Subrogation in loan agreements (“surroga del mutuo” or “portabilità del mutuo”) is an innovation introduced in Italy by the Budget Law of 2008, known as “Legge Bersani” and consequently disciplined by art. 120-quater of legislative decree n. 385/1993 (Testo Unico Bancario – Consolidated Banking Act). It is a procedure, which allows to transfer a pre-existing loan agreement from a bank (banca surrogata) to another (banca surrogante) that offers better conditions or different parameters compared with the previous commitment, with no additional costs or charges and without requiring the original credit institution’s consent.
The introduction encountered some initial resistances in the Italy, due to a legislative gap regarding taxation system. The gap risked to ingenerate extra costs for banks when evaluating the credit conditions, with potential repercussions on the loan agreement itself. Resistances eventually were overcome successfully thanks to banks’ decision to assume the costs of all notarial operations, which differs from standard loans where it is the borrower the one dealing with notary’s fees.
It appears now obvious the inner advantage of a loan subrogation, with its potential to transform the old loan arrangement into a brand new and more convenient one. If you wish to go for it, all you need is a request for subrogation in order to reduce the amount of monthly fees, change the loan’s durations or the applied rate, maintaining unchanged the residual debt’s sum.
After all, it seems that a loan subrogation it is nothing more than a typical loan agreement, in which the bank succeeds in the position of the original borrower for an amount corresponding exactly to the residual debt sum, mortgage guarantees included. The agreement remains indeed stable and unvaried and there is no cancelation of pre-existing mortgages. Simply it would be recorded in the mortgage’s registration an indication of the new creditor.
Please notice that loan portability is exclusively possible in the sole case of exact coincidence of credit’s amount compared with the one residual from the first agreement, since only loan conditions are revisable and editable. Besides, it is to some extent possible to obtain as well an addition sum of credit, however under this circumstance the variation of the loan agreement could also find place through different procedures, bringing potential additional costs.
Trilateral or bilateral subrogation?
Subrogation can occur through the following legislative schemes:
Trilateral Subrogation (Surroga trilaterale). The original bank (“Banca surrogata”), the new bank (“Banca surrogante”) and the debtor (“Mutuatario”) signed and record in a sole notarially attested act: the new loan agreement, establishing terms and conditions between the debtor and the new credit institution; a declaration given by the first borrower certifying the termination of the previous contract and a commitment for non-cancelling the original mortgage’s registration.
Bilateral Subrogation (Surroga bilaterale). The new Bank (“Banca surrogante”) and the debtor (“Mutuatario”) sign the loan agreement determining terms and conditions; subsequently, there will be a separate autonomous unilateral act declaring the termination of the first loan, together with the commitment of non-cancellation of the original mortgage. In order for the agreement to be effectively sealed, the subrogation shall always pass through both steps. Both acts will then require a notary’s authentication.
“Rinegoziazione” (Renegotiation) and “Sostituzione” (Substitution)
Once examined the whole structure of the agreement, we think it is important to add some more details in order to make a distinction between a subrogation, a renegotiation and a substitution in a loan agreement.
Renegotiation is the sole reformulation of a pre-existing loan contract, which allows the parties to adapt it to the new market conditions. It is hence no substitution, but only a variation of a contract.
Substitution is it a termination of an original contract followed by the cancelation of a former mortgage’s annotation and a registration of a new one in favour of a different credit institution. This institute usually finds application when there is a request for further liquidity or to obtain more favourable contract conditions.
Subrogation is conversely a real variation of the subjects of the agreement, which allows a credit transfer from a bank to a new one, in order to obtain some more advantageous contract terms and conditions, without variations concerning mortgage guarantees.
In loan portability the sole restriction remains the bond to the amount of credit, which cannot vary in the passage from a subject to a different one. Otherwise the rate type, the duration of the loan, the interests and the spread proposed by the new bank may change and they are thus the variables to be taken into consideration, when evaluating the advantages of a loan subrogation.
Italian Lawyer – Dott.sa Daniela Pacino