COMMISSION STAFF WORKING PAPER National measures and practices to avoid foreclosure procedures for residential mortgage loans   Accompanying document to the   Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on credit agreements relating to residential property (Text with EEA relevance)
Date: 2011-03-31
Institutions: European Commission
Subjects: competitiveness, consumer information, credit guarantee, financial solvency, financing, mortgage, real estate credit, single market

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EUROPEAN COMMISSION 

Brussels, 31.3.2011 
SEC(2011) 357 final 

COMMISSION STAFF WORKING PAPER 

National measures and practices to avoid foreclosure procedures 
for residential mortgage loans 

Accompanying document to the 

Proposal for a 
DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
on credit agreements relating to residential property 
(Text with EEA relevance) 

SEC(2011) 355 final 
SEC(2011) 356 final 
COM(2011) 142 final 

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COMMISSION STAFF WORKING PAPER 

National measures and practices to avoid foreclosure procedures 
for residential mortgage loans 

Accompanying document to the 

Proposal for a 
DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 
on credit agreements relating to residential property 
(Text with EEA relevance) 

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2 

   EN 

 
 
 
 
 
1. 

INTRODUCTION 

Defaults  on  mortgage  payments  can  have  severe  consequences  for  individual  homeowners, 
who  could  lose  their  homes  in  a  foreclosure  procedure,  but  also  for  society  as  a  whole, 
through their impact on financial and social stability. 

The  Commission  announced  in  its  Communication  for  the  2009  Spring  European  Council1 
that  it  would  examine  ways  to  ensure  that  foreclosures  are  avoided  wherever  possible  and 
identify national practices in this area. 

Over  the  last  two  years,  the  Commission  services  have  collected  information  on  measures 
already taken or about to be taken at national level as well as information on the evolution of 
defaults  and  foreclosures.  The  results  are  outlined  in  this  report,  the  purpose  of  which  is  to 
provide  examples  and  guidance  for  national  public  authorities  and  creditors  on  how  rising 
default  rates  have  been  addressed  across  the  EU2  with  measures  to  avoid  foreclosure 
procedures.  The  report  does  not  cover  initiatives  aimed  at  creating  or  reviewing  rules  on 
individual  insolvency.  The  Commission  is,  in  parallel,  coming  forward  with  a  proposal  for 
a Directive that aims to promote responsible lending and borrowing and ensure that borrowers 
are offered affordable loans, thus reducing the need for recourse to foreclosure of properties. 

2. 

EVOLUTION OF DEFAULT RATES AND FORECLOSURE PROCEDURES 

While the data3 needs to be analysed very carefully, several broad trends can be identified. 

All Member States that provided information regarding the years 2008 and 2009 experienced 
an  increase  in  default  rates  over  that  period.  However,  when  looking  at  the  various  default 
rates  more  closely,  Member  States  appear  to  have  experienced  the  impact  of  the  crisis 
differently, with some having higher absolute default rates than others. 

As is the case with default rates, data relating to the number of foreclosure procedures reveals 
a mixed picture. However, the increase in the number of foreclosures opened in 2008–2009 is 
generally  significantly  lower  than  over  the  period  2007–2008,  during  which  Member  States 
experienced overall an increase in the opening of foreclosure procedures. 

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COM(2009) 114, Volume 2. 
National examples were provided to the Commission services by Member States between April 2009 
and September 2010. The information contained in this document is only intended to give a picture of 
the  existing  national  measures  at  a  particular  moment  in  time  and  does  not  purport  to  assess  their 
effectiveness or sustainability. 
See detailed data in the annex. The situations and figures mentioned in this report could change in the 
future with the economic and financial situation. 

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3. 

NATIONAL MEASURES AND PRACTICES UNDERTAKEN BY CREDITORS 

Creditors in some Member States have voluntarily adopted certain internal practices to avoid 
foreclosures. Certain measures have also been imposed on creditors in some Member States. 

3.1. 

Reconciliation procedures 

Reconciliation procedures with the borrower before foreclosure procedures can be started are 
aimed at promoting individual solutions to overcome payment difficulties. Some examples are 
provided below. 

In Belgium, the law4 requires that a conciliation attempt has to be made before a judge before 
the  foreclosure  procedure  can  be  started.  In  2009,  creditors  committed  to  immediately 
contacting any borrower who has missed a payment in order to find appropriate solutions5. 

In  the  Netherlands,  the  Code  of  Conduct  on  Mortgage  Credit  (CCMC)  states  that  if 
a consumer fails to meet his commitments, the lender must enter into consultations with the 
consumer and examine whether a reasonable, acceptable solution for both can be found. 

In the UK, according to the Mortgages and Home Finance: Conduct of Business sourcebook 
(MCOB), creditors are required to have a written policy and procedures for dealing fairly with 
customers  in  arrears.  The  pre-action  protocol  for  residential  mortgage  possession  cases 
introduced in 2008 states that courts expect the parties to have taken all reasonable steps to 
discuss proposals for repayments of the arrears prior to the start of a possession claim. 

Under  the  Irish  Code  of  Conduct  on  Mortgage  Arrears  (CCMA)6,  the  borrower  enters  the 
lender's  Mortgage  Arrears  Resolution  Process  (MARP)  when  arrears  remain  outstanding 
31 days from date on which the arrears arose: the lender must explore a number of alternative 
repayment options to determine which are appropriate to the borrower's circumstances. 

In  Hungary,  the  Code  of  Conduct  on  the  Principles  of  Fair  Conduct  by  Financial 
Organisations Engaged in Retail Lending (CCPF) entered into force on 1 January 2010 and 
states  that  the  signatory  institutions  would  contact  the  borrower  in  the  event  of  payment 
default and try to agree on a reasonable solution. 

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Loi relative au crédit hypothécaire. 
Principes  pour  contracter  et  accorder  des  crédits  hypothécaires  et  à  la  consommation  de  manière 
responsable, Union Professionnelle du Crédit, July 2009. 
Revised version of the Code of 6 December 2010. 

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3.2.  Mediation 

Mediators  often  provide  a  neutral,  non-confrontational  setting  in  which  creditors  and 
borrowers can negotiate. Mediators also help the parties to understand and analyse the facts 
and  issues  as  well  as  to  identify  cost-effective  solutions.  Examples  of  specialised  mediation 
mechanisms are provided below. 

The UK MCOB requires the parties to liaise with a third-party source of advice regarding the 
shortfall of the borrower and makes arrangements for this. 

Under  French  legislation7,  while  it  is  not  obligatory  to  involve  mediators,  every  bank  is 
required to appoint a mediator who can be called on by both parties. 

In accordance with the Irish CCMA, at the borrower’s request and with the borrower’s written 
consent, the lender must liaise with a third party nominated by the borrower to act on his/her 
behalf in relation to his/her arrears situation. 

In  Cyprus,  pursuant  to  the  Cooperative  Societies  Law  (CSL),  cooperative  credit  institutions 
(CCIs) may refer the repayment of loans in arrears to an arbitration process. 

3.3.  Modification of loan terms 

The  modification  of  loan  terms  before  foreclosure  procedures  can  be  launched8  is  meant  to 
help  in  bridging  temporary  economic  difficulties.  For  this,  an  assessment  of  the  borrower’s 
long-term ability to repay the loan has to be made. Several  possibilities exist for modifying 
the terms of the loan or modifying the way it is executed, as described below. 

In  France,  the  courts  may  suspend  a  borrower’s  payment  obligations  at  his  request,  for 
a maximum period of two years. Such a decision must take into account the creditor’s needs 
and the borrower’s personal circumstances, in particular in cases of dismissal9. 

In Cyprus, under the CSL, the Committee of CCIs may extend the loan repayment period for 
members with arrears if there are reasonable arguments for doing so. 

Under the Irish CCMA, alternative repayment options that the lender must explore with the 
borrower  when  considering  a  MARP  case  must  include:  an  "interest  only"  arrangement  for 
a specified period, an arrangement to pay interest and part of the nominal capital element for 
a specified period, deferring payment of the instalment repayment for a period, extending the 
term of the mortgage, changing the type of mortgage, capitalising the arrears and interest and 
any voluntary scheme to which the lender has signed up. 

The  UK  MCOB  provides  a  non-exhaustive  list  of  the  type  of  options  that  the  lender  must 
consider, given the individual circumstances of  the  borrower,  e.g. extending the term of the 
loan,  changing  the  loan  type,  deferring  payment  of  interest.  Also,  a  lender  must  consider 
a reasonable request from a borrower to change the date of regular repayments or the method 
of payment. 

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Code monétaire et financier. 
Modifications of the terms of the loan can be also ordered during the foreclosure procedure by the court. 
Code de la consommation and Code civil. 

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In  Belgium,  the  borrower  can  ask  the  judge  to  allow  him  to  pay  lower  instalments  over 
a longer period of time. 

In  Romania,  the  Guidelines  for  Extra-Judicial  Restructuring  of  Mortgage  Loans  encourages 
the parties involved to discuss solutions prior to any measures for mortgage enforcement, e.g. 
modifying the amount of instalments, delaying payment, reducing the interest rate for a given 
period  of  time,  changing  the  type  of  interest  rate,  capitalisation  of  interest  or  arrears,  or 
refinancing the loan. 

In  accordance  with  the  Latvian  Consumer  Rights  Protection  Law,  the  lender  must  examine 
a request  by  the  borrower  regarding  extension  of  the  loan  or  change  of  the  currency  of  the 
loan, unless the borrower has been in default for more than 60 days or more than three times 
a year for more than 30 days each time. 

The  Finnish  Consumer  Protection  Act  gives  examples  of  modifications  that  the  lender  may 
envisage, e.g. consolidation of different loans, a moratorium or changes in the reference rate 
in order to bring down the borrowing rate. 

Under the Hungarian CCPF, signatory creditors undertake to allow the lump-sum redemption 
of foreign currency loans, in addition to the possibility of converting them into local currency 
at the customer’s request. 

By  signing  the  'Piano  famiglie',  members  of  the  Italian  Banking  Association  commit  to 
considering  suspensions  of  mortgage  instalments  for  families  in  difficulty  under  certain 
circumstances10. 

3.4.  Minimum length of time before starting foreclosure procedures 

A  minimum  waiting  period  before  starting  the  foreclosure  procedure11  gives  time  for  the 
implementation  of  any  of  the  practices  described  above.  The  additional  period  provided  to 
borrowers  may  also  help  them  to  settle  outstanding  payments  or  come  up  with  alternative 
payment measures. 

The Italian Banking Code provides that the borrower’s payment has to have been delayed at 
least seven times and for between one and six months before a foreclosure can be launched. 

In the Netherlands, the CCMC provides that a foreclosure cannot start before the consultation 
with the borrower has taken place and not within two months after the borrower has failed to 
meet his commitment. 

The Irish CCMA provides that the lender must wait for 12 months from the date the borrower 
is  classified  as  a  MARP  case12,  before  applying  to  the  courts  to  commence  legal  action  for 
repossession of a borrower’s primary residence. 

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12 

The criteria for benefiting from this plan refer to particular events such as job loss, death or disability, 
and to mortgages up to EUR 150 000, granted to borrowers with income up to EUR 40 000. 
Waiting periods normally also apply during the foreclosure process. 
The 12-month period commences on day 31 but does not include certain time periods, e.g. the period 
during which the borrower is complying with the terms of an alternative repayment agreement. 

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In Finland, a mandatory two-month minimum waiting period applies before a lender can sell 
the shares in Finnish residential housing companies13. 

In the UK, the MCOB requires creditors to give a reasonable period of time to consider any 
proposals for dealing with the payment difficulties. Further, the UK government has voluntary 
agreements with the major lenders, who have committed to not initiating proceedings within 
at least three months of an account going into arrears. 

4. 

NATIONAL MEASURES AND PRACTICES BY PUBLIC AUTHORITIES 

4.1. 

Public rescue schemes 

Public rescue schemes  have  been  introduced by several Member States. Such efforts should 
also be seen in the context of the level of social security provision in different Member States. 
Furthermore, to the extent that these public rescue schemes confer a competitive advantage on 
the  creditors  that  may  distort  competition  and  affect  trade  between  Member  States,  e.g.  by 
reducing creditors’ provision for non-performing loans, these schemes must be in compliance 
with state aid rules. 

4.1.1.  Public loan guarantees 

A deferral of at least part of the monthly payments to a point in time when the impact of the 
financial  crisis  has  ceased  is  meant  to  help  borrowers  to  overcome  temporary  financial 
difficulties.  Public  guarantees  may  provide  an  additional  incentive  for  creditors  to  consider 
the deferral of payments. 

Under  Spanish  legislation14,  unemployed  borrowers  who  had  not  been  late  with  their 
payments  were  able  defer  up  to  50 %  or  EUR 500  of  their  monthly  instalments  between 
1 January 2009  and  31 December 2010.  The  state-guaranteed  deferred  payments  had  to  be 
repaid over the remaining loan duration from 1 January 2011. 

The UK Homeowner Mortgage Support (HMS) programme, launched in April 2009, provides 
that borrowers with a temporary loss of income can defer interest payments for a period of up 
to two years, where this is appropriate to their individual circumstances and subject to suitable 
independent debt advice. The government can provide a guarantee to creditors covering 80 % 
of the interest payments deferred if the consumer ultimately defaults on the mortgage within 
four years. 

4.1.2.  Possibility to sell the home to a publicly sponsored association or to other funds 

Borrowers may overcome temporary difficulties by selling their property wholly or partly to 
a special entity and buying it back later when their income is high enough to support the full 
monthly payments. 

The  UK  Mortgage  Rescue  Scheme,  a  government  scheme  launched  in  January 2009,  offers 
two options to eligible homeowners. First, for householders who have experienced payment 
shocks, a registered social landlord (RSL) will buy an equity stake in their property, thereby 

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These shares qualify as a mortgage security on residential property. 
RD 1975/2008 of 28 November 2008. 

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reducing the homeowner’s repayments to a manageable level. Second, for the most vulnerable 
households on low incomes with little chance of sustaining the mortgage, the RSL will buy 
their property in full and rent it back to the former homeowner at lower than the market rent. 

In  Portugal15,  borrowers  can  sell  their  mortgaged  properties  to  a  particular  fund  while 
retaining the right to remain in the home as tenants, usually for five years, with an option to 
buy back at any time. 

4.1.3.  Financial relief for unemployed homeowners 

Public financial help to homeowners who experience an income cut due to the impact of the 
crisis  on  employment  may  help  to  avoid  the  worst  negative  impacts  of  a  temporary  fall  in 
income16. Several examples are described below. 

Legislation  introduced  in  March 2009  in  Portugal  provides  for  financial  assistance  to 
unemployed borrowers. A special credit line allows monthly payments to be reduced by up to 
50 %  or  a  maximum  of  EUR 500  for  up  to  24 months.  Reimbursement  has  to  take  place  in 
monthly instalments at six-month Libor -50 basis points over the remaining loan period. 

Legislation  introduced  in  October  2009  in  Poland  allows  jobless  homeowners  to  apply  for 
monthly interest-free public support for their mortgage instalments of up to PLN 1 200, paid 
over one year. Repayment will have to be made over an eight-year period. 

In  Ireland,  the  government  Mortgage  Interest  Supplement  scheme17  provides  for  weekly  or 
monthly payment of mortgage interest on a short-term basis and for a property which is the 
sole residence of a borrower. 

In  Hungary18,  homeowners  who  lost  their  jobs  through  no  fault  of  their  own  can  apply  for 
more favourable monthly payment obligations. A state-guaranteed bridging loan for a period 
of  up  to  two  years  covers  the  difference  between  the  original  instalment  due  and  the  more 
favourable instalment. 

In the UK, Support for Mortgage Interest (SMI), an income-based government scheme, helps 
the out-of-work with their mortgage interest. SMI is time-limited to two years for the jobless 
and  a  39-week  waiting  period  is  applied.  The  amount  paid  is  based  on  the  mortgage  loan 
outstanding  (with  a  cap  of  GBP 100 000,  temporarily  raised  to  GBP 200 000  since 
January 2009) and a standard interest rate. 

In Italy, the 2009 Finance Act established an auxiliary fund for borrowers who cannot pay the 
mortgage instalments for their primary residence. 

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Portaria No 1553-A/2008 of 31 December 2008. 
This  does  not  call  into  question  the  role  of  private-sector  payment  or  income  protection  insurances 
which are sold alongside a mortgage in some Member States. 
This public financial help to homeowners who lose their job or are subject to temporary income cuts 
was in place in Ireland before the recent crisis. 
Act IV of 2009 on Absolute Government Guarantees for Housing Loans. 

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4.1.4.  Temporary tax relief 

While  tax  incentives  for  regular  mortgage  payments  can  be  a  means  of  encouraging  home 
ownership19, temporary tax relief lightens the financial burden on borrowers in a crisis period 
and may help homeowners to hold on to their properties. Different forms of such tax relief are 
described below. 

The Spanish government approved an EUR 400 tax deduction in order to relieve homeowners 
paying mortgages20. In addition, a voluntary agreement between the government, the banking 
industry,  the  public  registry  and  public  notaries  facilitated  extensions  of  the  duration  of 
mortgage loans by exempting borrowers from fiscal, public notary and public registry charges 
caused by an extension. 

In Cyprus, new provisions21 were adopted to reduce the extra registration fees to be paid by 
the  mortgagee  in  case  of  re-registration  of  the  first  mortgage  (remortgaging),  as  a  means  to 
support borrowers moving to new creditors offering better terms. 

4.2. 

Providing debt and legal advice 

Borrowers in difficulty may turn to free or low-cost independent primary debt or legal advice 
before  foreclosure  procedures  have  started  to  find  out  about  the  available  options  likely  to 
solve their problems and eventually reach an agreement with the creditor. Different services 
can be responsible for providing this advice, as described below. 

In  Estonia,  the  Financial  Supervisory  Authority  provides  independent  and  neutral  advice  in 
any  disagreements  between  creditors  and  borrowers.  Debt  counselling  for  individuals  in 
economic difficulty is also provided by local government social workers22. 

In  Ireland,  the  national  Free  Legal  Advice  Centre  offers  basic,  free  legal  services  to  the 
public, including advice on credit and debt issues. The Money Advice and Budgeting Service 
(MABS), a national, free, confidential and independent service, offers advice to people in debt 
or  in  danger  of  getting  into  debt.  In  2009  it  agreed  an  operational  protocol  with  the  Irish 
Banking  Federation,  which  enables  creditors  and  MABS  advisers  to  work  together  to 
formulate  wherever  possible  a  mutually  acceptable,  affordable  and  sustainable  repayment 
plan. 

In  Finland,  the  Money  and  Debt  Adviser,  a  free  municipal  service  supervised  by  the 
Consumer Agency, helps over-indebted people with debt settlements. 

In Sweden, the Social Service Act and Debt Relief Act require every municipality to support 
individuals in need and advise debtors in matters concerning their debts. 

In  the  UK,  creditors  that  operate  forbearance  under  the  HMS  scheme  commit  to  refer 
borrowers  to  money  advice  agencies  before  deciding  whether  to  enter  the  scheme.  The 

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See, for instance, the Czech Republic, Estonia, France, Ireland and the Netherlands. 
RD 2/2008 of 21 April 2008. 
Law No 84(I)/2009 of 17 July 2009. 
In April 2009, an advisory manual for these social workers was blueprinted by the Ministry of Social 
Affairs together with the FSA. 

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Mortgage  Rescue  Scheme  also  requires  that  households  have  received  independent  money 
advice. 

The  Danish  government  has  financially  supported  the  creation  of  debt  advice  centres  for 
socially vulnerable people in debt for the period 2009–2012. Debtor advice centres exist also 
in Germany and Austria. 

In  Luxembourg,  borrowers  can  contact  specialised  services  for  mediation  and  indebtedness 
handling in order to negotiate a reimbursement plan with the creditor. 

In the Czech Republic, several financially-supported NGOs provide advice. 

4.3. 

Encouraging internal reporting 

Internal management reporting can help creditors to detect negative trends in their mortgage 
loan portfolio at an early stage and analyse the possible reasons. 

Under Article 71 of the Financial Business Act and the Guidelines issued on the basis thereof, 
the  Danish  Financial  Supervisory  Authority  requires  that  creditors  internally  report  credit 
default rates and respond adequately to this information. 

In Ireland, the CCMA prescribes that the lender must have in place management information 
systems  to  capture  information  on  its  handling  of  arrears,  pre-arrears  and  MARP  cases, 
including all alternative repayment arrangements put in place to assist borrowers. 

4.4. 

Collecting statistics 

Not all Member States appear to have reliable statistics on default rates or on the number of 
foreclosures.  The  systematic  collection  of  such  data  facilitates  the  identification  of  negative 
trends on national markets, enabling appropriate responses at an early stage. 

In  Denmark,  mortgage  credit  institutions  are  required  by  law23  to  report  default  rates  to  the 
Financial  Supervisory  Authority  on  a  quarterly  basis.  Foreclosure  procedures  are 
automatically  reported  to  the  Danish  Statistical  Office,  which  publishes  the  figures  each 
quarter. 

In Belgium, mortgage creditors are required to report payment arrears to the National Bank of 
Belgium’s Central Individual Credit Register24. 

In  the  UK,  mortgage  firms  (both  creditors  and  intermediaries)  are  required  to  regularly 
provide  data  to  the  Financial  Services  Authority.  The  collated  information,  covering  both 
individual transactions and levels of arrears, is then published by the FSA. 

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Act  on  Mortgage  Credit  Loans  and  Mortgage  Credit  Institutions  and  Executive  Orders  of  the  Danish 
Financial Supervisory Authority. 
Loi relative à la Centrale des Crédits aux Particuliers of 10 August 2001. 

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5. 

LESSONS TO BE DRAWN 

The  Commission  services  consider  it  essential  that  Member States  continue  to  monitor  the 
economic  situation  closely  and  consider,  if  appropriate,  introducing  rules  aimed  either  at 
preventing  foreclosures  or,  where  such  procedures  are  launched,  at  limiting  their  social  and 
economic impact. Creditors can also play a crucial role by adapting their current practices to 
deal  with  defaulting  borrowers.  Indeed,  they  often  have  an  interest  in  avoiding  expensive 
foreclosure procedures, the proceeds of which are almost always lower than from an unforced 
sale. 

Public authorities and creditors may find this report a source of inspiration. Its purpose is not 
to draw up a ‘league table’ of the best national practices. These practices should be considered 
within their respective national contexts and, in many cases, it is still too early to measure to 
what extent they have been adequately flexible and responsive to the recent economic crisis as 
well as to assess their effectiveness. 

Nevertheless,  some  positive  trends  and  common  principles  can  be  identified.  In  particular, 
foreclosures should constitute a measure of last resort for a lender. As highlighted, there are 
several steps and initiatives that can be attempted before repossession. Where it is clear that 
a given  borrower  is  entering  into  difficulties,  a  dialogue  should  take  place  with  the  lender 
either bilaterally or through a mediator. The purpose of the dialogue is to explore alternative 
repayment measures, i.e. a renegotiation of the loan terms and/or duration. If such a dialogue 
cannot  take  place,  or  if  it  fails,  it  may  be  useful  to  promote  the  provision  of  independent, 
confidential and, if possible, free debt advice for borrowers. 

This report has focused on pre-foreclosure procedures. However, where foreclosures do take 
place,  which  cannot  be  completely  ruled  out,  common  sense  and  humanity  should  always 
prevail at all levels (lender, authorities, courts, etc.) and throughout the whole procedure. In 
particular, the full economic and social situation of the defaulting borrower should be taken 
into  account,  and  the  implications  of  a  given  repossession  should  be  carefully  assessed, 
notably  when  a  primary  residence  is  at  stake.  For  example,  losing  the  family  home  after 
having  lost  one’s  job  has  intolerable  social  and  human  implications  for  both  borrowers  and 
their families. In these critical economic times our society must put the human dimension at 
its very heart. 

6. 

FOLLOW-UP 

The  Commission  services  will  closely  monitor  the  development  of  default  rates  and 
foreclosures as well as the measures taken by Member States to prevent foreclosures. 

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Evolution of default rates and number of foreclosure procedures 2007–2009 

Annex 

1. 

INTRODUCTION 

Both questionnaires sent in April 2009 and July 2010 asked Member States to provide data on 
default  rates  and  on  the  number  of  foreclosure  procedures  at  national  level.  Several 
Member States did not have data on residential mortgage loans alone or statistics on an annual 
basis and several Member States were unable to provide any data at all. As a result, the data 
provided  in  this  Annex  indicates  broad  trends,  but  should  not  in  any  way  be  considered 
comparable. This data should therefore be assessed with great care. 

2. 

DEFAULT RATES 

While the data needs to be analysed very carefully25, several broad trends can be identified. 

All  Member States  that  provided  data  or  information  regarding  years  2008  and  2009 
experienced an increase in default rates between 2008 and 2009. Member States experiencing 
an increase in default rates faced varying degrees of severity. The increases should be looked 
at carefully when drawing conclusions as to the extent of the problem. For instance, between 
end-2007 and end-2009 while default rates in Portugal and the UK rose only slightly, default 
rates in Cyprus, Hungary and Poland more than doubled and in Ireland tripled. Default rates 
in Denmark, Spain, Estonia, Bulgaria and Latvia all increased more than threefold. 

However, Member States have different levels of default rates. The observed increases should 
therefore  be  looked  at  carefully  when  drawing  conclusions  as  to  the  extent  of  the  problem. 
Apart from Bulgaria, Cyprus, Estonia, Greece, Hungary, Ireland, Latvia and Poland, in none 
of the Member States and Norway do loans over three months in arrears appear to account for 
more than 3 % of total outstanding mortgage loans in 2009. However, such low country-wide 
figures should not detract from the social and economic impact and importance of arrears for 
the individual borrowers concerned. Member States therefore appear to have experienced the 
impact  of  the  crisis  very  differently.  This  is  supported  by  the  fact  that  three  of  the 
Member States  with  the  highest  increases  (Denmark,  Estonia  and  Latvia)  exhibit  very 
different default rates. Clearly, those relative increases must be viewed alongside the absolute 
default rate, which is low in some of these cases. 

Table 1  below includes  detailed  data  on default rates in Member  States since  2007.  For  the 
purpose of this exercise, default rates refer to the percentage of mortgage loans over 90 days 
in  arrears  in  relation  to  outstanding  mortgage  loans  in  a  Member  State,  unless  otherwise 
indicated.  Data  relates  to  the  total  number  of  contracts  in  default  to  the  total  number  of 
outstanding contracts, unless otherwise indicated. 

25 

For instance, Finnish data have been calculated using available statistics on the number of judgments on 
payment  demands  (which  relate  to  bank  loans  in  general,  not  only  loans  granted  for  residential 
purposes) and the number of Finns having a mortgage loan. UK figures relate to loan accounts, which 
are slightly higher than figures for individual borrowers. 

EN 

12 

   EN 

 
 
                                                 
Table 1: Evolution of default rates 

Member States 
(in protocol order) 

Default rate1) 
31.12.2007 (%) 

Default rate1) 
31.12.2008 (%) 

Default rate1) 
31.12.2009 (%) 

Belgium 

Bulgaria 
Czech Republic 
Denmark 
Estonia 
Ireland 
Greece 
Spain 

France 

Italy 
Cyprus 
Latvia 
Lithuania 
Hungary 
Malta 

Norway 

Poland 

Portugal 

Romania 

Slovakia 

Finland 
United Kingdom 

1.72 

1.32 
1.5 
0.12 
0.4 
1.212) 
3.6 
0.72 

0.44 

1.0* 
3.24 
0.71 
– 
2.9 
– 

0.50 

1.2 

1.3* 

– 

2.17 

0.12 
1.88 

1.65 

0.53 
1.6 
0.26 
1.5 
1.443) 
5.3 
2.38 

0.40 

1.4* 
3.90 
4.73 
0.873) 
3.47 
0.53–0.84 

0.7 

1.0 

1.34) (1.5*) 

0.035) 

2.27 

0.17 
2.42 

1.69 

7.836) 
2.5 
0.55 
4.0 
3.6 
6.48) 
2.88 

0.44 

– 
6.90 
15.959) 
2.777) 
7.65 
2.610) 

– 

3.2 
1.6011) 
(1.7* July 2009) 
1.6711) 

– 

1.27) 
2.45 

Increase? 

Yes11) in 2008/2009 
No11) in 2007/2008 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes 
Yes13) in 2008/2009 
No in 2007/2008 
Yes 
Yes 
Yes 
Yes 
Yes14) 
Yes 
Yes in 2007/2008 
N/A in 2008/2009 
Yes  

Yes 

Yes 
Yes in 2007/2008 
N/A in 2008/2009 
Yes12) 
Yes 

Source: Member States (in protocol order) as of September 2010. 
* Data provided by industry as of January 2010. 
1) Default rates relate to the volume of outstanding residential mortgage loans in default to the total volume of 
outstanding mortgage loans in Cyprus, Denmark (mortgages issued by specialised mortgage credit institutions) 
and Estonia. 
2) 31.12.2006. 
3) 30.6.2008/1.7.2008. 
4) February 2008. 
5) April 2008. 
6) 30.6.2010. 
7) 30.3.2009/1.7.2009. 
8) 31.3.2009. 
9) 30.9.2009. 
10) March 2009. 
11) Data calculated using statistics provided in the annual report of the National Bank of Belgium for 2009 — 
cf. Statistiques, Centrale des credits aux particuliers, February 2010. 
12) Data calculated using statistics on number of judgments on payment demands. 
13) Data refers to the volume of default instalments over 12 months to the volume of outstanding household 
loans at the end of those 12 months. 
14) Data includes both consumer and mortgage loans. 

EN 

13 

   EN 

 
3. 

NUMBER OF FORECLOSURE PROCEDURES 

Eighteen  Member States  provided  figures  or  qualitative  information  on  the  evolution  of  the 
number  of  foreclosure  procedures  in  recent  years.  As  with  default  rates,  the  data  should  be 
analysed  with  care26  and  reveals  a  mixed  picture.  While  five  Member States  have  not 
experienced  a  noticeable  increase  or  have  even  experienced  a  decrease  in  the  number  of 
foreclosure  procedures,  most  of  the  Member States  that  provided  information  have  seen  an 
increase  in  the  opening  of  foreclosure  procedures  over  the  period  2007–2008.  The  rate  of 
increase  in  the  number  of  foreclosures  opened  in  2008–2009  is,  however,  generally 
significantly lower than the 2007–2008 figures. 

Again,  the  rising  numbers  need  to  be  interpreted  with  caution.  First,  while,  for  instance,  an 
increase of more than 63 % in Finland seems high, the total number of foreclosure procedures 
is  still  below  1 000  (and  includes  more  than  residential  mortgage  loans).  At  least  some 
Member States,  such  as  Latvia,  have  therefore  started  their  increase  from  a  very  low  base. 
Second, the total volume of foreclosure procedures and their increase should be looked at in 
relation to the total number of outstanding residential mortgage loans. This would provide an 
idea of the extent of the problem in a market. For instance, while the sheer number of 46 825 
foreclosures  in 2008  in  the  United  Kingdom  seems  to  be  very  high,  compared  to  the  total 
number of outstanding mortgages the number of foreclosures is still relatively low (0.30 %)27. 

Table  2  below  provides  information  on  the  number  of  foreclosure  procedures  in 
Member States since 2007. 

26 

27 

For instance, Finnish data reflecting the number of forced sales also include loans other than residential 
mortgages and loans to legal persons. Slovak data reflect all foreclosures, of which residential mortgage 
loans account for approximately 90 %. Spanish data apply to all mortgages, not only for housing. 
Data  were  provided  by  the  UK  Financial  Services  Authority  in  reply  to  the  Commission’s 
questionnaire. 

EN 

14 

   EN 

 
                                                 
Table 2: Evolution of the number of foreclosure procedures1) 

Member States 
(in protocol order) 

Number of 
foreclosures 
in 2007 

Number of 
foreclosures 
in 2008 

Number of 
foreclosures 
in 2009 

Bulgaria 

Denmark 
Germany 

Estonia 

Ireland 

Spain 

449 
(452)) 
1 015 
91 788 

– 

– 
25 943 
(17 4022)) 

886 
(982)) 
1 942 
88 379 
843 
(7662)) 
– 
58 686 
(20 5492)) 

1 5703) 
(672)3)) 
2 860 
86 617 
1 329 
(8692)) 
7144) 
93 319 
(37 6772)) 

% 
change 
2007–
2008 

% 
change 
2008–
2009 

97.33 

77.20 

Yes 

91.33 
-3.71 

N/A 

N/A 

47.27 
-1.99 

Yes 
No 

N/A 

N/A 

N/A 

N/A 

126.21 

59.01 

Yes8) 

Increase? 

France 

– 

– 

9 422 

N/A 

Cyprus 

Latvia 

Hungary 

596 
(272)) 
– 
225 663 
(2 5572)) 

636 
(142)) 
5582) 
245 597 
(2 5882)) 

358 
(242)) 
1 7022) 
71 683 
(6632)) 

Malta 

– 

– 

– 

Netherlands 

Austria 

Poland 
Slovakia 
Finland 
Sweden 

1 811 

7 908 

1 841 
1 070 
506 
1 904 

United Kingdom 

27 8692) 

1 961 

8 186 

2 256 

7 920 

1 618 
1 865 
825 
3 157 
46 9842) 
(0.30 % of all 
mortgages) 

– 
– 
1 036 
3 499 
54 0142) 
(0.35 % of all 
mortgages) 

6.71 

N/A 

8.83 

N/A 

8.28 

3.52 

-12.11 
74.30 
63.04 
65.81 

N/A 

-43.71 

-70.81 

Not aware of any 
noticeable increase in 
foreclosure procedures6) 
Yes in 2007/2008 
No in 2008/2009 
205.02  Yes in 2008/2009 
Yes in 2007/2008 
No in 2008/2009 
Not aware of any 
noticeable increase in 
foreclosure procedures6) 
Yes 
Yes in 2007/2008 
No in 2008/2009 
No in 2007/2008 
Yes7) in 2007/2008 
Yes 5) 
Yes 

25.58 
10.83 

15.04 

N/A 

N/A 

68.59 

14.96 

Yes 

Source: Member States as of September 2010. 
1) Data refers to opening of foreclosure procedures, which does not necessarily correspond to the number of 
concluded foreclosure procedures in a given year, unless otherwise indicated. 
2) Data refers to forced sales. In Spain this figure refers to concluded foreclosure procedures, i.e. procedures 
resolved by the judge, whether in favour of the lender or not. In Estonia, the figures refer to terminated 
procedures. In Latvia, the figures refer to the process completed in court with a decision on the transfer of the 
property after a forced auction. In Hungary, the figure refers to the number of properties sold. 
3) 30.6.2009. 
4) Number of court applications to commence proceedings to enforce debt/security in Q3 and Q4 2009. 
5) Data also includes loans other than residential mortgages and loans to legal persons.   
6) Qualitative information provided in 2009. 
7) Data reflects all foreclosures, of which residential mortgage loans account for approximately 90 %. 
8) Data applies to all mortgages, not only for housing. 

EN 

15 

   EN