In an article published on Monday, UFC Que Choisir denounces the mortgage loan guarantee system. The consumer association criticizes, among other things, the lack of choice of borrowers, and the low redistribution of profits. The Good Finance defends the system, pointing out the fact that it has not yet aroused complaints from borrowers. The president of the association will meet the Minister of Economy on Friday on this subject.
What UFC that to choose reproaches the bank guarantee
Restricted choice for borrowers
In an article published on Monday, the association UFC – Que Choisir denounces the limited choice available to borrowers to guarantee their mortgage. Because it is necessary that the lending bank obtains a security, in case the buyer of the property is in default of payment. Today it has 3 solutions: bank guarantee, mortgage and PPD (Lender Privilege Registration of Money Lender).
However, the banks prefer to have recourse to surety, because the surety company will replace the borrower in the event of default. It is generally necessary to wait for the 3rd unpaid monthly payment, so that the surety takes over the payment of the installments. In the case of a mortgage or an IPPD, the lending bank must make a seizure to recover its due. However, this same deposit will be returned to the borrower to recover the default.
Sometimes a surety company refuses to vouch for a first-time buyer profile. Generally it is too high a debt, or a too precarious professional situation. In this case it is possible to turn to the mortgage or the IPPD. The difference between a mortgage and an IPPD is that the PPD is only for palpable property.
The UFC that you choose criticizes the system for not presenting enough solutions, and especially for not letting the borrower look for his surety.
56% of home loans would be bonded
In its press release, UFC – Que Choisir suggests that the bank guarantee was present in 56% of the files in 2012. At this stage it is important to remember that the surety is cheaper than the mortgage or the IPPD. But above all, when a first-time buyer or a real estate investor wishes to resell or redeem his credit before the repayment ends, he will have to pay release fees if he has chosen a mortgage or an IPPD.
In addition, the Astro Finance company pays back a part of the initial cost of the deposit, when the borrower has gone through the repayments without default. Well precisely, this feature is not enough according to UFC – Que Choisir.
Surety companies should reimburse more
The borrowers having been guaranteed by Astro Finance, receive a reimbursement of around 72% of the bond fees, at the end of their loan. UFC – Que Choisir criticizes the company for pooling losses, but for privatizing profits. Because the bond fees thus paid by the borrowers, are deposited in a mutual guarantee fund, which today would represent 3.9 billion euros. What displeases the consumer association is that the profits go to the shareholders and not to the borrowers.
According to UFC – Que Choisir, the net profitability of the company Astro Finance would be 45%. The association argues that opening up to competition would allow borrowers to save $ 560 on average on the cost of a mortgage. Because prices sometimes range from simple to double from one organization to another. And the association to quote the Lite Bank guarantee of mutual credit, 2.5 times more expensive than that of Astro Finance.
UFC – Que Choisir plays its role, placing itself on the side of the consumer. This same process was undertaken in connection with the reimbursement of borrower insurance. The association had made a public report, which pointed out the obligation of certain insurers, to repay part of the profits obtained with the contributions of certain borrowers. The case is still not settled, because 2 of the individuals supported by UFC – Que Choisir were recently dismissed by the Paris tribunal de grande instance.
Who pays the deposit fees today?
You cannot get a home loan without a surety, a mortgage or an IPPD. Today, bail costs are therefore borne by the borrower. The amount varies according to the nature of the real estate transaction, and to give a rough range, varies from 0.8% to less than 2% of the guaranteed amount.
Generally the personal contribution of the first-time homeowner will allow him to pay the deposit costs. However, sometimes banks agree to finance their clients’ projects at 100%. In this case they advance all the borrowing costs themselves.
Reaction of the French banking federation
Questioned by AFP (Agence France-Presse), the Good Finance (French Banking Federation) highlights the fact that competition already exists. “There is strong competition between credit institutions in terms of mortgage loans. Customers have the choice of their establishment and the choice of their guarantee between the mortgage on the one hand and the surety on the other”. And to recall that no complaint has yet been filed by the borrowers.
Case to follow, because the UFC – Que Choisir has launched a call for witnesses on its site.
The case will be brought to Bercy
The president of the association, Mr. Neros Baste, intends to move forward. In the columns of the Nouvel Observateur, he asked for “free and undistorted competition. We must restore effective freedom of choice ”. “We have borrowers who are captive, victims of a market made by banks for banks, a sclerotic market which is characterized by questionable practices. We are in the presence of a scandal ”.
An interview is scheduled for Friday with the Minister of the Economy, Mr. Marck Percy.