Mortgage loan control: BDC rules and procedures for financial stability

From November 2, families struggling to repay their housing loan will be able to fix payments for two years. However, the Bank of Portugal has already confirmed that participation in this measure will result in an increase in interest payments at the end of the loan. To ensure everything goes smoothly, the Portuguese regulator, led by Mário Centeno, has published an instruction that requires banks to provide all available information on the fixing of housing payments set by the government.

The fixation of housing payments is a support measure for families with a housing loan included in Presidential Decree No. 91/2023 of October 11. It is an instant reduction in the monthly payment of borrowers, as the Euribor interest rate will be reduced by 30% during''two years. Families interested in doing so can apply to their bank starting Thursday to fix their home payments. Applications must be submitted by the first quarter of 2024.

It should be noted, however, that taking part in this support will increase the overall cost of a home loan, as Deco and the president of the BPI have already warned.

To make the fixing of housing payments transparent and accessible, the regulator has already published the Bank of Portugal Instruction No. 24/2023, which will come into force next Thursday, November 2. The urgency of the implementation of the Bank of Portugal instruction is due to the fact that "temporary regimes depending on the initiative of banking customers must have clear, complete and accurate information" in order to make a decision.

The regulator, led by Mariu Centeno, believes that banks should organize to provide the best information on the fixing of house payments, as "participation in this measure is expected to be particularly intense in the first month of application".

Therefore, through''this instruction "defines the obligations that institutions must comply with when disseminating public information on the temporary fixation of payments" and in the "temporary preferential interest regime" applicable to "loan contracts intended for the acquisition, construction or renovation of permanent housing".

From the outset, the Bank of Portugal wants to guarantee that banking institutions must provide public information on the temporary fixation of payments and on the preferential interest regime, following the following rules to 'protect the rights of banking customers': through statements provided to borrowers; in a separate and autonomous area on their websites, with appropriate highlighting on the homepage, with direct access for banking customers without''pre-registration; in home banking and mobile applications, if available.

This information on new credit support for housing "must contain at least the elements defined by the Bank of Portugal and be provided during the period during which customers can request access to these regimes," the statement also states. Information on credit support for housing must be agreed.

Bank of Portugal also wants there to be a "harmonized model for the transmission by institutions of legally required information to customers who have expressed interest in temporary payment fixing, to ensure that customers make an informed decision".

In addition, when banks are faced with a request for''full repayment of the loan to transfer it to another institution, they should pass on the necessary information to the borrower so that he or she can retain the index value used for payment fixing in the new loan agreement, the instruction says.

Banks must also "ensure that questions asked by customers are clarified through the provision of a frequently asked questions section on the application of temporary payment fixing and temporary preferential interest, in an easily accessible and permanent place, in particular on their websites." In addition, banks should also make it possible for families to ask questions in branches or through remote communication tools.

Banks must also provide the Bank of Portugal with a monthly "set of information on''loan contracts that have fallen under requests for access to the temporary fixation of payments and temporary preferential interest regime', so that the authority can monitor compliance with the rules on access to these regimes.

'The first communication to be sent to the Bank of Portugal concerns information for November and December 2023 and must be sent before January 15, 2024', it said.