Facilitations and improvements in taking out and repaying mortgages

Supervisor of Banks Dr. Hedva Ber: “A mortgage is one of the largest and most complex financial transactions a customer makes in his life, and is also a main point of interface between the public and the banking system.  The amendments we are making aim to simplify this important process and make it easier for the borrower to make optimal decisions when taking out or repaying a mortgage.  I thank MK Roy Folkman, who helped us map the difficulties in valuations for mortgages, and to design the solution that we are advancing today.”

 

MK Roy Folkman: "In conjunction with the Bank of Israel, and together with my colleague MK Amir Peretz, we are bringing more good news to home buyers in Israel.  Property valuations for borrowers will be easier.  The banks will be required to accept an assessor's report even if it was made for another bank, and someone wanting to examine a number of mortgage offers will not have to go through the valuation process again with each bank."

 

 

When taking out a mortgage, a customer must present the bank with a land assessor’s valuation of the property, which forms the basis for the LTV ratio among other things.  The fact that the bank requires the valuation at a relatively advanced stage in the process, after the customer has already chosen the bank from which he will take out the loan and around the time the money is actually transferred, created some difficulties for customers, particularly if the customer wanted to take out a loan at the maximum allowed LTV.  In such a situation, the loan amount was derived directly from the assessor’s valuation.  In view of this, the Banking Supervision Department is publishing a draft of two amendments to the directive on housing loans:

 

1.   Referring the customer for a valuation will be done at the stage of approval in principle – In the approval in principle document that the bank gives the customer at an early stage in the process, before signing the loan agreement with a specific bank, the bank will include a referral for a property valuation together with a list of assessors used by the bank who specialize in the geographic area in which the property is located.

2.   The banks will accept an assessor’s valuation prepared for another bank – A bank will be required to allow the borrower to use the property valuation issued by an assessor to whom the customer was referred by a different bank, provided that it is within 90 days of the date the property was assessed (other than special cases that will be defined as a cause for reasonable refusal).  As such, the valuation will not be a factor that restricts the customer from negotiating the terms of the loan with a number of banks simultaneously, and the customer will be able to take the loan from a bank other than the one from which he received the initial approval in principle and referral for a valuation.

 

In terms of early repayment of a mortgage, two amendments were made in the draft:

 

1.    A bank will be required to show updated information required by the borrower on its website or application, so that the borrower can examine the worthwhileness of repaying the mortgage early.  The information, which is specific to each borrower, will make it easier for the borrower to make an informed decision on early repayment.

2.  The bank will be required to provide the borrower with approvals for the insurance company, wherein the bank approves a lowering of the amount of the lien to the bank’s benefit in accordance with the repayment of the mortgage (or the cancellation of the lien entirely in the event of full repayment).  This approval will make it easier for customers to update their insurance policies after repayment of the loan.​