* Rules designed to prevent irresponsible lending
* Lenders will be forced to carry out credit checks
* First common EU rules could spur cross-border mortgages
By Robin Emmott
BRUSSELS, April 22 EU countries reached a deal
with the European Parliament on Monday on the bloc's first
common rules on mortgage lending, in an attempt to avoid a
repeat of property bubbles that helped fuel the euro zone's debt
Once written into European Union law, the rules 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, banning self-certified or "liar" loans.
The rules will 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.
"The new rules agreed today will give consumers much better
information about mortgage applications and offers," said
Ireland's Finance Minister Michael Noonan, whose country holds
the rotating, six-month EU presidency and who led the talks.
"We have seen in Ireland how practices in relation to
mortgage credit have contributed to the crisis in the financial
system," he said in a statement, referring to the implosion of a
bubble that dragged the country into a financial bailout.
The draft rules still 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.
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 aspects of the regulations are designed to encourage
cross-border competition between mortgage providers, for example
by requiring them to provide certain information in a
standardised 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.