Mortgage Loan Act – What is worth knowing?
The mortgage loan appeared on the Polish banking market some time ago, but the law regulating it was created only recently.
There was a need to implement the provisions of the GFIC directive to improve the position of consumers on the market of consumer loans and loans related to residential real estate.
Mortgage Act – the most important goals
The main premise of the Mortgage Act was to make the mortgage more affordable and transparent. It is to strengthen the position of borrowers and increase the transparency of lenders’ offers.
Its goal is also to increase the comparability of loan offers so that the customer reaching for the loan can easily choose the best for himself.
The Mortgage Act regulates the issue related to granting mortgage loans. It allows granting them only to institutions controlled by the Good Finance Investment Corporation (GFIC). Mortgages can therefore grant:
- domestic banks,
- branches of foreign banks,
- credit institutions conducting cross-border activities,
- branches of credit institutions,
- cooperative savings and credit unions.
It is worth remembering that non-bank institutions cannot grant mortgages.
The Mortgage Act says about the currency in which a mortgage can be issued.
It turns out that the mortgage can only be granted in the currency in which the client earns most of the income or holds the majority of the accumulated assets. Therefore, it is not possible to take out a loan only in a foreign currency.
Mortgage Act 2017 – what has changed in the provision?
The 2017 Mortgage Act introduced many changes. It contained a provision prohibiting the so-called tying, i.e. the popular practice of banks, consisting of making the credit decision dependent on the purchase of another financial product or financial service (e.g. deposit or paid account).
Another change concerns the length of the period for issuing a credit decision. The Mortgage Act of July 2017 introduces a strict and uniform deadline for the forwarding of a credit decision, counted from the date of submission of the loan application. It is 21 days.
The new mortgage law requires explicitness, reliability, compressibility, and visibility of the content of mortgage ads. Institutions that grant loans for the purchase of the real estate by advertising their products cannot therefore deliberately mislead consumers.
Banks skillfully circumvent the so-called tying and offer potential customers more favorable credit terms if they decide to purchase an additional product or service. If they do not accept the offer, the promotion will not be granted.
Obligations of the lender after the introduction of the Mortgage Act
The amendment to the Act imposed on mortgage lending institutions the obligation to enable debt restructuring provided that it is justified by the assessment of the borrower’s financial standing.
However, if the restructuring does not improve the client’s financial capacity, the lender must allow him to sell the property and repay the loan within at least six months.
Only after completing the listed activities can the creditor take any debt collection measures. According to the provisions of the Mortgage Act, after concluding a mortgage contract, the customer has 14 days to review the offer in detail and to withdraw from the contract, if any.
If it decides to withdraw from the loan agreement, financial institutions may not charge any costs in this respect, except for interest for the period from the date of disbursement of the loan to its repayment date. The Act protects consumers against liability for failure to conclude a contract.
Consumer Credit Act and the bank credit process
The Act is an important document for a consumer who plans to take out a mortgage. Accurate tracking of its provisions does not guarantee, however, obtaining the information necessary to select the best offer. It is necessary to accurately trace the mortgage parameters and analyze your financial conditions.
It’s worth using a loan comparison engine to find the best mortgage on the market. A conversation with an experienced credit advisor who will advise you on what offer to choose to best suit your needs and expectations may also be helpful in making the right decision.
Mortgage Act – requirements for intermediaries
The Act on Mortgage and Supervision of Mortgage Brokers and Agents says that the activity of providing mortgage brokerage services can only be performed by mortgage brokers and agents.
For a mortgage broker to operate in the field of mortgage brokerage, he must pass the exam – a test consisting of 50 questions. Only obtaining a positive result allows you to work in the profession.
If a candidate for an intermediary passes the exam, he obtains the permit issued by the Good Finance Investment Corporation and makes an entry in the register of credit intermediaries.
Each broker is obliged to conclude a civil liability insurance contract for damage caused in connection with the activity performed. He must also provide a criminal record certificate from the National Criminal Record.
Amendments to the Act and early loan repayment
Before the amendments to the Mortgage Act took place, many financial institutions blocked their clients from early repayment, not wanting to lose interest income on loan installments. It was common practice to impose high fees on borrowers who wanted to pay their debts ahead of schedule.
Due to the amendment to the Act, the borrower has the option of paying all or part of his mortgage at any time.
If he repays the entire loan before the deadline, the total cost of the liability will be reduced in proportion to the period by which the contract period has been shortened. Before that, he only needs to pay the fees associated with servicing the loan.
How to declare consumer bankruptcy after amendments to the Act?
The Act also brought changes in the area of loan restructuring. If the debtor has problems repayment of the loan, he will have 14 days to pay from the time the payment request is issued. Within the next 14 days, he will be able to submit a request for debt restructuring, which is to take place in a manner agreed with the debtor.
The bank may apply, e.g., temporary suspension of payments or extension of the loan period. If the debtor does not reach an agreement with the bank, he will have 6 months to sell the flat / house and pay the debt. During this time, the lender will not be able to claim his property.
New provisions in the Act and the protection of borrowers
As mentioned earlier, according to the Act, the creditor is obliged to ensure that all advertising and marketing information published in the press, television or the Internet directly regarding mortgage offers is unambiguous, reliable, understandable and visible.
In addition, they must not mislead the consumer. Consequently, the content of advertising cannot contain ambiguous and imprecise wording that may create false expectations for the consumer regarding the availability of the mortgage or its total cost.
The font and display time of all advertising and marketing information must enable it to be read by the consumer.
The Act also requires that the most important mortgage information be provided in advertisements: the interest rate, the total amount of the mortgage and the APRC (Actual Annual Interest Rate).