Framework on mortgage loans
Mortgage portability under Law Decree no.7/2007
ABI – in accord with the Italian Competition Authority and the Ministry of Economic Development – finalized a procedure on mortgage portability (art. 8 of Law Decree No. 7 of 2007, converted with amendments into Law No.40/2007). This procedure does not allow the imposition of any costs on the customer and applies only at the final stages of the portability operation, namely after the client chooses the new bank. This procedure is carried out in three phases:
• Start of the procedure
• Communicate the amount of the remaining debt
• Formalize the portability
In order to achieve this inter-bank exchange of information, with the aim of reducing the necessary timeframes, obligations and related costs, we choose to use the National Inter-bank Network – which guarantees that the entire Italian banking system shall participate thereto- by adopting the Electronic Database Alignment.
The above procedure on banks exchanging information electronically was made available to banks by operative centres starting from 4 February 2008 and is mandatory for banks in terms of receiving information starting from 31 May 2008. In light of the foregoing, it is understood that the procedure on mortgage portability was immediately operative, regardless of the availability date of the inter-bank procedure.
To date, more than 11,000 mortgage portability operations have been successfully completed.
Agreements with tax centres (CAF) to communicate the necessary information for tax purposes
Following the meeting between ABI and the National Committee of CAF on the possible initiatives to launch to facilitate the tax assistance provided by CAF to tax payers with mortgages, an agreement was entered into between ABI and the Committee – which is one of the initiatives of the “Impegni per la Qualità” [Commitments for Quality] Plan – concerning the contents and modalities on how the bank should issue a certificate concerning the interest payable and ancillary additional charges paid for loans secured by a mortgage on real property.
ABI-Mef agreement on renegotiating variable rate mortgages
With the aim to increase market efficiency and provide a response to families facing difficulties in paying their mortgage instalments, art. 3 of Law Decree no. 93 of 27 May 2008 envisaged the execution of a specific written agreement – entered into on 19 June 2008 by and between the Ministry of Economics and Finance and ABI – as to which all the banks and financial intermediaries may participate under art. 106 of the Consolidated Banking Act. This agreement contains the conditions and criteria to renegotiate variable rate mortgages, executed before 29 May 2008, to purchase, build or renovate a primary residence in order to align loan payments to more satisfactory conditions for mortgage holders.
Specifically, renegotiation ensures bringing in line the amount of the mortgage instalment to be paid with an expiry after 1 January 2009 with the amount obtained by applying to the amount and original mortgage expiry date, the interest rate achieved by averaging the interest rates applied under the contract in the year 2006. If the mortgage contract was executed, or renegotiated after 31 December 2006, one must use the first instalment following the execution or renegotiation.
The difference between the amount of the instalment due according to the original repayment plan and the amount achieved by the renegotiation is charged on an ancillary loan account governed by the rate obtained on the basis of the ten-year IRS on the date of renegotiation, increased by a maximum spread of 0.50 percentage points. The resulting debt from the ancillary loan account, on the original mortgage expiry date, is payable by the customer through regular instalments of an amount equal to the amount of the instalment on the basis of the renegotiation. This amount is calculated on the same interest rate, which governs the ancillary account, provided that it is more suitable to the client with respect to what was contemplated in the contract. If, prior to this date, there is a notable difference in the instalment in favour of the mortgage holder, this would contribute to reduce the debit items charged to the ancillary loan account.
This is an innovative solution that does not entail costs and additional security for the customer and, at the same time, does not rule out the possibility of mortgage portability or early repayment or any other renegotiation agreement between the bank and the customer that entails better conditions for the customer, even if executed after the renegotiation deed.
White paper on mortgage credit
The retail credit sector participated in a consultation on the “White Paper on the integration of the EU Mortgage Credit Market”. With regard to that, a document was forwarded to the European Commission, European Banking Federation and European Mortgage Federation that conveys the observations of the banking system, notably with respect to: (i) better regulation; (ii) pre-contractual information; (iii) TAEG [effective all-in interest rate p.a.]; (iv) responsible lending; (v) early repayment.
Regional interventions, solidarity and guarantee funds
The sector proposes defining measures supporting families facing difficulties in paying their mortgage instalments. With respect thereto, in the wake of the work carried out with the ABI Regional Commissions, a memorandum of understanding was signed by the Liguria Region, the FILSE (a joint stock company in which banks and the Liguria Region have a stake and shall manage the Fund pursuant to Delibera Giunta Regionale no. 116 of 12-02-2008) and ABI.
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Activities on consumer credit
The Retail Credit Department of ABI carries out constant monitoring of consumer credit market trends, also in collaboration with the association of specialized intermediaries, Assofin.
Each year, generally in June, a public conference on consumer credit in Italy and from an international perspective takes place in Rome.
Monitoring Fraud centre on consumer credit
On the issue of preventing fraud perpetrated on the banking/financial system in providing credit to households through the so-called identity theft, a questionnaire was prepared together with Assofin. This questionnaire was aimed at assessing the qualitative/quantitative profiling of the phenomenon. The results of the survey confirm the necessity to create a system to prevent this phenomenon, by allowing financiers to access public databases that today are still inaccessible (such as INPS [National Institute for Social Security], INAIL [National Institute for Insurance against Labour Accidents]) so they may be able to verify the truthfulness of the information provided by the borrower when executing the contract. This access would be limited to verifying/comparing the truthfulness of the information provided when executing the contract. The sector is quite proactive in creating suitable legislation on this issue.
Credit brokerage
The use of brokers and agents in financial services is crucial for banks and financial intermediaries that do not have their own network of counters. The provision of precise rules of conduct and professional standards defined for firms operating in the placement of credit products was identified as the best way to guarantee the maximum amount of consumer protection.
While awaiting for lawmakers to finalize a framework, with respect to the “Impegni per la Qualità” [Commitments for Quality] prepared by the PattiChiari Consortium (www.pattichiari.it), two codes of ethics were drafted for credit brokers - “Code of Ethics for credit brokers on the consulting and placing of credit products” and “Code of Ethics for credit brokers used for providing advice on debt collection by banks or financial intermediaries (under art. 17 of Law no. 262/2005)” – designed to define a minimum set of principles (in addition to what is provided for under the law) which guarantees that the agent, in line with the principles of independence and impartiality with respect to the broker and customer, provides the customer with the maximum comprehensibility and knowledge in consulting and placing products as well as banking services.
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