EBA consults on creditworthiness assessment under the MCD

12 December 2014

The European Banking Authority (EBA) published today a consultation paper on draft Guidelines on creditworthiness assessments under the Mortgage Credit Directive (MCD). These draft Guidelines provide details on how creditors across the EU should assess and verify consumers' creditworthiness before concluding credit agreements for immovable residential properties. The consultation will run until 12 February 2015.
The MCD requires that, before concluding a credit agreement, the creditor makes a thorough assessment of the consumer's creditworthiness and takes into appropriate account factors relevant to verifying the ability of the consumer to meet his/her obligations under the credit agreement. 
The EBA has developed draft guidelines that are aimed at ensuring Competent Authorities implement the MCD consistently across the EU, by providing greater detail on how creditors should give effect to the relevant MCD provisions.
The draft Guidelines establish requirements for verifying consumers' income, documenting and retaining information, identifying and preventing misrepresented information, assessing the consumer's ability to meet his/her obligations under the credit agreement, considering allowances for the consumer's committed and other non-discretionary expenditures, as well as allowances for potential future negative scenarios and for identifying groups of loans with higher risk profiles.
These draft Guidelines are based on the EBA Opinion on Good Practices for Responsible Mortgage Lending published by the EBA on 13 June 2013, before the MCD was adopted. The Guidelines are aligned to the relevant principles of the Financial Stability Board's Principles for Sound Residential Mortgage Underwriting Practices.
The EBA expects to publish the final guidelines in Q2 2015 and they will apply from the transposition date of the MCD of 21 March 2016.

Consultation process

Comments to this consultation can be sent to the EBA by clicking on the "send your comments" button on the consultation page. Please note that the deadline for the submission of comments is 12 February 2015.

Note to the editors

1. The Directive 2014/17/EU on credit agreements for consumers relating to residential immovable property (Mortgage Credit Directive) was published in the Official Journal of the Commission on 28 February 2014 with a transposition date of 21 March 2016.
2. The Opinion of the European Banking Authority on Good Practices for Responsible Mortgage Lending was published on 13 June 2013. 
3. In April 2012, the Financial Stability Board published its Principles for Sound Residential Mortgage Underwriting.