Home Loans : civil and banking law perspectives

Abstract

This thesis deals with home loan contracts, and will identify those characteristics distinguishing them from other types of financial credit contracts. The chapters are divided chronologically, that is starting from the pre-contractual phase to the conclusion of the contract. Thus, Chapter 1 explores the pre-contractual phase in home loan contracts in the light of European Union initiatives in this area. It will discuss an Agreement reached between the European mortgage lending industry and consumer groups, for the adoption of a voluntary code of conduct regarding pre-contractual information to be given to consumers by credit institutions offering home loans. The Code has been incorporated in a Commission Recommendation of March 2001. This chapter also addresses the position of the Maltese banks in view of the voluntary code of conduct. Chapter 2 then focuses on the second stage in the pre-contractual phase of home loans. This is the Promise of Loan agreement. The information given to the Bank will determine whether the bank will issue a sanction letter promising a loan. The chapter will outline the banking practices associated with the sanction letter, and will then examine its implications as a "promise to lend" through the perspective of Civil Law, doctrine, and case law. Chapter 3 will be the backbone of the thesis. It deals with the home loan contract and examines how the institute of mutuum is translated into a typical standard form contract. Special attention is therefore given to the institute of mutuum, highlighting its characteristics, object, causa, the obligations of the borrower and the lender, the question of the time period applicable, interest and penalties. Reference will be made to the Civil Code and other (including foreign) legislation. Chapter 4 delves into the element of Security, which protects the lender against non repayment. An analysis will be made of different types of securities given in this contract. Therefore this chapter embraces a study of Civil law on both general and special hypothecs, as well as special privileges arising from law. Other ulterior guarantees normally required by the banks, such as compulsory insurance policies, will also be mentioned.