Due to the alarm state we are in, the Boletin Oficial del Estado of 18 March 2020 (Official Bulletin of the State) publishes the Real Decreto-ley 8/2020, of 17 March, on urgent extraordinary measures to deal with the economic and social impact of COVID-19.
The Goverment has approved in the Consejo de Ministros (Council of Ministers) a set of economic measures to curb the impact of COVID-19 so that any person affected by this virus loses his house. Among these measures a moratorium on mortgage payments is included, which consist of offering the client the possibility of deferring mortgage payments for a period of time, in this case the term will be one month, as announced by the government.
Likewise, the government has also announced €200.000M will be mobilized to face this crisis. Additionally, the self-employed and companies that carry out the ERTE (Record of Temporary Employment Regulation) will not have to pay social security contributions.
Therefore, this measure is compulsory for all institutions and is suitable for any client who is in a situation of economic vulnerability. By vulnerability we mean “being unemployed, or, in the case of a professional entrepreneur, suffering a substantial loss of income or a considerable drop in sales”. A debtor will also be considered vulnerable when “the effort represented by the mortgage burden on the household income has been multiplied by at least 1,3”. And the beneficiaries of this measure will also be “customers whose income has been reduced to the equivalent of three times the annual IPREM (Public Indicator of Multiple Effect Monthly Income) of 14 payments” which is €7.519, 59. This rate may be increased 0,1 times for each dependent child or person over 65 years of age, and with other conditions in the case of disability over 33% or cerebral palsy.
The legal text says it can also be possible to apply when “the mortgage fee, expenses and basic supplies exceed 35% of the net income of all members of the family unit”. While in the case of entrepreneurs and self-employed, will be when “there has been a substantial fall in sales when this fall is at least 40%”.
It is indicated that when requesting the moratorium, the bank will have “a maximum period of 15 days” to accept it or not. “Once the moratorium has been granted, the creditor institution will notify the Bank of Spain of its existence and duration for accounting purposes and of the fact that it has not been charged for the calculation of risk provisions”. This means that even if the payment is not received by the institution, it will not be considered to be in arrears for accounting purposes. Documents must be presented to demonstrate the situation and once the moratorium is granted “the bank may not demand payment of the mortgage instalment, nor of any of the items comprising it (repayment of capital or payment of interest), either in full or as a percentage. Nor will they accrue interest”.
The documents that will prove these circumstances will be:
- In the case of legal unemployment, by means of a certificate issued by the body managing the benefits, stating the monthly amount received as unemployment benefits or allowances.
- In the case of cessation of activity by self-employed persons, by means of a certificate issued by the Agencia Estatal de la Administración Tributaria (State Tax Administration Agency) or the competent body of the Autonomous Community, where appropriate, on the basis of the declaration of cessation of activity declared by the person concerned.
- Number of persons who live in the dwelling (family book or document accrediting a cohabitation, certificate of registration relating to the persons registered in the dwelling and declaration of disability, dependency or permanent incapacity to carry out a work activity).
- Ownership of the property.
- Declaration of responsibility of the debtor or debtors relating to the fulfilment of the requirements demanded to be considered without sufficient economic resources according to this decreto-ley (Royal Decree-Law).
Another effect of the moratorium will be the suspension of the mortgage debt during the period stipulated for it and the consequent non-application of the early maturity clause in the mortgage loan contract during the period of the moratorium.
Likewise, the Real Decreto (Royal Decree) also establishes that if someone benefits from this measure without meeting the requirements, “he will be responsible for any damages that may have occurred, as well as all the expenses generated by the application of these measures. The amount of the damages cannot be less than the benefit unduly obtained”.
Another issue considered is the guarantees for companies and self-employed people to alleviate the economic impact of COVID-19 and to extend the net debt limit of the ICO (Instituto de Crédito Oficial). The guarantees must cover “on behalf of the State, financing granted by financial institutions to companies and the self-employed”. This measure, already used in the 2008 crisis, seeks to maintain employment. The Ministry of Economy will grant guarantees to the financing granted by the entities to cover “the management of invoices, working capital needs, maturities of financial or tax obligations or other liquidity needs”.
It is established that the maximum amount will be €100,000 million and “the applicable conditions and requirements to be met will be established by agreement of the Council of Ministers” and “will comply with the European Union regulations on State aid”.