The Council of Ministers today approved a Royal Decree that establishes measures to alleviate the problem of evictions for people at risk of social exclusion. It establishes the thresholds that give entry to the group to be protected, delay interests are limited and extrajudicial execution procedures are reformed. Along with the decree, a Code of Good Practice is included that financial institutions may subscribe to on a voluntary basis and that will be published in the BOE.
The standard sets the definition of the exclusion threshold: That it be the first and only home and that all members of the family lack income derived from work or economic activities. In addition, the mortgage payment must be greater than 60% of the net income received by all the members of the family unit. They must also lack patrimonial assets with which to face the debt.
The acquisition value of the mortgaged home must be in the following margins:
- Cities with more than 1,000,000 inhabitants: 200,000 euros
- Cities with more than 500,000 inhabitants or integrated into metropolitan areas of municipalities with more than 1,000,000 inhabitants: 180,000 euros
- Cities with more than 100,000 inhabitants: 150,000 euros
- Cities with less than 100,000 inhabitants: 120,000 euros
Also for families at the exclusion threshold, the applicable default interest will be the result of adding 2.5% of the amounts due and not paid to the remuneration interest agreed in the loan.
This decree also addresses a reform of the extrajudicial execution procedures, to make them more agile, cheap and transparent in line with those of judicial execution. Specifically, there will be a new online auction system in collaboration with the Ministry of Justice and Presidency.
The reform is completed with a Code of Good Practice for voluntary adherence by financial institutions. These must communicate their inclusion to the General Secretariat of the Treasury and Financial Policy, who will make the list public. The permanence in the Code will be a minimum of two years and its non-compliance may be invoked before the Courts of Justice by the affected party.
The monitoring will be carried out by a Control Commission that will include a representation of the Spanish Mortgage Association, the Bank of Spain, the CNMV and the Secretary of State for the Economy. The Control Commission will publish a semi-annual report on the degree of compliance with the Code.
The Code of Good Practice It will be applied in the following phases:
one. Restructuring of mortgage debt: Debtors in the scope of exclusion may request the entity to restructure their mortgage debt that makes their payment viable and that must be presented within a month. This plan must include a deficit in the amortization of capital of four years, the extension of the amortization period to 40 years and the reduction of the interest rate applicable to Euribor + 0.25 points. Debtors whose execution procedure has not started may request the restructuring.
2. Complementary measures: If, despite the refinancing, it is not feasible to pay the debt, the debtor may request a take away in the capital pending amortization. Any restructuring that involves a mortgage payment of more than 60% of its income will be considered unfeasible. Those who are in execution procedure may request the removal, provided the auction has not been announced.
3. Substitute measures: If neither of the two previous phases is successful, the debtors in the exclusion field may request the Settlement of the house. It will mean the total cancellation of the debt with the delivery of the house, along with the personal responsibilities of the debtor. The debtor may remain a minimum period of two years as a lessee, paying an annual income equivalent to 3% of the amount of the outstanding debt. During said term, the non-payment of the rent will accrue a default interest of 20%. The dation in payment will not be applicable when the execution procedure has concluded or if the home is taxed with subsequent charges.