Lhe debate on the regulation of real estate loans recently heated up around a ruling by the Court of Cassation which refused to consider as excessive a loan imposing a debt ratio of 65%, due to the fact that the remainder remains to be lived borrowers was sufficient. The case to which it related was old.
In December 2008, a couple who owned an exceptional villa in the Var took out a loan of 1.3 million euros to buy a house in Yvelines and consolidate their loans. He plans to repay two thirds of it within two years, after selling the villa, estimated at more than 1 million euros. However, the economic crisis does not allow this. In 2016, the mortgaged villa is sold at auction for 476,300 euros.
The couple attacked their bank, BNP Paribas Personal Finance, accusing it of having failed in its “duty to warn” against the risk of excessive debt that they were incurring, with an effort rate (amount of repayments (related to income) of 65%.
There Paris Court of Appeal dismisses him, ruling that “the remaining living expenses, excluding expenses, were (…) greater than 3,000 euros »formula “clumsy”as Jérôme Lasserre Capdeville, an academic specializing in banking law, points out, since living expenses are always excluding charges.
However, on July 12, 2023 (22-11.321), the Court of Cassation validates its judgment, by rejecting the couple’s appeal, according to which a debt rate of 65% justified the issuance of a warning (12-29.910 ; 14-29.022 ; 16-19.887 ; 16-28.049).
Circumvent the prohibitions
Although its decision concerns a time (2008) when the High Financial Stability Council (HCSF), an organization responsible for preventing a dysfunction of the financial system, did not yet exist, many commentators, notably brokers, believe that it authorizes bankers to circumvent the norms thereof. In particular the one which, since the 1er January 2022, prohibited from exceeding the effort rate of 35% (except for 20% of credits), which led to it being accused of contributing to the housing crisis.
The Court’s judgment would, according to them, make life remaining the primary criterion for determining debt risk. This criterion would have more meaning than that of the rate of effort not related to an income base (a rate of 50% does not have the same meaning depending on whether it relates to a monthly income of 2,000 euros or 10,000 euros) and would make it possible to avoid depriving certain wealthier households of access to credit.
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