Article 208
Requirements for immovable property collateral
1.
Immovable property shall qualify as eligible collateral only where all the requirements laid down in paragraphs 2 to 5 are met.
2.
The following requirements on legal certainly shall be met:
(a)
a mortgage or charge is enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement and shall be properly filed on a timely basis;
(b)
all legal requirements for establishing the pledge have been fulfilled;
(c)
the protection agreement and the legal process underpinning it enable the institution to realise the value of the protection within a reasonable timeframe.
3.
The following requirements on monitoring of property values and on property valuation shall be met:
(a)
institutions monitor the value of the property on a frequent basis and at a minimum once every year for commercial immovable property and once every three years for residential property. Institutions carry out more frequent monitoring where the market is subject to significant changes in conditions;
(b)
the property valuation is reviewed when information available to institutions indicates that the property value may have declined materially relative to general market prices and that review is carried out by a valuer who possesses the necessary qualifications, ability and experience to execute a valuation and who is independent from the credit decision process; ESG-related considerations, including those related to limitations imposed by the relevant Union and Member States regulatory objectives and legal acts, as well as, where relevant for internationally active institutions, third-country legal and regulatory objectives, shall be considered to be an indication that the property value might have declined materially, relative to general market prices; for loans exceeding EUR 3 million or 5 % of the own funds of an institution, the property valuation shall be reviewed by such valuer at least every three years.
3a.
Institutions may monitor the value of the immovable property and identify the immovable property in need of revaluation, in accordance with paragraph 3, by means of advanced statistical or other mathematical methods (‘models’), provided that those methods are developed independently from the credit decision process and all of the following conditions are met:
(a)
the institutions set out, in their policies and procedures, the criteria for using models to monitor the values of collateral and to identify the properties that should be revaluated; those policies and procedures shall account for such models’ proven track record, property-specific variables considered, the use of minimum available and accurate information, and the models’ uncertainty;
(b)
the institutions ensure that the models used are:
(i)
property- and location-specific at a sufficient level of granularity;
(ii)
valid and accurate, and subject to robust and regular back-testing against the actual observed transaction prices;
(iii)
based on a sufficiently large and representative sample, based on observed transaction prices;
(iv)
based on up-to-date data of high quality;
(c)
the institutions are ultimately responsible for the appropriateness and performance of the models;
(d)
the institutions ensure that the documentation of the models is up to date;
(e)
the institutions have in place adequate IT processes, systems and capabilities and have sufficient and accurate data for any model-based monitoring of the value of immovable property collateral and identification of property in need of revaluation;
(f)
the estimates of models are independently validated and the validation process is generally consistent with the principles set out in Article 185, where applicable.
4.
Institutions shall clearly document the types of residential property and commercial immovable property they accept and their lending policies in this regard.
5.
The immovable property taken as credit protection shall be adequately insured against the risk of damage and institutions shall have in place procedures to monitor the adequacy of the insurance.
By way of derogation from Article 92(5), point (a)(ii), and without prejudice to the derogation set out in Article 92(3), second subparagraph, for exposures secured by immovable property granted before 1 January 2025, institutions that apply the IRB Approach referred to in Chapter 3 of this Title by using their own estimates of LGD shall not be required to apply the provisions set out in the first subparagraph of this paragraph.