Article 191
Mortgage loans
1.
Retail loans secured by mortgages on residential property (mortgage loans) shall be treated as type 2 exposures under the counterparty default risk provided the requirements in paragraphs 2 to 13 are met.
2.
The exposure shall be either to a natural person or persons or to a small or medium sized enterprise.
3.
The exposure shall be one of a significant number of exposures with similar characteristics such that the risks associated with such lending are substantially reduced.
4.
The total amount owed to the insurance or reinsurance undertaking and, where relevant, to all related undertakings within the meaning of Article 212(1)(b) and (2) of Directive 2009/138/EC, including any exposure in default, by the counterparty or other connected third party, shall not, to the knowledge of the insurance or reinsurance undertaking, exceed EUR 1 million. The insurance or reinsurance undertaking shall take reasonable steps to acquire this knowledge.
5.
The residential property is or will be occupied or let by the owner.
6.
The value of the property does not materially depend upon the credit quality of the borrower.
7.
The risk of the borrower does not materially depend upon the performance of the underlying property, but on the underlying capacity of the borrower to repay the debt from other sources, and as a consequence, the repayment of the facility does not materially depend on any cash flow generated by the underlying property serving as collateral. For those other sources, the insurance or reinsurance undertaking shall determine maximum loan-to-income ratio as part of its lending policy and obtain suitable evidence of the relevant income when granting the loan.
8.
All of the following requirements on legal certainty 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 insurance or reinsurance undertaking to realise the value of the protection within a reasonable timeframe.
9.
All of the following requirements on the monitoring of property values and on property valuation shall be met:
(a)
the insurance or reinsurance undertaking monitors the value of the property on a frequent basis and at a minimum once every three years. The insurance or reinsurance undertaking carries out more frequent monitoring where the market is subject to significant changes in conditions;
(b)
the property valuation is reviewed when information available to the insurance or reinsurance undertaking indicates that the value of the property may have declined materially relative to general market prices and that review is external and independent and 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.
10.
For the purposes of paragraph 9, insurance or reinsurance undertakings may use statistical methods to monitor the value of the property and to identify property that needs revaluation.
11.
The insurance or reinsurance undertaking shall clearly document the types of residential property they accept as collateral and their lending policies in this regard. The insurance or reinsurance undertaking shall require the independent valuer of the market value of the property, as referred to in Article 198(2), to document that market value in a transparent and clear manner.
12.
The insurance or reinsurance undertaking shall have in place procedures to monitor that the property taken as credit protection is adequately insured against the risk of damage.
13.
The insurance or reinsurance undertaking shall report all of the following data on losses stemming from mortgage loans to the supervisory authority:
(a)
losses stemming from loans that has been classified as type 2 exposures according with Article 189(3) in any given year;
(b)
overall losses in any given year.
14.
The supervisory authorities shall publish annually on an aggregated basis the data specified in points (a) and (b) of paragraph 13, together with historical data, where available. A supervisory authority shall, upon the request of another supervisory authority in a Member State, the EBA or the EIOPA provide to that supervisory authority, the EBA or the EIOPA more detailed information on the condition of the residential immovable property markets in that Member State.