EN ECB-PUBLIC  
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 22 May 2013 
on mortgagor protection 
(CON/2013/33) 
 
Introduction and legal basis 
On 30 April 2013, the European Central Bank (ECB) received a request from the Spanish Secretary of 
State for Economic Affairs and Business Support for an  opinion on a draft law on mortgagor protection, 
debt restructuring and social housing (hereinafter the ‘draft law’), which was enacted by the Spanish 
Parliament on 8 May as Law 1/20131. 
The ECB’s competence to deliver an  opinion is based on Articles 127(4) and 282(5) of the Treaty on the 
Functioning of the European Union and the third and sixth indents of Article 2(1) of Council Decision 
98/415/EC of 29 June 1998 on the consultation of  the European Central Bank by national authorities 
regarding draft legislative provisions2, as the draft law relates to the Banco de España and to rules 
applicable to financial institutions insofar as they materially influence the stability of financial institutions 
and markets. In accordance with the first sentence of  Article 17.5 of the Rules of Procedure of the 
European Central Bank, the Governing Council has adopted this opinion. 
 1.  Purpose of the draft law 
The purpose of the draft law is to improve the functi oning of the mortgage market by reinforcing the 
independence of valuation agencies and services
3, introducing a maximum 30-year repayment period for 
mortgage loans on principal residences if used for securitisation purposes, and improving transparency 
with regard to mortgage loans by requiring a mortga gor’s statement that they have been warned of 
potential mortgage loan risks. 
In addition, under the draft law foreclosure proceed ings may only begin once the borrower has been in 
default for a minimum of three months. Moreover, the courts or the parties may challenge the foreclosure 
proceedings based on unfair terms in the mortgage cont ract. The latter amendment has been introduced to 
                                                 
1  Law 1/2013 entered into force on the date of its publication in the Boletín Oficial del Estado  No 116 of 15 May 2013. 
2  OJ L 189, 3.7.1998, p. 42. 
3  Under the draft law, the Banco de España has powers to veri fy the independence of valuati on agencies and services and if 
necessary to impose sanctions. 
ECB-PUBLIC  
2 bring the Spanish implementation of Council Directive 93/13/EEC4 into line with a recent European 
Court of Justice judgment5. 
The draft law is also aimed at protecting principal residence mortgagors by limiting default interest and 
introducing deductions for early repayment of their remaining debt following foreclosure. 
For principal residence mortgagors in particularly vuln erable situations as defined in the draft law, the 
draft law provides for a two-year moratorium on evicti ons and, in line with the Code of Good Practices 
that credit institutions may voluntarily adhere to, debt restructuring and reduction measures or, should 
these fail, delivery of the property in lieu of payment. 
Finally, the draft law requires the Spanish Governme nt to promote the establishment of a social housing 
fund for the benefit of mortgagors evicted from their principal residences. 
 2. General observations 2.1 The ECB notes that the European Commission has a dopted a proposal for a Directive that aims to 
promote responsible lending and borro wing and ensure that borrowers are offered affordable loans, 
thus reducing the need for recourse to foreclosure of properties
6. The draft law appears to be 
compatible with this proposal. 
2.2 It is primarily for the national legal order to ba lance the interests of the parties in a default or 
foreclosure situation as fundamental property right s and other socio-economic interests will be at 
stake. Also, the ECB considers that the chang es to the mortgage and foreclosure legislation 
envisaged in the draft law should be based on a thorough assessment of their impact on the 
financial system7. In addition, in this context, the Sp anish authorities should monitor the effects 
that the protective measures envisaged for mortga gors could have on provisions and the fulfilment 
of regulatory capital requirements  of credit institutions.  
2.3 The ECB nevertheless stresses that foreclosure shoul d be regarded as a last resort. Secured lenders 
should be interested in avoiding foreclosure proceedings, which are expensive and generally 
generate lower proceeds than voluntary sales, where the mortgagor continues to meet all or some 
agreed part of their repayment obligations. It is therefore important: (a) that secured lenders adapt 
their current practices to deal with defaulting bo rrowers so as to avoid foreclose proceedings; and 
(b) that the regulatory framework provides incentiv es to all parties concerned to agree on a timely 
and reasonable debt restructuring in the event of a default.  
                                                 
4  Council Directive 93/13/EEC of 5 April 1993 on unfair te rms in consumer contracts (OJ L 95, 21.4.1993, p. 29). 
5  Judgment of 14 March 2013 in Case C-415/11, Mohamed Aziz v Catalunyacaixa . 
6   See the European Commission proposal for a Directive of the European Parliament and of the Council on credit 
agreements relating to residential property, (COM/2011/0142 final), and the accompanying Commission Staff working 
paper on ‘National measures and practices to avoid foreclosure procedures fo r residential mortgage loans’ of 31 March 
2011, (SEC(2011) 357 final). 
7  See paragraphs 2.1 and 2.3 of Opinion CON/2012/40. All ECB opinions are published on the ECB’s website at 
www.ecb.europa.eu. 
ECB-PUBLIC  
3 2.4 To this end, a more comprehensive set of  measures that addresses the underlying causes of 
mortgage distress and attempts to avoid, insofa r as possible, foreclosure proceedings should be 
pursued. Only a comprehensive resolution strategy can address the challenges that arise in the face 
of changed economic circumstances of borrowers, significant changes in property values and the 
potential for resultant unviable mortgages, whilst maintaining appropriate incentives for both the 
debtor and creditor, and minimising the poten tial for moral hazard. Equally, while the 
establishment of a social housing fund is to be welcomed, this initiative should form part of a 
comprehensive and unified strategy for dealing with mortgage distress. Such a strategy may 
ultimately result in fewer foreclosures and a reduced need for a social housing fund. 
  This opinion will be published on the ECB’s website.  Done at Frankfurt am Main, 22 May 2013. 
 
[signed] 
 
The President of the ECB 
Mario DRAGHI