The proposal provides mortgage undertakings with the possibility of granting all new and existing mortgagors a temporary exemption from amortisation requirements. The exemption possibility applies during a severe downturn in the Swedish economy. The current situation due to the spread of the corona virus is a clear example of when the exemption may be granted to all mortgagors amortising in accordance with the amortisation regulations.
Finansinspektionen is proposing new general guidelines to clarify when a mortgage undertaking may grant exemption from the amortisation requirements set out in Finansinspektionen’s regulations (FFFS 2016:16) regarding amortisation of loans collateralised by residential property (the amortisation regulations).
Finansinspektionen is now clarifying that it is possible under extraordinary circumstances that lead to a severe downturn in the Swedish economy for the term “special grounds” to be interpreted in such a way that mortgage undertakings may grant temporary exemption from the amortisation requirements for all mortgagors amortising in accordance with the amortisation regulations. The general guidelines also clarify that the granting of such an exemption may be given at the point in time when the mortgage is being issued during a severe downturn in the Swedish economy. However, the mortgage undertakings must still consider other relevant regulations, such as rules on credit assessment and the Consumer Credit Act, which requires, among other things, a firm to consider consumers’ interests with due care.
The current situation due to the spread of the coronavirus provides a clear example of when a broad interpretation of the term “special grounds” may be applied. Finansinspektionen’s proposal clarifies that the current situation allows a mortgage undertaking to grant amortisation exemption even without the income of an individual borrower having been directly impacted. This provides mortgagors with greater manoeuvrability for managing their personal finances. It continues, however, to be the responsibility of the banks to decide if an individual borrower may be granted amortisation exemption.
The general guidelines are proposed to enter into force on 14 April 2020