Towards a new EU regulatory law on residential mortgage lending
| DOI | https://doi.org/10.1108/JPPEL-06-2018-0017 |
| Pages | 51-66 |
| Date | 28 February 2019 |
| Published date | 28 February 2019 |
| Author | Héctor Simón-Moreno,Padraic Kenna |
| Subject Matter | Building & construction law,Property law,Building & construction,Property management & built environment,Real estate & property |
Towards a new EU regulatory law
on residential mortgage lending
Héctor Sim
on-Moreno
Department of Private, Procedural and Tax law, UNESCO Housing Chair,
Universitat Rovira i Virgili, Tarragona, Spain, and
Padraic Kenna
National University of Ireland, Galway, Galway, Ireland
Abstract
Purpose –The measures enacted so farat European level to address the global financial crisis are likely to
have limited effects as they are still market efficiencyoriented. Accordingly, this study aims to explore how
the EU Charter on Fundamental Rights may be useful to achieve a more human right dimension in EU
regulatorylaw.
Design/methodology/approach –The work departs from the current commodification of housing
worldwide and the limitedcapacity of EU to tackle new housing challenges. Thework takes the link already
established by the CJEU between EU consumer law and the EU Charter on Fundamental Rights one step
furtherand addresses the potential implications concerningresidential mortgage lending.
Findings –The main finding is the potential influence that the EU Charter of Fundamental Rights may
have on EU regulatory mortgagelending, as there are indicators of a bifurcation of mortgage law regimesat
the EU level, separatinghome loans from other mortgages.
Social implications –The influence of the Charter of FundamentalRights on EU regulatory law, mainly
consumer law treated in a human rights dimension,could be a first step to treat housing as a social good and
not as a commodity in the EU. This could lead to a completelynew approach concerning the traditional rules
governingresidential mortgage loans.
Originality/value –The potential constitutionalisation of consumer law and the impactof the CJEU cases
on national procedural rules have already been addressed by scholarship. The present workgoes one step
further as it addresses the potentialimplications of the EU Charter of Fundamental Rights on EU regulatory
law in terms of thepotential bifurcation of EU rules on mortgage lending.
Keywords Housing rights, EU law, Human rights, Mortgages, Consumer law
Paper type Research paper
Introduction
The economic and socialbasis of European property law has changed dramatically since the
eighteenth century, but traditional notions of property and contract law remain rooted in
these earlier times. Agricultural land has been replaced by housing as the main source of
wealth (Piketty, 2014). This can partly be traced to the broadening of property ownership
through national housing policies, organised around mortgage lending from the early
nineteenth century, and the expansion of mortgage lending following global financial
deregulation in the 1980s (Rolnik, 2013). Property markets have encompassed housing
This work has been made possible thanks to the research stay at the Centre for Housing Law, Rights
and Policy, National University of Ireland, Galway, between 1 March and 31 August 2018, funded by
the Spanish Ministry of Education, Culture and Sports in the framework of the Programme “José
Castillejo”for the Mobility of Young Scholars 2017 (CAS17/00474).
New EU
regulatory law
51
Received26 June 2018
Revised21 September 2018
21November 2018
Accepted24 November 2018
Journalof Property, Planning and
EnvironmentalLaw
Vol.11 No. 1, 2019
pp. 51-66
© Emerald Publishing Limited
2514-9407
DOI 10.1108/JPPEL-06-2018-0017
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2514-9407.htm
markets and exchange of homes, building on traditional property, contract and mortgage
law (Kenna, 2010). In many countries, State policy has focussed on advancing
homeownership to promote political conservatism, along with asset-based welfare
approaches (Ronald, 2008;Rolnik, 2012)[1]. The process of commodification and
financialisation of housing has been enormous[2]. Real estate (which largely relates to
housing and commercial property) has become the main store of wealth for European
households, and a key source of collateral for mortgage lending and complex financial
products. Indeed,mortgage debt to outstanding private loans ratioincreased from around 30
per cent in 1960 to 60 per cent in 2010 and mortgage loansrose to account for 64 per cent of
EU GDP in 2010 (it accounted 20 per cent in 1914) (Aalbers, 2017b), and outstanding
residential loans in Europeamounted to e7tn in 2016 (European Mortgage Federation, 2017).
Significantly, home loan mortgage lending practices were an integral element creating the
global financial crisis in USA (following the collapse of Lehman Brothers) –unsustainable
expansion of home-ownership to those on low and precarious incomes coupled with lack of
regulation on irresponsible sub-prime lending (Nasarre-Aznar, 2014). This has had major
consequences for some EuropeanMember States[3] and cast doubt on the efficacy of the EU
governance of mortgage markets. But in some ways, this might have prompted
developments in EU consumer and mortgage law, towards a new “regulatory”mortgage
law.
This article examines some of these developments, exploring how EU law transcends
traditional and strict public/private law divides in land and mortgage law. It considers
recent developments in the interpretation of EU consumer law in the context of mortgage
enforcement actions in Member States,as well as the likely impact of the Directive 2014/17/
EU, of 4 February 2014, on credit agreements for consumers relating to residential
immovable property (MCD)[4], onthe private law of mortgages. This synthesis of consumer
and mortgage regulation has created a new form of EU regulatory law, which we argue
needs an added human rights dimension. The gradual integration of the EU Charter of
Fundamental Rights (The Charter)[5]and such principles as LifeTime contracts can address
that deficiency. Finally, we consider how the mix of all these influences could develop this
EU regulatory law on mortgages, and whether there is indeed a new formulafor reforming
traditional nationalland law rules and procedures.
EU law and the traditional public/private law divide
Land, property and housing legislative competence in the EU remains with Member States.
Housing and property competencesrelate to areas of society jealously preservedby Member
States at national level, largelydue to their inherent links with local economic and political
power structures. EU legislative power is limited due to the lack of an express competence
on housing and property law (Art. 5 of the Treaty of the European Union[6] and Art. 345 of
the Treaty on the Functioningof the European Union, TFEU)[7].
However, the primary objective of the overallEuropean integration process has been the
establishment of a common market (Micklitz, 2014). In this, the EU has respected the rules
on subsidiarity and national competence in areas of private law such as property, tort and
contract. Indeed, the sharp division between private law and public law developed over
many years[8] remain very sensitive in such areas as property rights. Private law rules
regulate legal transactions among private parties, i.e. horizontal relationships, while public
law concerns vertical relationshipsbetween the state and private parties –its main function
was the protection of the common good and the public interest. The distinct and separate
jurisprudence hasserved to maintain a clear line of protection of property rights, withpublic
law interfering in the privatelaw sphere within very narrow and prescribed paths[9].
JPPEL
11,1
52
To continue reading
Request your trial