Spanish banks accused of ruining masses of mortgage holders
Thursday, March 10, 2011 @ 2:09 PM
When Spaniard Jose Antonio Langarita decided to buy his own home in 2006, he had no idea of the magnitude of the risks he was taking.
Spain's property bubble had not yet burst, it looked like home prices would soar indefinitely, and that even low-income earners could afford to become home owners.
Three years after being granted a mortgage of nearly 80,000 euros (112,000 dollars), Langarita had unexpected expenses on his car, and he was unable to make the monthly mortgage payment of 450 euros.
At the time, he was earning 1,100 euros a month as a cleaning company employee.
Langarita's home - located in Arroniz in the northern region of Navarre - was put up for auction. When no buyer appeared, the bank seized the property for 50 per cent of its value and informed Langarita that he still owed the lender 28,000 euros.
'I could not understand why - if I had already lost my home, and hardly had enough to eat - I had to continue paying the bank,' Langarita said in an interview with the daily El Pais.
In a ground-breaking ruling, a Navarre court said recently that Langarita did not have to give the bank anything but the mortgaged home.
That ruling and a few other similar ones have sparked a debate on whether Spain's financial institutions unethically plunged hundreds of thousands of people into economic precariousness by granting them mortgages they would obviously have difficulties paying.
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