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HOUSING FINANCE - EU Parliament wants a Free EU Market for Mortgage Industry. No integration into Consumer Credit Directive. No Consumer Protection
In a motion on mortgage credit in response to the Commission's Green Paper on Mortgage Regulation the European Parliament has issued its paper which if implemented will significantly weaken national consumer protection in housing and affect the social protection provided by national markets. Exorbitant early repayment fees in some countries, a devastating second mortgage market where houses are “eaten up”, limited offers in some countries with regard to variable rate, cross selling of insurance, endowment credit and high cost for mobility are not taken into account. Free Internet access, abolishment of product regulation, access for non-banks – the believe into markets is unchallenged.

This lengthy and technical paper ignores the dissenting opinnion of consumer organisations published in the statement of the first mortgage group.
Only three points can be seen as consumer friendly taking notice of the real world of housing finance today but all three points lack concretisation.

SOCIAL IMPACT ASSESSEMENT NECESSARY: “any specific proposals should be preceded by thorough economic and social impact assessments;”

EQUAL OPPORTUNITIES FOR LOW INCOME BORROWERS: “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;”

CODE OF CONDUCT INSUFFICIENT: “Considers the Code of Conduct and the ESIS to be important yet insufficient instruments for the protecting the economic interests of citizens … making the Code of Conduct, which is currently voluntary, mandatory if early compliance is not forthcoming;”


The rest of the text is more or less a motion to support lenders' access to consumers wherever they are in whatever form they want. We would like to have an answer to all these questions by a Parliament which obviously had involved only a few and especially those into the definition of this motion who know well what the supplier sides assumes to be good for them.

BIG IS BEAUTIFULL, UNRESTRICTED MARKETS ARE BENEFICIAL?

“Recognises the consumer benefits that would be brought by further well-focused integration of the EU mortgage market;” “encouraging market-led initiatives wherever possible;” “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” “Supports Commission action to facilitate cross-border mergers and acquisitions in financial”

PREDATORY LENDERS – OPEN DOORS? “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;”

DOOR STEP SELLING: A GOOD THING? “Recognises the beneficial role that credit intermediaries, such as mortgage brokers, can play in helping customers access
DEBT BY MOUSECLICK. “Recognises the potential of the Internet as a means for mortgage credit marketing, and recommends that the Commission study this further”

NO INTEGRATION INTO CONSUMER CREDIT DIRECTIVE? “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”

FOREIGN LAW APPLICABLE? “Rome Convention on the law applicable to contractual obligations in the case of mortgage deeds, lex rei sitae applies”

DATA PROTECTION UNNECESSARY? “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;” “access to both positive and negative credit data is desirable;”

STATE SUBSIDIES TO LOW INCOME BORROWERS IN QUESTION? “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;”

INDUSTRY IMPACT IN CONSULATION PROCESS OK? “3. Welcomes the Commission's wide consultation … welcomes the Commission's efforts to date to comply with better regulation requirements” “Welcomes the setting up of the Mortgage Funding Expert Group”

NO PROTECTION AGAINST DANGEROUS CREDIT PRODUCTS? “Cautions the Commission that attempts to harmonise products themselves might lead to legal inconsistencies and thus produce a negative impact on the sector” “EU action should not hamper competition and
innovation, in particular regarding products, ancillary services and funding techniques;”

CROSS SELLING OF HIGH PRICED INSURANCE?: “Recognises the important role of mortgage insurance in reducing the risk exposure of lenders and allowing access for a wider range of borrowers”; NO INCLUSION OF INSURANCE FEES? “APR ... should combine all charges to be levied by the lender …"

UNLIMITED EARLY REPAYMENT FEES? 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 the development of the market in terms of funding, new products and lending to higher-risk borrowers;

ID: 39243
Author(s): iff
Publication date: 19/12/06
   
URL(s):

Link to EP: Resolution on mortgage credit in the EU (2006/2102(INI)) (14 November 2006) - Dec 2006

Link to Commission: Green Paper on Mortgage Credit in the EU (COM(2005)327) (19 July 2005)
 

Created: 19/12/06. Last changed: 21/12/06.
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