Abstract
This chapter analyses the evolution of the mortgage loan in Spain during the present century. The economic development of Spain is described with its great connection to mortgages. The text centres on the new conditions incorporated in the loans in the years before the crisis, which were subsequently demonstrated to be unfair terms and caused serious problems for consumers and a lack of confidence in the financial sector. This provoked the reaction of legislators. This chapter studies the effectiveness of the subsequent mortgage laws in their intention to minimize the asymmetrical positions that the lender and the borrower occupy in the contractual relationship. Among the conclusions of the chapter, the authors highlight how each law is more precise but its effectiveness is lacking if the banking culture is not changed in terms of the relationship between to clients.
TopBackground
Spain has had an economic development similar to the rest of the countries in our zone in some aspects, but very different in others. This development is briefly explained in order to analyse the role played by the Spanish financial system.
Key Terms in this Chapter
European Standardised Information Sheet (ESIS): Pre-contractual information with a standardized format. The bank has the obligation to provide this document to the client and it is binding.
FiAE: Acronym of Ficha de advertencias estandarizadas. Additional mandatory document that the law 5/2019 incorporate. The bank has the obligation redact and give this document to the client. In it the relevant elements of the loan are explained.
Foreign Currency Loan: Loan in a currency other than the euro (in the eurozone), mainly the dollar, the yen, and the Swiss franc.
IRPH: Is the acronym IRPH of “ Indice de referencia de los Préstmos Hipotecarios” . In English, Reference Index of Mortgage Loans. It is a reference index of the adjustable-rate mortgages in Spain and is calculated by the simple mathematical average of the interest rates on mortgage loans of over three years that the banks have set up or renewed during the month.
Floor-Ceiling Clause: Clause that establishes a maximum interest rate for adjustable rate mortgages that the client will not take on, even if the interest rate of the loan reached such a figure and a minimum interest rate that the client should pay, although the interest rate is inferior.
FEIN: Ficha europea de Información estandarizada . Is the acronym of ESIS in Spanish.
Annual Percentage Rate (APR): Is the annual rate charged for borrowing. It includes any fees or additional costs associated with the loan (except the valuation of the residential property) and not only the amortization and the interest.
FIPRE (Ficha de Información Precontractual): Pre contractual Information Sheet of each Mortgage loan of a bank. In Spain, the banks have to draft and facilitate this document to the clients. It serves as a guide and to compare the offers of the different banks
Default Interest: Interest generated when the debtor does not make the payment on time. It supposes a percentage that is applied to the unpaid amount.
Unfair Terms: Term in a contract that causes a significant imbalance in the parties' rights and obligations under the contract, to the detriment of the consumer.