8. Consumer Mortgage Protection in France

As might be expected there exists a regulatory framework for all mortgage transactions to ensure a reasonable degree of consumer protection.

The consumer credit framework covers all sales transactions, apart from auctions and purchases by professional property dealers, which are covered by different legislation.

The main points of the consumer protection law are as follows:

• Advertising

All advertising by lenders must mention the main characteristics of loan, notably the identity of mortgagor, application procedure, the annual percentage rate (TEG), and delay periods.

• Preliminary Offer

The preliminary offer must be in writing, giving details of mortgagor, nature, object and modalities of loan, a table or repayment schedule distinguishing capital and interest, insurance requirements and guarantees, modalities for transfer to a third person and any costs if the loan does not proceed.

• Duration of Offer

The offer must be held open for a minimum of thirty days from date of receipt by the applicant.

• Retraction Period

The applicant has eleven days to reflect and change their mind without penalty during which time they cannot have access to the funds.

• New Offer

Any change to the offer must restart the process.

• Conditional Purchase

In the case of a conditional purchases (subject, to say, planning permission) if acquisition of the property does not take place within four months then the offer is rescinded, and the client must reimburse all monies that may have been lent.

• Insurance

All mortgages are obliged to take out an insurance policy covering life, incapacity and invalidity. If the insurance company does not agree to the policy then the client can demand cancellation of loan within one month.

• Construction Disputes

In the event of legalities concerning the acquisition, notably in relation to construction of a new property, the mortgagee can be granted suspension of mortgage payments pending resolution of the dispute.

• Early Redemption

The mortgagee can always make early repayment of the mortgage, in part or full, but the contract can forbid repayments less than ten per cent of loan.

The lender can demand an early repayment penalty, which cannot be greater than one quarter interest, up to a maximum of 3% of total loan outstanding.

However, this penalty cannot be imposed where early repayment is as a result of sale of property following change of job, death or retirement of applicant or spouse.

• Sale Contract

The sale contract of a property must include a conditional clause concerning a mortgage if one is being sought and, if not obtained within period stated in the contract, then the purchaser can recover in full the deposit.

However, where refusal of the mortgage is due to a false declaration or their own actions then the purchaser can be held to the contract.

• Couples

Married couple and those in civil partnerships are both responsible for repayment of the mortgage even though the mortgage may be in only one name.