Mortgage Law goes into effect
Posted by meb at March 7th, 2007
The Mortgage Law went into effect yesterday. The Law which amends Various Laws regarding the Housing Finance System was published in the Official Gazette. According to the law, the consumers will be able to prefer either fixed or variable interest rates while using credits. A two-percent early-payment fine over the principal capital will be imposed on those who want to close their debts early.
Mortgage Finance Institutions
With the new law, Mortgage Finance Institutions will be established in order to enable the citizens to buy houses in better conditions at longer terms. The banks will be able to participate in the mortgage finance institutions. These institutions will be exempted from the bank and insurance transactions tax of the emission premiums and their transactions will be excluded from the stamp tax. The earnings yielding from the securities issued by these institutions will not be taxed. The Housing Finance Fund will be set up for financing the housing sector and converting the receivables into securities.
Fixed and Variable Interest Rate Options
According to the law, the repayment amounts of the debts originating from the housing finance will be determined according to the indexes which are domestically and internationally recognized and used as widespread. Within this framework, the necessity for borrowing with the fixed interest rate which blocks the development of the market will be removed on condition that it should aim at housing finance. When the debts are given with variable interest rates, the risk management of the banks and the repayments of the citizens will facilitate since the terms will be longer. When the interest rate is fixed, then the rate determined at the beginning of the agreement, will not be changed without the approval of both sides.
Protecting consumers
It will be essential for the housing finance institutions to give a ‘Pre-Agreement Information Form’ which involves the conditions of the financial leasing agreement or the credit recommended to the consumer and to inform the consumers about the credit or the financial leasing transactions prior to the agreement. The consumer will be free in approving this recommendation.
Early payment fines
Houses at the project and construction stages will also be included in the Mortgage system. In the system, there will be no restrictions regarding the real estate such as age, district or credit term. The banks will have the right to sell the houses of those who do not pay their credit installments for two months. Those who want to close their remaining debts will pay a two percent early payment fine in addition to the principal capital.
Credits for those who will construct houses on their lands
The law envisages the evaluation of the houses and cooperatives within the context of the Urban Transformation Project and the dwellings to be built by the Mass Housing Administration (TOKI) as part of the Mortgage system. Moreover, those who will construct houses on their lands will also take advantage of the housing credit.
Situation of current credits
The current housing credits will be included in the system automatically following the enactment of the law. The consumers who do not want to get involved in the Mortgage system will not be included in the system according to the advantage situation if they apply within three months following the promulgation of the law.
Converting mortgage into money
According to the law, the finance institution will be able to convert the real estate, for which credits are obtained, into money if the consumer who do not pay his/her housing credit. In addition, the finance institution will have the authority to sequestrate this real estate.
Compulsory Life Insurance
Due to the law which delegates responsibility also to the financer institution, the financers will be able to supervise the construction at every stage. The value of the house will be determined with the opinion of an expert. The purchased house will be insured until the end of the term. Those who receive housing credits will be obliged to make life insurances. If the people who receive credits die, their legal dependents will not be obliged to continue.
source: The New Anatolian
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