Struggles with mortgage payments in Spain

I wonder if people struggling with mortgage in Spain know that, making use of a Spanish law dated 2013, a 100% settlement with the Bank is possible 

The Spanish Government protected mortgage debtors in a very nice and radical way back in 2013 as the existence of a clear unbalance between Banks and debtors was evident to them. Good policies!

So, making use of these rules, you can negotiate a settlement with the Bank for the benefit of both you and them:   you get out of an unbearable mortgage loan and they get ownership rights on a property with no need of judicial action and costs.

Auction value of a mortgaged property is a high value compounded by: Principal amount + Interests (ordinary and delay interests) + Legal costs

So if a Bank lent to you, say 150k euros , the auction value of the property may well be in the region of250k.

Law 1/2013, of May 14^th for protecting mortgage debtors established that repossession of a property by a Bank if auction did not have qualifying bids, must be for at least 70% of the auction value of the property (if the house was a permanent home of debtor) or for 50% of said value ( if house is not a permanent home)

In many cases outstanding debts equal that 50% so, a settlement can be achieved.

If it is a holiday home, look seriously for a sharer.

Preferably family or friends but even ask on web-sites like this.

Share the costs. Selling half may pay your mortgage off or at the very least make it manageable.

But the big thing is you keep the property rather than possibly ending up with nothing or worse still, still owing.

Be careful of letting the bank take control. I had a lady desperate to sell to me but the bank had taken over. The bank only had interest in getting the best price for them, they did not care about the customer. Strung me out for ages (hoping for a better offer?) in the end I went elsewhere.

Yes TTeedd: Good advise.

Never allow the Bank to take control without your monitoring.

The whole process ( from repossession notification, through valuation, to adjudication of the property) is in many occassions developed with breaches of consumers guarantees.

How is the procedure once you default; 

 1. Generally, the Bank will send to you a notice of Case being sent to Courts after three monthly defaults.  They do not always send the case to Courts right away but  an active negotiation with the Bank, with the help of a professional advised at this stage. It is not a good idea just to leave payments unattended and run away.

2. Once in Courts, the Judge will issue an enforcement order and will notify this to you for you to oppose it. Notification needs to be made to you in due address and through right means .Right address is that  which was agreed as address for notifications in the mortgage deeds. You need to have full control of any notification being sent there after your payment default as this is in many cases taken as an advantage by the Banks- notify you while and where absent-  forobstructing your defence rights.

 3. Defence of your position in Courts. Reasons to oppose the enforcement have been recently increased after a Decision by the High Court Of Justice of the European Union. 

  4. Best strategy at this point is to  answer the repossession with a dation counteroffer in order to  reach an agreement with the bank to have the whole debt  settled after the auction.  Of course the difficulty of this varies depending on the equity you have on the house and policies of the Bank.

 5.-As you know the way the Bank has to obtain  liquid value out of the house is through public auction. If no one bids,  the bank can keep it for no lower than 70%  (for first residences) and 50% (for second residencies ) of value for auctions. Value for auctions is a big value the house was valuated for for mortgage purposes. It is contained in mortgage deeds and comprises:  borrowed capital+ interests+ legal expenses

So, three CostaLuz Golden rules:  (1)Never leave a repossession order unattended ,(2) Have control of the address for notifications,(3) Hire a good lawyer. 

After the debt is liquid an enforceable, they can start an European Enforcement Order in the UK.

If sharing debt/ ownership with someone lese: Bank will need to approve the sharing. It is important that both mortagge and sale is accordingly worded in a public deed and registered at the Land Registry

"Never allow the Bank to take control without your monitoring. The whole process ( from repossession notification, through valuation, to adjudication of the property) is in many occassions developed with breaches of consumers guarantees."

Wonderful informative advice Maria, but given your observation re the ongoing Bank breaches of consumer guarantees is it not time to bring all of these many instances to the attention of those who are supposed to be monitoring the compliance and behaviour of the Banks in Spain? If regulatory bodies are in place why are they not putting the Banks " on notice"  and fining them for non compliance to act as adequate disincentive to ongoing breaches? Is it because these instances are going unreported or do they not have the power to do so?

Do you see this as part of law firms roles to report back these large scale instances, where detected, as part of the duty of care to clients who have to battle and battle against these disgraceful bank breaches? 

If these instances go unreported, the scale of bad practice, manipulative ploys, and non compliance will remain undetected by the monitoring bodies ( and the EU commission) and clients will have little option but to add to the already overstretched justice system in Spain.

I have to ask the question in your honest opinion and experience is the current monitoring system of the Banks behaviour with regard to breaches in Spain inadequate, and should this be being brought to the attention of the EU Commission if the Spanish regulators are not prepared to take corrective action " from within"? Who is the banking regulatory body in Spain that you report these instances to and have you found them ineffective to date?

Thank you sincerely for all your ongoing informative advice.

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Answers below in bold green:

"Never allow the Bank to take control without your monitoring. The whole process ( from repossession notification, through valuation, to adjudication of the property) is in many occassions developed with breaches of consumers guarantees."

Wonderful informative advice Maria, but given your observation re the ongoing Bank breaches of consumer guarantees is it not time to bring all of these many instances to the attention of those who are supposed to be monitoring the compliance and behaviour of the Banks in Spain? I am sure platforms like Adicae have. But yes, I do think every lawyer dealing with cases of this nature should also bring attention to Bank fo Spain. If regulatory bodies are in place why are they not putting the Banks " on notice"  and fining them for non compliance to act as adequate disincentive to ongoing breaches? Is it because these instances are going unreported or do they not have the power to do so? I do not know, really. Possibly a combination of the two reasons.

Do you see this as part of law firms roles to report back these large scale instances, where detected, as part of the duty of care to clients who have to battle and battle against these disgraceful bank breaches?  Yes, I do. S part of the care for Rule of Law and bettering of society roles we have as lawyers and as citizens.

If these instances go unreported, the scale of bad practice, manipulative ploys, and non compliance will remain undetected by the monitoring bodies ( and the EU commission) and clients will have little option but to add to the already overstretched justice system in Spain. Correct.

I have to ask the question in your honest opinion and experience is the current monitoring system of the Banks behaviour with regard to breaches in Spain inadequate, and should this be being brought to the attention of the EU Commission if the Spanish regulators are not prepared to take corrective action " from within"? I have honestly always seen the work of Bank of Spain as quite shy. Who is the banking regulatory body in Spain that you report these instances to and have you found them ineffective to date? Bank of Spain. Somehow ineffective.

Thank you sincerely for all your ongoing informative advice. A duty and a pleasure