• Morgage loans and credits legislation

Morgage loans and credits legislation

Mortgage credit is a notion introduced only for some years but very widely used on real estate market. To better understand the legal frame on basis of which banks give this type of credits, Casa Pitas presents you the article 34 from Law no. 190/1999 regarding the mortgage credit for real estate investments.
CHAPTER I: Real estate creditors
Art. 1 (1) In the sense of the law, mortgage creditors further called lenders, are the banks, Romanian legal entities, the bank branches, foreign legal entities, authorized by the Romanian National Bank to function on the Romanian territory, the CEC and the National Agency for Accomodation.
(2) The institution mentioned at the paragraph (1) can surrender mortgage claims achieved as a result of granting mortgage credits, to certain entities authorized to activate on the capital markets, in the conditions of current methodology norms.
Art. 2 – Prudential supervision of the activity of the banks, Romanian legal entities, of the bank branches, foreign legal entities, authorized by the Romanian National Bank to function on the Romanian territory, and of the CEC will be made by the National Romanian Bank in the conditions of the Bank Law no. 58/1998, while supervision of the emission and transaction of value titles and mortgage obligations will be made by the National Commission of Real Estate Values (C.N.V.M.).
CHAPTER II: The granting, guaranteeing and development of mortgage credits
Art. 3 – The granting, guaranteeing and development of mortgage credits will be achieved by lenders on basis of internal norms of credit approved by: the Council of Administration, in the case of banks, Romanian legal entities, including the CEC; the statutary organs of the bank, foreign legal entities, in the case of foreign banks branches; National Council of Coordination, in the case of the National Agency for Accomodation.
Art. 4 (1) Within the internal norms of crediting of the lenders, the following elements will be assessed, without being restrictive:
 -organizing the activity of granting, guaranteeing and development of mortgage credits; -the conditions in which mortgage credits can be granted, such as : the interest rate, the maximum value of the mortgage credit that can be given to a single lender;
 -the documentation that has to accompany the request of granting of a mortgage credit. With this purpose, there will be drawn models of the requests of granting of mortgage credits, of credit contracts, contracts of guarantee, statements and situations stipulated on article 7 ;
-competences of approval of mortgage credits, according to their value. With this purpose, each lender will assess the value starting from which a mortgage credit is considered as having great value;
 -the indicators on basis of which it can be assessed the bonity of the mortgage credits applicants and the method to calculate them;
-the criteria that have to be considered for the assessement of estimate foreign currency and buildings that are about to be mortgaged.
(2) In the case of banks and the CEC, mortgage credits of great value will be granted with the approval of the Risk Committee, whereas in the case of the ANL these credits will be granted with the approval of an institution with attributes similar to the Risk Committee that will be founded with this purpose.
Art. 5 – People who develop their activity within the compartments with attributes regarding the granting, guarantee and development of mortgage credits, as well as members of the Risk Commitees and of the institution with similar attributions assessed on art. 4 paragraph (2) must have at least one year of experience in the activity of crediting.
SECTION I : The granting and the guarantee of mortgage credits
Art. 6 – Mortgage credits will be granted in lei, on basis of the mortgage credit contract which will assess, without being limitative, the condition of expiration date, the interest rate, the value of the guarantees, clauses referring to the untaking up at the expiration date of the credit representing the principal and/or the interest rate.
Art. 7 – (1) To obtain mortgage credits, applicants must lay down an application together with at least the following documents :
in the case of persons :
documents proving the fulfillment of the conditions stipulated on art. 7 from Law no. 190/1999 ;
-documents to assert the capacity of the given persons to dispose of certain income with a permanent character such as salary certificate, income statement;
-documents to assert the value of the payment commitment of the applicant and especially of the obligations that have become exigible but have not been taken up at the expiration date. With this purpose, the applicant will present a statement to which he will attach copies of documents such as: credit contracts, leasing contracts, contracts of purchasing in rates the goods of long term use
-statement concerning the litigations with third parts mentioning the reasons that led to the respective situations.
in the case of legal entities :
documents proving the fulfillment of the conditions stipulated art.7 from Law no. 190/1999, such as :
-excerpt from the constitutive acts concerning the object of activity, excerpt from the decisions of statutary organs from which to result the destination of mortgage; copy of the latest balance sheet laid down at the right institutions and of the three balance checks; situations concerning the patrimonial elements brought as guarantee for the loans taken from other creditors ;
- the budget of income and expenses for the current year; statement regarding litigations with third parties clarifying the reasons that led to the respective situations;
-the projection of the flux of liquidities for the current year. In the case of the construction, rehabilitation, consolidation of extension of the buildings, credit applicants will present a financing plan, agreed by the credit applicant with the builder, which should stipulate the phasing in time of the sums.
Art. 8 – (1) The approval of every mortgage credit will be made on basis of a paper realized by the credit inspector, signed by the director of the compartment of credits and the director of the financial – accounting compartment. The paper must include, without being limitative, the following elements: in the case of applicants for mortgage credits, persons :
 -data for the identification of the applicant, such as: name, forename, address, personal numeric code, citizenship ;
-information (data) concerning the credit required, such as: sum, expiration date, destination, the building that will constitute the guarantee;
-information about the bonity of the applicant. With this purpose, there will be made a comparative analysis between the income of the applicant, including the members of his family, and the commitment of payment he has taken. On estimating the bonity of the applicant, there will be taken into account the fact that credit rates and interest rates should represent up to 50% from the net income of the applicant and of his family, calculated as difference between the total income and the commitments shown in the statement from art. 7 paragraph 1 let. a) 3-rd line ;
-the special situations in which the mortgage credit applicant might be in relation with third parties, such as litigations that might affect significantly its bonity; in the case of mortgage credit applicants, legal entities:
-dates for the identification of the applicant, such as: name, address of the social office, excerpt of the constitutive acts regarding the object of activity, excerpt from the decisions of the statutary organs concerning the contracting of the mortgage credit;
-information (dates) regarding the credit required, such as: sum, expiration date, destination, the building that will constitute the guarantee ;
-information about the bonity of the applicant. With this purpose, there will be taken into consideration the following aspects:
-the calculation  on basis of data from the latest balance sheet and the latest monthly check balance of at least the following indicators :
-current liquidity,
-patrimonial solvency,
-degree of coverage of the interest rate,
-rate of profit,
-speed of rotation of the circulating actives. The method of calculation of these indicators and the recommended levels of the respective indicators are presented in the addendum which is part of current methodological norms;
-estimation of the capacity of the applicant to pay back at the expiration date the credit rates and the interest rate on basis of the analysis of the data from the statement regarding the flux of liquidities.
(2) Papers stipulated on paragraph (1) will be accompanied by an assessement report of the estimate or of the building brought as guarantee. The assessement report of the estimate will be laid down by an enterprise of constructions, while the asessement report of the building brought as guarantee will be laid down by an estimator certificated by the National Association of Estimators in Romania (ANEVAR).
(3) After the approval of the mortgage credit by the organs stipulated on art. 3, the lender will put down with at least 10 days before signing the mortgage credit contract a written offer including all the conditions of the contract, and also its validity term.
Art. 9 – (1) The mortgage credit contract will assess, besides the other conditions of granting and development of the mortgage credit, also the following obligations :
-the calculatio of interest rates also in the case of sums not paid at the limit date representing credit rates and/or interest rates ;
 -the assertion, in accordance with the legal stipulations, of guarantees representing mortgages and privileges, as well as the assignment of the contract of guarantee in 30 days from the date of signing the mortgage credit contract.
(2) Within the guarantees constituted for the mortgage credit, there will be accepted only mortgages of the Ist rank and privileges. The value of these guarantees, stipulated in the assessement report made in the conditions of the art. 8 par (2) cannot be smaller than 120% from the value of the mortgage credit. In the case of the guarantees representing mortgages, the mortgage credit contract will assess the obligation of the borrowed not to make other mortgages of the same rank on the respective building. (3) Within 5 days from the closing of the contract of guarantee, the borrowed will close an insurance contract for the building put under mortgage in the conditions of the art. 16 –18 from Law no. 190/1999.
Art. 10 – The sum of the credit granted will be handed to the borrowed, portioned or entirely, in accordance with the stipulations from the contract of credit. In the case of mortgage credits alloted for the acquisition of buildings, the respective sums will be transferred, on the indication of the borrowed, in an account opened under the name of the seller. In the case of mortgage credits for the construction, rehabilitation, consolidation or expansion of the buildings, the sums will be given to the builder at the indication of the borrowed in accordance with the financing plan realized with this purpose.
SECTION II : The development of mortgage credits
Art. 11 – All during the mortgage credit lenders have to follow the accomplishment of the conditions stipulated in the mortgage contract od credit, referring to: the destination of the sums advanced, the financing plan assessed in the case of credits alloted for the construction, rehabilitation, consolidation or expansion of the buildings and the reimbursal at the expiration date of credit rates, the payment of the corresponding interest rate, as well as the bonity of the borrowed.
Art. 12 (1) For sums put at the disposal of the borrowed, either in portions or entirely, these have to present to the lender documents, such as: sale-purchasing contract, fiscal bills, fiscal receipts to prove the use of the credit for the destination assigned in the mortgage credit contract.
(2) In the case of mortgage credits granted for the construction, rehabilitation, consolidation and expansion of the buildings, credit inspectors will check, at least once in 3 months, if the builder has respected the term of execution of the works. In the case of mortgage credits given on basis of a financing plan, the credit inspector will check the way in which the conditions from the financing plan are fulfilled, especially those referring to the value of the sums advanced and the terms of execution.
(3) In justified cases, lenders can supplement mortgage credits already assigned, with the appropriate observance of the conditions stipulated in art. 6 – 10.
Art. 13 – All along the development of the mortgage credit inspectors will watch permanently the bonity of the beneficiaries of the mortgage credit, with the view of assessing the changes appeared in the financial situation of the borrowed. Through the internal norms of work there will be assessed as well the documents, such as the balance sheet, the check balance, the income statement, and the frequency with which they must be presented to the lender. On basis of the data inscribed in these documents and of the ones obtained from other sources, the lender will assess all along the development of the mortgage credit, the capacity of the borrowed to pay back at the expiration date the credit rates and the interest rates.
Art. 14 - In the case that the credit rates and/or the interest rate are not acquitted on the expiration from after 30 days, lenders will apply the stipulations of the art. 19 – 23 from the Law no. 190/1999.
CHAPTER III :Mortgage claims
Art. 15 – Mortgage claims are those existing between the lenders and the borrowed, persons and legal entities, with the purpose stipulated in art. 1 from the Law no. 190/1999.
Art. 16 – Mortgage claims whose creditors are indicated in art. 1 paragraph. (1) from current methodological norms can be cessioned to certain entitities authorized to function on the capital market, in the conditions stipulated by the Civil Code for the claim cession, with the observance of art. 26 from Law no. 190/1999.
Art. 17 (1) The cessions of mortgage claims towards entities authorized to function on the capital market will only be assigned in conditions stipulated by their internal norms, drawn with this purpose.
(2) The requirements referring to the approval of the cessions of mortgage claims and the administration of the credit risk corresponding to these cessions will be assessed within the internal norms stipulated in par.(1) by taking into consideration accordingly the requirements stipulated in the internal norms for the granting, guarantee and development of mortgage credits.
CHAPTER IV : The titles of values and obligations
Art. 18 – (1) Any titular of mortgage claim and the entities authorized to function on the capital markets, regardless of the way of obtaining the quality of mortgage creditor, can issue, according to art. 25 from Law no. 190/1999, on basis of mortgage claims held, titles of value called mortgage titles, within the limit of 75% from the total nominal value of mortgage claims held at the moment of the issuing.
(2) The mortgage titles are real estate values issued in a dematerialized form on the capital markets and submitted to the regulations of the National Commission of Real Estate Values concerning the issuer, the issuing, the placement, the transfer, the storage and the evidence of real estate values.
Art. 19 (1) Entities authorized to assign mortgage credits can issue, according to art. 29 from Law no. 190/1999, on basis of mortgage claims held, mortgage obligations, within the limit of 60% from the total nominal value of mortgage claims held at the moment of the issuing.
(2) Mortgage obligations are real estate values issued in a dematerialized form on the capital markets and submitted to the regulations of the National Commission of Real Estate Values concerning the issuer, the issuing, the placement, the transfer, the storage and the evidence of real estate values.
Art. 20 – Titles of value and mortgage obligations, issued by the same titular of mortgage claims, cannot exceed together 75% of the total nominal value of  mortgage claims held at the moment of the latest issuing.
Art. 21 – On basis of art. 13 and 14 from Law no. 52/1994 regarding the real estate values and the stock exchanges, the National Commission of Real Estate Values wil adopt regulations necessary for the accomplishment of obligations deriving from Law no. 190/1999 and the present methodological norms.