The European Banking Authority (EBA) has recently published its final guidelines on passport notifications for mortgage credit intermediaries in support of the transposition of the Mortgage Credit Directive (MCD). The Guidelines will ensure that information about credit intermediaries carrying out business in more than one Member State is exchanged consistently between national authorities.
The Mortgage Credit Directive provides that passport notifications will need to be exchanged between national authorities competent for the registration and/or supervision of mortgage credit intermediaries across the EU Member States. The EBA Guidelines formalise the notification process between the national authorities in the home and host Member States.
What is the Mortgage Credit Directive?
The Directive aims to ensure that all consumers who purchase a property or take out a loan secured against their home are adequately informed and protected against the risks.
The Directive is being introduced to facilitate an internal mortgage credit market with a high level of consumer protection.
The main provisions of the Directive include consumer information requirements, principle based rules and standards for the performance of services (e.g. conduct of business obligations, competence and knowledge requirements for staff), a consumer creditworthiness assessment obligation, provisions on early repayment, provisions on foreign currency loans, provisions on tying practices, some high-level principles (e.g. those covering financial education, property valuation and arrears and foreclosures) and a passport for credit intermediaries who meet the admission requirements in their home Member State.
This Directive aims to develop a more transparent, efficient and competitive internal market by implementing strong protections for consumers seeking mortgage credit, while promoting sustainable lending and borrowing and financial inclusion.
Will the Mortgage Credit Directive Apply to All Mortgage Lending?
It remains to be seen whether all mortgages will be covered by the terms of the Directive. The Directive affords significant discretion to the national authorities to determine whether buy-to-let lending, local authority mortgages and equity release products fall within the scope of the Directive. Discretion is also afforded to the national authorities to ban or restrict the payment of commission by banks to mortgage brokers.
When will the Mortgage Credit Directive be Transposed?
The Mortgage Credit Directive must be transposed by national authorities by March 2016.
The creation of a single market for residential mortgages in the EU is to be welcomed from a competition perspective, as is the enhanced consumer protection which the transposition of the Directive into Irish law will bring. The Department of Finance has concluded a consultation process in relation to how the various discretions afforded under the Directive should be implemented and the results of this consultation could have some interesting impacts on the manner in which mortgages are marketed in Ireland.
For further information on the Mortgage Credit Directive please contact Enda Newton (Partner).