Opinion of the European Central Bank of 22 May 2013 on mortgagor protection (CON/2013/33)
Date: 2013-05-22
Institutions: European Central Bank
Subjects: Spain, financial solvency, financial stability, mortgage, national law, real estate credit

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  functioning  of  the  mortgage  market  by  reinforcing  the 
independence of valuation agencies and services3, 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  mortgagor’s  statement  that  they  have  been  warned  of 

potential mortgage loan risks. 

In addition, under the draft law foreclosure proceedings 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 contract. The latter amendment has been introduced to 

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Law 1/2013 entered into force on the date of its publication in the Boletín Oficial del Estado No 116 of 15 May 2013. 

OJ L 189, 3.7.1998, p. 42. 
Under the draft law, the Banco de España has powers to verify the independence of valuation agencies and services and if 
necessary to impose sanctions. 

 
 
 
 
                                                 
ECB-PUBLIC 

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  vulnerable  situations  as  defined  in  the  draft  law,  the 

draft law provides for a two-year moratorium on evictions 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 Government 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 adopted 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  properties6.  The  draft  law  appears  to  be 

compatible with this proposal. 

2.2 

It  is  primarily  for  the  national  legal  order  to  balance  the  interests  of  the  parties  in  a  default  or 

foreclosure situation as fundamental property rights and other socio-economic interests will be at 

stake.  Also,  the  ECB  considers  that  the  changes  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  Spanish  authorities  should  monitor  the  effects 

that the protective measures envisaged for mortgagors could have on provisions and the fulfilment 

of regulatory capital requirements of credit institutions.  

2.3  The ECB nevertheless stresses that foreclosure should 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 borrowers so as to avoid foreclose proceedings; and 

(b) that the regulatory framework provides incentives to all parties concerned to agree on a timely 

and reasonable debt restructuring in the event of a default.  

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Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ L 95, 21.4.1993, p. 29). 
Judgment of 14 March 2013 in Case C-415/11, Mohamed Aziz v Catalunyacaixa. 
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 for residential mortgage loans’ of 31 March 
2011, (SEC(2011) 357 final). 
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. 

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2.4  To  this  end,  a  more  comprehensive  set  of  measures  that  addresses  the  underlying  causes  of 

mortgage  distress  and  attempts  to  avoid,  insofar  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  potential  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 

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