The Implementation of the EU Mortgage Credit Directive – on the Necessity of a Legislative Amendment

Abstract

The Directive 2014/17/EU of the European Parliament and of the Council of 4 February 2014 on credit agreements for consumers relating to residential immovable property (Mortgage Credit Directive) was complemented by new regulations regarding the assessment of customers’ creditworthiness through the Act Implementing the Mortgage Credit Directive and Amending Accounting Rules (Gesetz zur Umsetzung der Wohnimmobilienkreditrichtlinie und zur Änderung handelsrechtlicher Vorschriften) of 11 March 2016 in the law of obligations (Section 505a ff. Bürgerliches Gesetzbuch, BGB) and the regulatory law (Section 18a Kreditwesengesetz). Firstly, the dangers of the ‘extraordinary’ monetary policy of the ECB to the real estate market and a possible connectivity regarding the regulatory initiative are indicated. The contribution describes the purpose of the Directive, compares the new principles of creditworthiness assessment with the previous practice and analyses the consequences for banks and potential borrowers. It closes with a critical assessment of the EU wide regulation in this field and specifies approaches concerning a different German implementation in accordance with the Directive.