Author (Person) | Mallinder, Lorraine |
---|---|
Series Title | European Voice |
Series Details | 13.12.07 |
Publication Date | 13/12/2007 |
Content Type | News |
Charlie McCreevy, the European commissioner for the internal market, will next week opt for a light regulatory approach to responsible lending for Europe’s fast-growing mortgage market. His approach seems uninfluenced by the ongoing sub-prime mortgage crisis in the US. McCreevy had appeared set to propose a directive with rules on responsible lending that, according to an early draft, drew on "lessons from the US sub-prime crisis". Mortgage lenders opposed the plans, which would have covered pre-contractual information, interest rates on loans, early repayment and responsible lending. Jennifer Johnson, adviser at lenders’ lobby the European Mortgage Federation (EMF), said it had been surprised by the early draft because "McCreevy had said there would be no proposals for legislation unless there was a proven need". "We saw it as a knee-jerk reaction to the sub-prime crisis," she said, adding: "If we want to take action, we need to do it where there are obstacles to cross-border provision, not on consumer protection. We’re not against responsible lending, but if you want to open markets, consumer protection is not the way to do that." With limited numbers of consumers taking mortgages abroad, lenders feel that mandatory consumer protection rules would achieve little. At present only 1% of mortgages are contracted across borders on the EU market, which was this year valued at €5.8 trillion by the EMF, around 50% of EU gross domestic product. The figure, based on loans outstanding, is a 12.5% increase on 2005. McCreevy announced his position at a finance conference last week, saying that a directive would not "deliver the value added necessary to justify a legislative measure". He is now expected to strengthen existing voluntary rules in areas such as credit assessments (the poor quality of which led to the US sub-prime debacle), early repayment terms and information requirements. The U-turn upsets consumer groups, which have lobbied hard for increased protection for borrowers. "We’re going to have another voluntary charter that doesn’t really work," said Levi Nietvelt, economic adviser at BEUC, the European consumers’ group. BEUC had wanted to secure legal rights to early repayment with "fair and objective" compensation modelled on the Danish system. Nietvelt said that current compensation levied by lenders removed the incentive for consumers to pay back loans early. BEUC also called for rules on independent property valuation. Surveyors are often appointed by banks, which creates potential conflicts of interest. In cases where borrowers default on payments, surveyors frequently buy the relevant properties back from the bank at a price that they have determined. The lack of independent valuation, says BEUC, means that properties are often undervalued.
Charlie McCreevy, the European commissioner for the internal market, will next week opt for a light regulatory approach to responsible lending for Europe’s fast-growing mortgage market. His approach seems uninfluenced by the ongoing sub-prime mortgage crisis in the US. |
|
Source Link | http://www.europeanvoice.com |
![](https://www.europeansources.info/wp-content/uploads/esologo2.png)