Further fight for homeowners in Spain

LAST UPDATED: 15 May, 2011 @ 22:38
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Further fight for homeowners in Spain

By Amie Keeley

CONSUMER groups are demanding a change in Spain’s mortgage law.

The appeal, which is being backed by a variety of judges, would see the entire debt of a mortgage cancelled if a bank reposses a home.

It follows the ruling of a Navarra court, which found in favour of a homeowner, preventing the bank from seeking the remaining loan amount after repossession.

The family were forgiven almost 30,000 euros of negative equity on a home they had bought for 70,000 euros.

However, the following week a different judge made the exact opposite ruling, giving a bank the right to go after the difference.

The judge, also in Navarra, ruled that the mortgage must be paid in full, according to Spanish law.

Now consumer group Adicae insist that the law must be clarified.

It insists that the current legislation is 150 years old and is causing ‘enormous social alarm’ as reposession cases increase throughout the country.

The Spanish Federation of Municipalities is backing the campaign to change the law.

The government meanwhile is holding firm with finance minister Elena Salgado insisting that changing the current mortgage legislation could have huge consequences for the financial sector.

She adds it would deter future investment into Spain.

18 COMMENTS

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  1. Good idea, hope it succeeds. Greedy banks need to learn a hard lesson.

    >She adds it would deter future investment into Spain.

    The only thing deterring future investment in Spain is corruption, inefficiency, and a useless government.

  2. Well, I hope it doesn’t Fred. I hold no brief for greedy banks or their overpaid executives but we do need Banks to lend to revive the economy and the housing market. If borrowers enter into a contract then they must honour their side of it and not just throw the keys in and walk away because their home is worth less than their mortgage. If that is allowed to happen then in future banks will seek higher deposits, lend a lower proportion of the property value and seek parental guarantees to underpin their debt. Then it will take 20 yars for the housing market to recover and unemployment to fall, instead of 4-7 years.

  3. I don’t think any family would just “throw the keys in and walk away” from their house – this is an action of last resort; many people have invested their whole lives in their property and do not want to lose it. Many families are now trapped in this situation through no fault of their own, so handing back their keys to remove their debt and allow them to move on with their lives is fine with me.

    The housing market will never recover back to its previous levels in my opinion, and unemployment will not be back to any ‘normal’ level in the next decade.

  4. Fred, you have clearly never been involved in the mortgage lending business. For families as you describe, repossession is heartbreaking, but I am sorry to say that many of the younger generation, who may or may not be married, think nothing of throwing the keys in and expect to walk away from the debt. And bear in mind that the money the Bank’s are lending is not ‘theirs’ it is yours, mine and that of other depositors. If you tlk to Banks here about mortgages, one of their biggest problems is Brits and other foreigners who think it is ok to return ‘home’ and leave their Spanish debt behind. So if this consumer body has its way, it will just put back the recovery by even more years. It would be far more sensible to support people who really need help, in other ways with subsidised housing etc. ‘Never’ is a long time; I think the housing market here will come back as the world gets out of recession, as there are many, many Northern Europeans who want to spend winter in the sun through their retirement, but that purchase demand is held back now by cheap rentals and a perception that the market has further to fall

  5. Steve,
    what rubbish you write – if the banks had’nt gone on lending to developers to build more and more crap apartment blocks they would’nt be sitting on 1.3 million unsaleable properties which, they refuse to revalue to a realistic price.

    Spanish personal debt is IRTO €2.5 trillion – they never saved, as if tomorrow would never come – well it has now – tough.

    In France it is illegal to issue a mortgage for more then 33% of a person’s actual salary – guess what, times might be hard in France but no one is throwing in the keys – oh yes and their are no as in zero illegal builds in this country.

    In Germany you have to show by years of regular saving that you have the discipline to take out a mortgage and you have to put down between 10 & 20% as a deposit. Strange how property is better built (that would’nt be difficult for any country compared to Spain) and cheaper in France and Germany.

    Many Europeans are quite happy to rent their whole life – so many stupid Brits thought property was a one way bet not only in the UK but in Europe as a whole.

    The Brits who bought to make a profit in France are leaving in droves unable to sell at any price – good a home is a utility not an investment – you want to make money does the word ‘bourse’ come to mind or spread betting.

  6. Steve, when you say “…think nothing of throwing the keys in and expect to walk away from the debt” you must therefore be referring to those people for whom the bank gave a massive mortgage offer to i.e. 90-100% of the property’s value? In such cases the person has no significant personal debt to lose, so I can understand the banks annoyance there…

    However, since it was the banks who granted such ridiculous loan offers to begin with, and even enticed people to borrow way beyond their means, and fiddling the system to do so, then that makes me even more keen to see this law amended. Add to this the disfraceful behaviour of banks, who have evicted people from homes they cannot even sell onwards, and my opinion is further reinforced.

    Many people did borrow beyond their means, sure, but banks had a duty not to allow them to, but they did because they were greedy (and corrupt) and encouraged people to over-borrow and told them it would all be ok. Coupled with lawyers and notaries who are all friends of the bank managers, then we have a nice little system in place. Spain knackered its own economy through its greed and corrupt practices. The homebuyers are not the main evil here.

    If Spain wants to recover, it needs to reform its banks, extingusish corruption and bad practices, cease the inefficiency and apalling customer service, and reform its laws to ensure that 300,000 people can legally own the homes they purchased with lawyers, notaries and bank managers. Those issues seem to be omitted from your post, yet they are the most important points. Recovery is not just about banks, it’s about trust and honesty.

  7. Funny how people who choose to live here Stuart are always so critical of Spain! Or maybe you dont live here…?

    I agree that housing should be a utility, and the frothy market encouraged by successive British governments has caused a lot of misery. But at least in Spain, uniquely in Europe, the Bank of Spain effectively prevented Banks from buying the crap mortgage securitisation paper coming from the US. And despite funding overdevelopment here, no Bank has been as rash in their mortgage lending as Northern Rock

    Not sure why you say what I wrote was rubbish as you seem to be dealing with different issues in other countries-all of which have differing historic and cultural approaches to housing. Germans in particular has a much greater propensity to rent, and if they do buy it is usually from age 35 and up, and then they only move twice typically.

    Of course the disadvantage of renting is in retirement, when income doesn’t cover outgoings for many people.

    And I dont think you mean that it is illegal in France to issue a mortgage for more than 33% of salary-that would be about €10000 typically, and wouldn’t buy you anything, even in France. And you cite Germans as having to put down 10 or 20% deposit. Typically it is 30% in Spain, and then often backed by a parental guarantee.

  8. No Fred, I ‘must not be’ referring to those people to whom the banks made a massive mortgage offer. That is another urban myth. Responsible lenders with a sensible approach to risk still finish up with repossessions. Banks lend to individuals based on their income (and credit history)-if they become unemployed they cannot repay; often lending is to a couple and if they stop being a couple, then the mortgage is a casualty. Not too bad in a rising housing market but in a falling market negative equity soon arises-even if a 20% deposit was taken. Why? Repossessed properties rarely sell at market price; empty properties (and gardens)need maintaining; legal/agent fees also cost money. But I think you have made your mind up that it is all the banks fault so I really shouldn’t bother you with the facts. I have noticed that all your posts on these sites tend to be very negative, so I guess that is how you feel about life, Fred. C’est la vie!

  9. Steve, you must be living under a rock if you believe that banks in Spain “lend to individuals based on their income (and credit history)” lol. Nothing could be further from the truth, and I have seen time and time again banks offering enormous mortgage deals that would simply be illegal in other countries.

    Yep, it’s all the banks fault and that’s why so many banks have collapased, and that’s why public opinion of banks is at an all time low, and that’s why governments all around the world have said that banks were the major contributors to the recent financial crash. It’s not just my opinion. Spanish banks are in a league of their own of course – here they have been totally mismanaged, much like the rest of the country.

    And so we get to the crux of your post, namely that my view is negative etc. What you find ‘negative’ I find to be ‘reality’. If your ‘facts’ were correct then Spain’s banks would not be in the mess they are now in, so your analysis simply doesn’t add up.

    It is fine by me that banks are casualties in all of this.

  10. Steve,
    still talking rubbish. You need to study the financial history of Spain to see why the Bank of Spain prohibited Spanish banks from buying US SIVs. Many banks collapsed in the 80s because of speculative loans that went tits up.

    The second reason of course was that Spain had it’s very own worthless mortgage paper that’s what Fred and I are saying.

    Yes I did live in Spain but being a qualified builder no way would I buy Spanish built rubbish. No, I came to build alt. energy housing but found surprise, surprise that it was never going to happen – properly built and specced houses, built for the climate being cool in summer and warm in winter – the Schools of Architects would never allow that it would show them up for what they – willing lackeys of the cowboy developers.

    The whole of northern Europe/Scandinavia has the same mentality except for the UK/Ireland just as the whole of southern Europe has the same corrupt build it cheap and screw problems in the future.

    Again your wrong – Germans and Dutch have excellant pension schemes and can well afford to pay the government controlled rents into retirement.

    BTL in the UK is obscene, rather in 97 when Gordon Gekko and Tony the Liar came to power on a raft of lies they could have brought in a capital Gains tax on all property transactions of 100% on the first two years and a sliding scale for another 16 years.

    The average price of a property across the UK would have hardly risen from £97K making the UK a much more competetive country. The quicker the Brits get their mental health back and stop using property as an investment the better – like I say – you want to make money study the markets or try spread betting.

  11. At the risk of confusing you with the facts Fred, Spain’s banks are not in the mess you seem to believe. International (not Spanish)Stress tests, published today show that the big 8 Spanish Banks can all withstand a greek style sovereign debt crisis. In fact the Tier 1 Capital ratio requirement is 6%-the biggest bank ,Santander, (which owns many international banks including Abbey and Alliance & Leicester)has a capital ratio of 10%-almost double that required. And the 2nd largest, BBVA, is 9.3%. For sure there are smaller savings banks in trouble (like small UK building societies) but the Bank of Spain has them undergoing enforced mergers, to improve management and costs. Not so different from what the UK went through in the 90’s when I was heavily involved in it. And of course some Banks were stupid and will be again if the regulators let them. What, after all is a regulator for, if it doesn’t regulate?. The banks were and are guilty but the real villains were the regulators and rating agencies. But then I probably dont know what I am talking about…….

  12. when will all the people who comment understand that our fred is just a bored miserable pensioner who thinks hes a spanglophile because he eats lubina…. which is the only positive thing he has ever said about spain….
    i love my home ,i love spain and in truth am sick of hearing it slammed by people with can and should b*gger off bank to england and sit in the rain with the rest of the moaners .
    a critics life is a life without risk ,

  13. Well Stuart,

    You are wrong about many things. Despite the Germans being more advanced with energy savings than most other European countries,many German pensioners can live here more cheaply through the winter as there fuel bills and living costs in Germany exceed their rental/living costs in Spain. And my wife is Dutch so I know a little of Dutch pensions etc. But I was talking generally about pensioners and renting not just Germany. Clearly if a pensioner has paid for their house it is easier for them to live within their pension. But I can understand your frustration at trying to get work as a proper builder in this market and this country. Impossible. No one will pay for quality unfortunately.

    But you must have a short memory. The housing collapse in California spread through the US and to the UK in the late 80’s/early 90’s and in 1991 when it peaked there were 187000 repossession claims. Much resulting from poor lending, corrupt lawyers, estate agents and valuers. I recall it well because as a lender, I set up a small team to pursue bent valuers etc through the courts and recovered millions. So it was certainly not only Spain, and yet the Bank of England was not so smart as the Bank of Spain and let UK banks load themselves up with US securitisation rubbish-hence the demise of RBS etc.

    Yep I do trade the markets, and Spread bet-and I am pleased to say that I got out of Lloyds Bank at just over £7-bit more than the 58p I would get today.

    Good luck with your building-maybe Scandinavia would be more receptive-bit cold for me though!

  14. The Bank of Spain says that the problem of the cajas is ‘manageable’, but a large bail-out looks inevitable according to most financial commentators (the ones that I read anyway). Is that really a good outlook, Steve? Whilst the main banks you mention may be safe for the moment, the cajas remain a serious issue for the wider econonmy long-term.

    I see a lot more 100% loans on offer currently; Spain is just repeating history and offering deals that look suspiciously like those that caused all the trouble in the housing market in the first place.

    Only time will tell…

  15. …… somebody help me my math is off – as mentioned somewhere in a post there are 1,300 000 unsold properties/houses/apartments in Spain > lets say they average price/value is 100 000 € = 130 000 000 000 € (negative) equity in someone’s book (a bit much for write off) = Spanish banks don’t have a problem ? on top of that the folks that can not keep up paying over valued mortgages and have to give back the keys ???? 1 plus 1 is what ??? Some common sense please

    Shame but wasted 20 years of EU idiotism means Spain doesn’t have a lot of other strong economic columns to fall back on

  16. Steve,
    if your wife is Dutch then you will know that the Dutch retire with two pensions a private one and a State one, so do the Germans.The Dutch retire on 90% of their final salary.

    If you own a multi-let property in the Netherlands then the local Gemente will decide the rental value of 50% of the apartments. You are not allowed to leave property empty by Law and you can own as many properties as you like BUT you can only live in one – how different from the UK.

    Rentals are strictly controlled in Germany and cowboy BTLs simply don’t exist.

    The reasons German live in Spain in the winter is simply the weather why all the bullshit about expenses.

    Wrong, you have conflated the Californian housing collapse of the 90’s with the late 80’s East Coast housing collapse which was brought about by the Savings and Loans fiasco. As a matter of fact we seriously considered buying a home there at the time, especially in New England as it has some seriously beautiful locations and a lovely well built house in the country could be bought for around £45K.

    Like many you simply don’t understand that real insulation protects against both extremes of temperature which makes your comments about Scandinavia – ludicrous – go and study basic physics – then you might understand.

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