A limited legislative framework
Since 2010, the possibility of taking out mortgage loan insurance by an individual has been liberalized.
The Lagarde law first instituted a ban on lending organizations from imposing their loan insurance.
The main purpose of this measure was to curb the tendency of banks to match a mortgage with associated insurance.
To promote competition, the Hamon law of 2014 made it possible for individuals to terminate their mortgage insurance during the 12 months following the date of signature of the contract.
This provision was supplemented by the Bourquin amendment of 2017 which instituted annual termination on the anniversary date of the contract, subject to two months' notice.
Despite these provisions, it is clear that the stranglehold of banks on the mortgage insurance market is still relevant.
The Financial Sector Advisory Committee noted on October 5, 2020 that banks hold almost 88% of the revenues represented by this market of 6.5 billion euros.
The possibility of terminating "at any time"
The authorization of the contraction of a mortgage loan at an advantageous rate by a bank is often correlated with the purchase of the equivalent loan insurance. Individuals find it difficult to benefit from the Hamon and Bourquin legal provisions as the procedural management of banking organizations slows down their application. To justify this bad faith, the UFC-Que-Choisir has displayed the average savings linked to the change of insurer, which range from € 6,550 to € 15,100 depending on the duration of the mortgage.
The fall of 2020 was punctuated by a legislative battle fought around the law on the Acceleration and Simplification of Public Action (ASAP). If this law aims to rationalize the Administration and the public services, the deputies adopted an amendment on October 2, 2020 which authorizes the termination of the loan insurance contract "at any time", and this despite the unfavorable opinion issued by the Minister for Industry Agnès Pannier-Runache. This provision would have made it possible to start the fall in the prices of loan insurance and to widen competition to alternative organizations. The text was the subject of a second reading in the joint committee, which rejected these provisions on October 20, 2020. The parliamentarians considered thatsuch a step forward could lead to increased refusals by banks to extend credit and higher interest rates.
If the possibility of terminating "at any time" was rejected, Parliament found a consensus on strengthening the arrangements already in force. Article 115 of the ASAP law instituted the obligation of lending organizations to inform their clients verbatim about their annual termination right, at the risk of incurring a fine of € 15,000 according to article 116. The text has also specified the date of termination of the contract on the anniversary date of the loan offer. It is therefore a complement to the Bourquin law, which allows the individual to know his rights concerning the need to respect a notice to start the procedure for terminating the contract.
Ten years after the adoption of the Lagarde law, the revised ASAP bill was adopted on October 27 and 28, 2020 respectively by the National Assembly and the Senate.
Censorship of a legislative rider by the Legislative Council
The protesters of the liberalization of the mortgage loan insurance market organized an appeal before the Constitutional Council on November 3, 2020. The nine Wise Men rendered their decision on December 3, 2020 and no less than 25 provisions were censored, including articles 115 and 116 relating to mortgage insurance.
The Council ruled that these articles "do not present any link, even indirectly, with those of article 45 of the initial bill".
In other words, it is a legislative cavalier, that is to say provisions which have no relation to the object of the law.
The text will therefore be put back for reading in Parliament, but the obligation to inform the Hamon and Bourquin procedures by the banks will not be adopted.
What will happen to the ability to terminate "at any time"?
Even if attempts to expand insurance rights have failed, this does not mean that "anytime" termination and the obligation to inform banks is unconstitutional.
The Sages did not reject these articles because of a fundamental incompatibility with the constitutionality bloc, it is rather a formal incompatibility.
The opening up of insurance to competition is regularly the subject of lively debate.
In 2014, the law offering individuals the possibility of terminating their car or home contract was scrutinized by the Constitutional Council, which approved the text.
The termination of the mortgage insurance contract will not be reinforced by the ASAP law, but the deputy initiator of the amendment Patricia Lemoine has promised not to "give up". The latter plans to table a bill during the first quarter of 2021 in order to expand the applicable regime. The free choice of home loan insurance can therefore be judged on the merits without taking the appearance of a legislative rider.
