EU seeks to avoid housing bubbles with mortgage law deal
BRUSSELS (Reuters) - European Union negotiators are expected to finalize the bloc's first common rules on mortgage lending on Monday, in an attempt to avoid a repeat of property bubbles that helped fuel the euro zone's debt crisis.
The legislation will force lenders in Europe's 6.5 trillion euro ($8.5 trillion) mortgage market to check the creditworthiness of potential customers and their ability to repay, effectively banning self-certified or "liar" loans.
The rules would also make it illegal for those carrying out credit checks within banks and other lenders to have their pay linked to the number of mortgages they approve - a practice blamed for encouraging irresponsible lending in the past.
"We are hoping to conclude talks with the European Parliament on Monday on these important new rules to protect consumers and mortgage holders," said a spokeswoman for the Irish EU presidency, which will negotiate on behalf of EU governments.
If a deal is reached, the draft rules will need to be rubber-stamped by the full parliament and EU governments before entering force in mid-2015.
Irresponsible home lending in the United States created a domestic housing bubble that, when it burst, helped to spark the global financial crisis.
Similar property bubbles in Ireland and Spain left banks holding hundreds of billions of euros in bad debts, forcing governments to prop them up and then seek euro zone bailouts when the expense proved too much.
As well as seeking to avoid reckless lending, the rules also increase consumer protection by making it harder for lenders to seize homes from borrowers who fail to keep up with repayments.
Other elements in the regulations are designed to encourage cross-border competition between mortgage providers, for example by requiring them to provide certain information in a standardized way to consumers across the bloc.
Regulators believe greater competition between lenders in different countries will result in a better deal for consumers and contribute to the bloc's economic recovery. ($1 = 0.7644 euros)
(Reporting by Charlie Dunmore; Editing by Stephen Powell)
- Bike-riding nurse defies Ebola quarantine, on collision course with governor |
- Clashes erupt as Israeli police kill Palestinian suspected of shooting Jewish far-rightist |
- Ukraine, Russia, EU agree to natural gas supply deal
- Apple's Cook: 'I'm proud to be gay'
- Iraqi Kurdish forces enter Syria to fight Islamic State |