The Saudi Arabian Monetary Authority (SAMA) issued new mandatory instructions to both banks and financing companies inside the kingdom related to residential mortgages. These instructions came based on the powers granted by the relevant regulations and laws. These instructions seek to protect all parties' rights and enable consumers to make the right decision regarding their finance. This should boost financing measures and validity of real residential mortgage industry. SAMA stressed that unless banks and financing companies meet these instructions, they will not be able to conclude any contracts to individuals.

      Based on the new instructions, SAMA directed financing banks and companies to thoroughly study all requests by customers to fully understand their situation and gain a better visibility into their financial status; making sure that the product should fit the customer. The financer must not provide the finance to the customers unless they demonstrate the capability to pay-off his/her obligation according to financer's policies which had to be as well approved by SAMA regulations.  Moreover, SAMA stressed that financers should provide full clear explanation of the proposed loan in which they illustrate most important terms and conditions of the contract. Clarification and documentation of relevant risks and inquiries must be provided by a special advisor in a very clear, simple and understandable language to the customer. Financer is not expected to provide the mortgage offer, unless the customer fully recognizes all terms and obligation related to the contract. Based on the new instructions, financers are obligated by SAMA to provide an offer which is valid for no less than 15 days. The offer should include a clear printed copy of the contract including all data and documents to be signed. The offer must contain a number of documents including the mortgage contract and its annexes, disclosure format, credit risk acceptance format of variable interest mortgage. SAMA stressed also on the necessity of documenting customer's recipient of these documents. Customer should be allowed to take these documents outside to consider others' opinions if he/she likes so. Otherwise financer is not allowed to conclude the contract with the customer. Moreover, banks and finance companies are demanded by SAMA to provide a qualified credit advisor who is eligible to clarify and give clear explanation of the proposed loan and its relevant risks and conditions or any possible re-pricing. SAMA asserts that the qualified credit advisor should not be the same agent who had contacted the customer initially to propose the suggested loan product bearing in mind that this communication should be documented either by audio recording or signing a particular format for that purpose. SAMA emphasized on the five days period starting from customer's recipient of the contract to give customers the opportunity to review and discuss the offer with the credit advisor and whomever he/she wants. SAMA requested all financers to urge the customers not to take any action during the five days period (e.g., advance payment, deposit) emphasizing that no contract allowed to be concluded before the waiting period elapsed.

SAMA urged banks and other financer companies to immediately take all necessary steps to ensure full compliance with above instructions starting from 01/12/1439H corresponding to 2018/08/12 indicating that legal actions will be taken against any violation. SAMA requested all customers to always adhere to their rights by filing a complaint to consumer protection department (www.samacares.sa) or through the toll line 8001256666 in case of non-response.