Bank of Israel Introduces New Regulation to Streamline Mortgage Recycling Process

In response to the growing trend of "mortgage recycling" and the challenges customers face when refinancing at the same bank, the Bank of Israel has announced a new regulation aimed at simplifying and expediting the process. This groundbreaking directive, set to take effect next year, seeks to revolutionize the mortgage consulting field and alleviate the frustrations faced by borrowers.

Mortgage recycling, the favored sport of many mortgage holders, involves paying off an existing mortgage and refinancing it with the same or a different bank. This practice has gained popularity, but due to a lack of proper regulations in the mortgage consulting sector, customers often encounter obstacles and delays.

To address these concerns, the Bank of Israel's new regulation mandates that banks must receive clear instructions from customers, either through online channels or over the phone, when they intend to make an early payment on their mortgage. This step ensures that borrowers have control over the refinancing process and can initiate it hassle-free.

One significant improvement is the option for customers to receive all the necessary information and documentation from the bank through online channels, as long as they express their interest in this format. This not only saves time and resources but also makes the process more accessible to tech-savvy customers.

Furthermore, the new directive empowers customers to choose whether they want to notify their intention to pay off the mortgage directly to the new bank without any negative consequences. For instance, the number of days required for advance notice to avoid commission charges will not be affected by this choice. Additionally, customers will no longer be required to physically visit their old bank branch to obtain the necessary documents for the refinancing process, as the old bank will now transfer these documents directly to the new bank.

Moreover, in a bid to enhance collaboration and ensure seamless implementation of these improvements, banks are expected to establish streamlined processes amongst themselves.

Notably, the new regulation also covers mortgage recycling with institutional lenders that are not banks. It specifies that these lenders must adhere to the same secure and reliable processes and infrastructures already in place.

Overall, the Bank of Israel's intervention and implementation of this new directive are seen as a significant step forward in modernizing the mortgage consulting sector. By simplifying and digitizing the mortgage recycling process, borrowers can now anticipate a smoother experience when refinancing, avoiding unnecessary frustrations and delays.