THE FINANCIAL CONTENT OF THE LOAN AND THE MORTGAGOR PROTECTION: SOME CURRENT ISSUES

Abstract

This paper reports on the context of legal thought and case-law and the main amendments Act 1/2013 makes to the rules governing home loan agreements. It also examines the rules on conventional default interest, whose amount is limited by the act. Moreover, it looks at some of the amendments to the Civil Procedure Act that indirectly influence the financial terms of loan agreements, such as the criteria for allocating sums obtained through foreclosure to the different component items of the debt, early maturity of the mortgage debt due to breach of contract and restrictions on the amount of foreclosure costs in the case of homeowner loans. The act should have more thoroughly revised the concept of monetary loans in the light of problems now being addressed by Spanish case-law and scientific doctrine. Some of these issues are: how interest ceilings might be introduced to identify rates that must necessarily be regarded as usurious (a step that might do away with the intolerable diversity of case-law on what a usurious rate is); how to treat default interest for purposes of controlling potential usurious rates; whether the collateral or personal guarantee securing a loan subsists once the loan has been declared usurious; and when a borrower whose loan has been declared usurious and therefore null may be required to return the principle.