaires, as the committee responsible, to incorporate the following suggestions in its motion for a resolution:
A. whereas the Commission Green Paper on Mortgage Credit in the EU (COM(2005)0327) assesses the case for Community legislation aimed at further integration of the European mortgage credit markets with the objective of enhancing EU growth, employment and competitiveness;
B. whereas a more integrated mortgage credit market would enable economies of scale to be applied to more useful effect, reduce costs and hence, in the final analysis, benefit consumers, and would also boost the development of the European economy, thus marking a further step forward in attaining the Lisbon goals;
C. whereas an open, efficient and more integrated mortgage credit market would respond to the increasing mobility of labour and citizens within the internal market;
D. whereas the protection of European consumers must be a paramount feature of any legislative action on mortgage credit, which for most EU citizens represents the biggest financial commitment in their lifetime, with long-term implications for their standard of living and financial stability;
E. whereas enhanced transparency on key features concerning available mortgage products will not only improve market efficiency, but also increase the confidence of EU borrowers looking at mortgage credit deals in other Member States and enable them to take an informed decision;
F. whereas consumers need to have access to the fullest and simplest possible information, provided in each specific instance in standard forms lending themselves to comparative study in the different Member States, in order to enable them to exercise their freedom of choice more effectively when taking out mortgage credit on a cross-border basis;
G. whereas significant differences still exist between Member States' legal systems and business cultures, in particular in relation to provisions regulating areas not covered by EU legislation such as enforcement procedures, property legislation, land registers, contract terms and so on;
H. whereas considerable market barriers have so far hindered the increase of cross-border mortgage credit offers, so far amounting to less than 1% of the overall EU mortgage market;
I. whereas mortgage brokers can play an important role, drawing on their expertise with mortgage products on their domestic market but also across markets in other Member States, supporting cross-border activity and acting as a bridge between consumers and both foreign and local financial institutions;
J. whereas, in order to bring more efficiency and competitiveness to the EU mortgage credit market, it may be preferable to look first at the implementation and working of the Commission recommendation of 1 March 2001 on pre-contractual information to be given to consumers by lenders offering home loans[1] (code of conduct on housing loans) and the use of the European Standardised Information Sheet (ESIS), aiming to ensure that consumers obtain transparent and comparable information on housing loans;
K. whereas the above mentioned code of conduct on housing loans appears to have been implemented with varying degrees of success across Member States, yet without solving the overall problem of the lack of a common legal framework;
1. Recognises the consumer benefit which further well-focused integration of the EU mortgage market would bring;
2. Agrees with the Commission that the issue of the law applicable to mortgage credit contracts should be addressed within the context of the revision of the 1980 Rome Convention on the law applicable to contractual obligations;
3. Calls on the Commission to take measures towards establishing a functioning secondary market in mortgages and a legal framework for efficient portfolio trading, for example by the separation of lending from collateral security in re;
4. Welcomes efforts to bring about improvements and adjustments in the law governing forced sales procedures;
5. Calls for moves towards harmonisation of provisions on pre-contractual information, which are necessary to enable the borrower to take an informed decision on the mortgage contract he/she is about to sign;
6. Insists that such pre-contractual information must be accurate and comprehensible to allow for informed choice, and that it should give the consumer as comprehensible and global a picture as possible in the light of the available information on which the mortgage contract is based; stresses that, in case the lender takes the initiative to offer a credit in another Member State, such information must be supplied to the borrower as quickly as possible in the official languages recognised in the borrower's Member State of residence;
7. Considers the existing voluntary code of conduct on housing loans and the ESIS to be an important yet insufficient instrument for the protection of the economic interests of citizens moving between Member States and likely to acquire property in other Member States; encourages the Commission to consider making the voluntary code of conduct mandatory in the future;
8. Cautions the Commission that attempts to harmonize products themselves might lead to legal inconsistencies and thus produce a negative impact on the sector;
9. Calls in particular for common EU standards in the calculation base of the Annual Percentage Rate of Charge (APRC), this being a key element in providing consumers with a viable way of comparing the overall cost of a mortgage credit; is of the opinion, however, that the statement of overall costs should list only those costs incurred in respect of the lender;
10. Believes that in addition to providing exact information on the Annual Percentage Rate (APR), the lender must provide information on any other types of charges or costs likely to arise from its activities, for example the expenses incurred in examining an application, commitment fees, fees for early repayment in full or in part and so on;
11. Maintains that lenders ought to be in a position to supply consumers with any other information related to transactions and the legal obligations to be entered into by the borrower (solicitor’s/notary’s fees, registration and administration or handling charges and so on);
12. Recognizes that the issue of early repayment needs further consideration; invites the Commission to develop further proposals on how to improve information to consumers on early repayment and early repayment fees;
13. Calls on the Commission to look into developing the role of intermediaries (mortgage brokers) as a way of assisting consumers in accessing accurate and detailed information;
14. Calls for the strict respect of all EU data protection legislation in force for any operation related to the risk assessment of a borrower's credit-worthiness and for the storage of such data in any kind of database;
15. Is in favour of encouraging access to land registers, where this is not prevented by existing legislation, and supports all efforts to harmonise the informative value of these registers by means of national measures and encourages the enhancement of the current EULIS system;
16. Invites Member States to adopt a differentiated approach in the implementation of national enforcement procedures related to mortgage credit contracts in order to take account of consumers' personal and social circumstances; supports the Commission's suggestion of creating a regularly updated scoreboard with information on cost and duration of forced sale procedures in Member States and calls upon the Commission to regularly review the effectiveness of this measure;
17. Welcomes the Commission's efforts to date to comply with better regulation requirements; however, reminds the Commission that any conclusions reached should always be the result of an extensive consultation process;
18. Invites the Commission to examine how a further convergence of key aspects of the mortgage credit market of particular relevance for EU consumers could be implemented, including common EU standards in the calculation base of the APRC and a list of compulsory information to be included in any mortgage credit offer presented to a potential borrower.
PROCEDURE
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Title |
Green Paper on mortgage credit |
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Procedure number |
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Committee responsible |
ECON |
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Opinion by |
IMCO 18.5.2006 |
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Enhanced cooperation – date announced in plenary |
18.5.2006 |
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Draftsman |
Manuel Medina Ortega 7.3.2006 |
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Previous drafts(wo)man |
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Discussed in committee |
20.2.2006 |
18.4.2006 |
30.5.2006 |
19.6.2006 |
11.7.2006 |
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13.9.2006 |
5.10.2006 |
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Date adopted |
5.10.2006 |
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Result of final vote |
+: -: 0: |
33 0 0 |
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Members present for the final vote |
Charlotte Cederschiöld, Janelly Fourtou, Evelyne Gebhardt, Malcolm Harbour, Anna Hedh, Kurt Lechner, Arlene McCarthy, Toine Manders, Manuel Medina Ortega, Béatrice Patrie, Zita Pleštinská, Giovanni Rivera, Zuzana Roithová, Luisa Fernanda Rudi Ubeda, Heide Rühle, Andreas Schwab, József Szájer, Marianne Thyssen, Jacques Toubon, Bernadette Vergnaud, Glenis Willmott |
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Substitute(s) present for the final vote |
Maria Badia I Cutchet, Simon Coveney, Benoît Hamon, Joel Hasse Ferreira, Filip Andrzej Kaczmarek, Gisela Kallenbach, Syed Kamall, Othmar Karas, Joseph Muscat, Gary Titley, Diana Wallis |
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Substitute(s) under Rule 178(2) present for the final vote |
Sharon Bowles, Den Dover, Harald Ettl, John Purvis |
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Comments (available in one language only) |
... |
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- [1] OJ L 69, 10.3.2001, p. 25.
OPINION of the Committee on Legal Affairs (04.10.2006)
for the Committee on Economic and Monetary Affairs
on Mortgage Credit in the EU (Green Paper)
(2006/2102(INI))
Draftsman: Kurt Lechner
SUGGESTIONS
The Committee on Legal Affairs calls on the Committee on Economic and Monetary Affairs, as the committee responsible, to incorporate the following suggestions in its motion for a resolution:
A. whereas mortgage credit markets display an extremely high degree of complexity; whereas legal systems and financing cultures, property law and land register systems, law of rights in rem, law governing credit agreements, valuation issues, forced sales procedures, refinancing markets, etc. differ considerably from one country to another while at the same time an internal coherence exists among the various fields,
B. whereas on a number of important issues the Community has no competence, or only a limited competence, and whereas the principles of subsidiarity and proportionality must be respected,
C. whereas regulating one area in isolation may lead to considerable disruption in the overall system with its distinctive national features,
D. whereas the high degree of legislative flexibility required by the innovative mortgage credit market can be better guaranteed at national level,
1. Welcomes the fact that the Commission begins its Green Paper by asking whether and to what extent legislative measures can and should be taken;
2. Considers that the Code of Conduct should not be replaced by binding European legislation at this time;
3. Considers that European-level regulation of the obligations to provide information and advice to consumers is not appropriate in the light of differing credit requirements;
4. Considers that the approximation of the legal provisions on early repayment would jeopardise product diversity and would not serve the interests of the consumer;
5. Is in favour of legislation to regulate the APR;
6. Agrees that the issue of the law applicable to mortgage credit contracts should be addressed within the context of the revision of the 1980 Rome Convention on the law applicable to contractual obligations;
7. Welcomes efforts to bring about improvements and adjustments in the law governing forced sales procedures;
8. Is in favour of encouraging access to land registers, where this is not prevented by existing legislation;
9. Calls on the Commission to take steps to ensure the smooth running of the secondary mortgage market and establish a legal framework for conducting effective portfolio trading, in particular by identifying the factors preventing the available legal refinancing facilities from meeting the desired objective and allowing for the differing legal traditions and the different models for collateral security in re.
PROCEDURAL PAGE
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Title |
Mortgage Credit in the EU (Green Paper) |
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Procedure number |
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Committee responsible |
ECON |
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Opinion by |
JURI |
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Enhanced cooperation – date announced in plenary |
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Drafts(wo)man |
Kurt Lechner |
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Previous drafts(wo)man |
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Discussed in committee |
21.6.2006 |
12.9.2006 |
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Date adopted |
3.10.2006 |
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Result of final vote |
+: –: 0: |
20 0 0 |
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Members present for the final vote |
Maria Berger, Rosa Díez González, Bert Doorn, Monica Frassoni, Giuseppe Gargani, Piia-Noora Kauppi, Klaus-Heiner Lehne, Katalin Lévai, Antonio López-Istúriz White, Hans-Peter Mayer, Aloyzas Sakalas, Francesco Enrico Speroni, Andrzej Jan Szejna, Diana Wallis, Rainer Wieland, Jaroslav Zvěřina, Tadeusz Zwiefka |
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Substitute(s) present for the final vote |
Jean-Paul Gauzès, Luis de Grandes Pascual, Kurt Lechner, Toine Manders, Marie Panayotopoulos-Cassiotou |
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Substitute(s) under Rule 178(2) present for the final vote |
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Comments (available in one language only) |
... |
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PROCEDURE
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Title |
Mortgage Credit in the EU |
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Procedure number |
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Committee responsible |
ECON |
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Date authorisation announced in plenary (Rule 45) |
18.5.2006 |
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Date authorisation announced in plenary (Rule 39) |
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Committee(s) asked for opinion(s) |
EMPL |
IMCO |
JURI |
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Not delivering opinion(s) |
EMPL |
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Enhanced cooperation |
IMCO |
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Rapporteur(s) |
John Purvis 5.9.2005 |
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Previous rapporteur(s) |
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Discussed in committee |
18.4.2006 |
20.5.2006 |
12.9.2006 |
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Date adopted |
10.10.2006 |
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Result of final vote |
+: –: 0: |
41 1 0 |
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Members present for the final vote |
Zsolt László Becsey, Pervenche Berès, Sharon Bowles, Udo Bullmann, Ieke van den Burg, David Casa, Jan Christian Ehler, Jonathan Evans, Jean-Paul Gauzès, Robert Goebbels, Donata Maria Assunta Gottardi, Benoît Hamon, Gunnar Hökmark, Karsten Friedrich Hoppenstedt, Sophia in 't Veld, Wolf Klinz, Christoph Konrad, Guntars Krasts, Kurt Joachim Lauk, Andrea Losco, Astrid Lulling, Gay Mitchell, Joseph Muscat, John Purvis, Alexander Radwan, Dariusz Rosati, Eoin Ryan, Antolín Sánchez Presedo, Manuel António dos Santos, Peter Skinner, Margarita Starkevičiūtė, Sahra Wagenknecht |
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Substitute(s) present for the final vote |
Katerina Batzeli, Harald Ettl, Ona Juknevičienė, Werner Langen, Alain Lipietz, Baroness Sarah Ludford, Charles Tannock, Corien Wortmann-Kool |
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Substitute(s) under Rule 178(2) |
Christopher Heaton-Harris, Luis Herrero-Tejedor |
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Date tabled |
19.10.2006 |
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Comments |
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