The European Mortgage Credit Directive (MCD) of 4 February 2014¹ was transposed into German law with the Act Implementing the MCD (Gesetz zur Umsetzung der MCD) as at 21 March 2016.² To ensure the protection of consumers raising real estate loans, a large number of requirements have been set out in different laws, in particular in the German Civil Code (Bürgerliches Gesetzbuch) and the German Introductory Act to the Civil Code (Einführungsgesetz zum BGB). Other changes can also be found in the German Industrial Code (Gewerbeordnung), the German Payment Services Supervision Act (Zahlungsdiensteaufsichtsgesetz), the German Insurance Supervision Act (Versicherungsaufsichtsgesetz) and the German Banking Act (Kreditwesengesetz).

A new section, 18a, has been added to the German Banking Act, which specifies a large number of obligations that banks have to meet when granting consumer real estate loans. They include in particular requirements in terms of (pre-)contractual information obligations, the assessment of creditworthiness, the independence of appraisers from the lending process and adequate qualification of bank employees who work in lending. BaFin has set out the requirements for the qualifications and expertise of internal and external employees in a dedicated regulation.³

The new provisions of the MCD Directive led to uncertainty at the credit institutions, especially in relation to the creditworthiness assessment. For this reason, legislators are planning to specify the requirements in greater detail. The Federal Ministry of Finance and the Federal Ministry of Justice and Consumer Protection (Bundesministerium der Justiz und für Verbraucherschutz) are to use the regulatory route to set out guidelines for assessing creditworthiness. This is to ensure that young families and older people are not disadvantaged in the residential mortgage lending process.

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