what are the impacts for the borrower and market players?, News/Real Estate Expert Opinion

Coming into force on June 1, 2022, the Lemoine law is an in-depth reform of the mortgage loan insurance market. A major step forward for consumer rights, this new regulation also has setbacks: an increase in prices and a rapidly changing risk assessment.

Change of borrower insurance at any time

Since June 1, any new borrower can terminate their mortgage credit insurance at any time upon signing the loan offer. The system will apply to contracts in progress from September 1st.

Called for years by consumer associations and insurers, this strong measure is a source of significant savings for borrowers. Often forced to take out bank insurance to obtain their financing on time, they thus recover purchasing power by replacing the current contract with an offer up to three times cheaper with equivalent guarantees.

By facilitating termination, the license opens up new prospects for alternatives thanks to the relaxation of the banking monopoly on borrower insurance. Already fierce, competition between the various players will intensify to the benefit of consumers.

Removal of the health questionnaire: threat to prices

The Lemoine law introduced the end of medical selection for loans of less than 200,000 euros repaid before the borrower turns 60, an inclusive measure for people affected by the disease. Before this law, the medical questionnaire generated strong discrimination linked to the health history of patients and former patients, which resulted in significant additional costs, exclusions of guarantees or even refusal of insurance.

Without any health data on this segment to reinforce their pricing, insurers are forced to pool risks, to the detriment of young and healthy profiles who necessarily pay the least for their loan insurance. We pass from one form of discrimination to another under the guise of an otherwise laudable effort at inclusion. Professionals speak of an increase in rates between 5% and 20%, which often penalizes young workers with lower incomes than other borrowers.

The subscription form will no doubt be evaluated to include data formerly entered in the health questionnaire: smoking and the practice of a dangerous sport. Occupational risks are another major factor, such as travel. For example, those who smoke and drive a lot will pay dearly for their insurance if they do not have to fill out a health questionnaire.

What was presented as a measure in favor of purchasing power risked proving to be counter-productive due to hyper mutualisation far from being favorable to the greatest number.

Right to be forgotten: beware of circumventions

Third flagship measure of the Lemoine law, the minimum period to benefit from the right to be forgotten is reduced from 10 to 5 years, and concerns former cancer patients, and now people cured of hepatitis C. After this period , eligible borrowers do not have to declare their former pathology in the health questionnaire.

Former patients can now access property without waiting for an often dissuasive period to realize a real estate project. If it welcomes the measure, the League against cancer calls on the public authorities to be vigilant about the application of the law. She fears attempts to circumvent the disappearance of the health questionnaire in the context of loans of less than 200,000 euros whose term occurs before the borrower’s 60th birthday and the non-declaration of cancer or hepatitis C .

Subscription to insurance could thus be conditional on taking out a provident insurance contract subject to a medical questionnaire, or guarantees activated after a long waiting period.

It should be added that the banks retain the assessment of the medical risk indirectly via the study of income which includes, in particular, mutual insurance premiums, daily allowances for sick leave or long-term sick leave.

Since June 1, at Magnolia.fr we have been processing three times more requests for loan insurance substitution, signifying that borrowers have understood the financial stakes of the Lemoine law. The volume should explode from September 1 with the generalization of termination at any time.

In the meantime, it is appropriate to question the strategies put in place by the banks to avoid hemorrhage. The reform provides for penalties of up to 15,000 euros for establishments in breach of the rules. The past has shown that they are never applied against the powerful banking lobby.

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