09 September 2008

Reuters: EU proposes 12-month deadline on home foreclosures

The core strategy is to encourage lenders to offer mortgages outside their home state as McCreevy doubts many consumers will go beyond their own region, let alone country, to seek a home loan.

People who default on a mortgage would lose their home within a year under European Union draft guidelines on foreclosures as housing markets turn sour in parts of the bloc.

 

EU Internal Market Commissioner Charlie McCreevy is seeking to build a more coherent mortgage market across the 27-nation region and give consumers a greater choice of cheaper lenders.

 

The core strategy is to encourage lenders to offer mortgages outside their home state as McCreevy doubts many consumers will go beyond their own region, let alone country, to seek a home loan.

 

"Member states should ensure that their foreclosure procedures are completed in the shortest possible time and, in any event, within 12 months calculated from the writ of execution to the completion of the sale proceedings," a copy of McCreevy's draft guidelines, obtained by Reuters, said.

 

Speeding up foreclosures should not be at the expense of national rules for protecting consumer rights, the draft said.

 

The housing market has come under the spotlight as prices fall in EU states such as Ireland, Britain and Spain after years of heady rises.

 

The draft is formally a recommendation or set of non-binding guidelines for EU states to follow.

 

The draft also calls on EU member states to ensure that registration of a property sale is completed within 21 days from the application and the cost should be a maximum of 1 percent of the mortgaged amount.

 

Lenders privately welcome the two deadlines but, as the recommendation is non-binding, they doubt EU states will apply it vigorously as in some countries foreclosures can take years.

 

"When you start foreclosure, the concerned party can initiate a claim which prolongs the whole thing. Court procedures can have different durations in different countries," a mortgage industry official said on condition of anonymity.

 

"I don't think any member state will comply with this recommendation," the official said.

 

The European Commission has yet to say when it will formally adopt the recommendation.

 

(Editing by Dale Hudson)

© Reuters