October 25 (SeeNews) - Romania's Constitutional Court (CCR) said on Tuesday that the law restricting the banks' rights to seize assets from defaulters on mortgage loans is partly unconstitutional.
The CCR judges ruled that in establishing whether a house can be seized from a borrower defaulting on a mortgage loan, the court considering the case will only take into account the conditions of the initially signed loan contract and not the devaluation of the price of the house, Romania's top court said in a statement.
Also, in the initial form of the law, the courts were not supposed to verify whether some risks had been predictable at the time when the contract had been signed. Now, after the CCR ruling, the courts will have to establish whether "unpredictability" existed, as this would be a mitigating circumstance for the defaulters.
The CCR has ruled on 25 cases and postponed a final decision on another eight files to October 27.
The mortgage default bill was signed into law by president Klaus Iohannis in April.
Under the law, banks can seize from mortgage defaulters only the property for which the borrowers had received a loan of up to 250,000 euro ($283,000) but cannot claim any further payment.
The law excludes the Prima Casa (First Home) programme, through which the government guarantees 80% of house purchase loans in order to support people who acquire their first home.
The law has drawn fire from Romania's central bank, commercial banks, the European Central Bank, the International Monetary Fund, Fitch Ratings and Japan Credit Rating Agency, who have expressed concerns that it threatens the recovery of Romania's banking system.