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Brussels, 22 April 2013
Statement by Commissioner Michel Barnier following the agreement in trilogue on the Mortgages Directive
I welcome the agreement reached this evening on the Mortgages Directive.
The financial crisis started with the subprime debacle in the United States where mortgages were being handed out with no background checks carried out on whether consumers could afford them, and ill-informed and often vulnerable consumers were encouraged to take excessive risk. We have seen similar excesses in Europe, for example with the housing booms and the inevitable busts which followed in Spain and Ireland. The consequences for the financial sector and the economy as a whole have been enormous. And there have been too many very real tragedies for those who have lost their homes because they could no longer meet their mortgage repayments.
This Directive will help put an end to these excesses and foster responsible lending practices. Consumers will finally get the protection they deserve. They will be better informed so they can choose the mortgage product which best meets their needs, at the best price, and fully aware of the risks they are taking.
This Directive will also benefit mortgage credit providers. They play a key role in the economy. Two-thirds of the loans in portfolios are mortgages. The Directive will ensure that the mortgage credit providers meet new professional standards, and will encourage competition. It will create the framework for a European-wide mortgage market enabling operators to finally be able to take full advantage of the Single Market and its 500 million consumers thanks to a European passport.
I would like to thank all the actors involved in the negotiations which started in March 2011 and which have not always been easy, in particular the rapporteur Mr Sánchez Presedo and the shadow rapporteurs Mr Schwab, Mr Pallone, Mr De Backer, Ms Ford, Mr Giegold as well as the Polish, Danish, Cypriot and Irish Presidencies. I am looking forward to the European Parliament and Council confirming this political agreement in the next few weeks.
The Mortgage Credit Directive (Directive on credit agreements relating to residential immovable property – see IP/11/383 and MEMO/11/205) will introduce for the first time European-wide standards for the conduct of the credit worthiness assessment in the mortgage credit area. Where the result of such assessment is negative, the creditors will no longer be allowed to hand out mortgage credits.
The Directive will not only put a brake on the excesses of the past, but will also offer the mortgage credit providers new opportunities to take full advantage of the Single Market with its 500 million consumers. Provided that credit intermediaries are properly authorised, registered and supervised at national level, they will receive a European passport and can look for new business opportunities in any of the 27 Member States.
But above all, the new Directive will include a number of important elements that go beyond a mere crisis response, for the benefit of consumers:
'Tying practice' means the offering or the selling of a credit agreement in a package with other distinct financial products or services where the credit agreement is not made available to the consumer separately.
FSB principles on sound and responsible mortgage underwriting practices.