What is the purpose of banking regulations
Residential Property Credit Directive 2021 (WoKri or WIKR)
3. Residential Home Lending Policy - Past Impact on Lending
In its original form, the residential real estate credit directive initially resulted in fewer people interested in real estate receiving a loan than in the past. The amount of the percentage decrease varied from bank to bank, since the specific implementation and handling of the guideline is the responsibility of each bank. Depending on the bank, the decline ranged from 0 to 25%.
Anyone who used to have high equity but low income was still financed by a bank, as a bank checked the loan security during the fixed interest rate when lending before the introduction of the residential real estate credit line - but not necessarily the serviceability of the loan rates in old age.
Lending to people who do not receive their income in euros had also become more difficult since the introduction of the credit directive. Many banks categorically rejected such financing projects instead of carrying out a credit check first. Reason: You have to hedge the exchange rate risk yourself in the future, otherwise you run the risk of the borrower simply changing the credit currency if the home currency depreciates against the euro.
Some banks had taken the guideline as an opportunity to sell more insurances to borrowers again, for example occupational disability insurance, in order to protect against loss of income in the long term. It is true that the new directive is intended to make the sale of insurance more difficult. But the sale is still legitimate as long as it is not a tied transaction (insurance contract must be concluded separately) and the customer can choose between several insurance policies.
in the Bottom line The Home Loans Directive in its initial form would have resulted in fewer people living in their own homes and having to continue to rent. The directive was therefore controversial.
The federal states of Baden-Württemberg, Bavaria and Hesse therefore had in October 2016 submitted a draft reform to the Federal Council, which provides for a relaxation of the procurement guidelines. The Federal Cabinet then passed a defused bill in December 2016. In its Opinion of February 2017 the Federal Council called for a further relaxation of lending in certain cases. Within the framework of the Financial Supervision Law Amendment Act, which was passed by the Federal Council on May 12, 2017, several of the points of criticism expressed by consumers and banks have been taken up. Ambiguities were also removed, some of which resulted in a very strict application of the specifications. The associated regulation, which contains the guidelines on the award criteria, was presented in August 2017. The ministerial draft for the regulation now stipulates that expected positive events such as resumption of work after parental leave can be taken into account in the credit check.
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