25 Feb, 2011 @ 09:30
1 min read

Victory for the home owners

By Amie Keeley

THE Spanish government has slammed a court ruling which prevents banks from chasing bankrupt homeowners for more money.

Finance secretary Elena Salgado criticised the Navarra judge who ruled that giving a mortgaged house back to a bank is sufficient to cancel a mortgage debt.

And this is the case even if it has suffered negative equity.

Now international rating agencies such as Moody’s have warned that the ruling could endanger the Spanish banking system.

The Navarra court ruled that a family had to be forgiven nearly 30,000 euros of negative equity on the home they had mortgaged through BBVA bank.

It came about when the bank repossessed their home valued at 71,000 euros. But after the flat failed to sell at auction it was reduced and sold for 43,000 euros and the bank sought the remainder.

Eventually the court decided that as it was the bank that had initially valued the house at 71,000 euros when it gave the loan, the homeowner could not be expected to pay the difference.

While the ruling has been welcomed by consumer groups, agency Moody’s have warned it could deter important investors in Spanish mortgage debt.

The case has similarities to a British family, who face losing their UK home after they defaulted on the mortgage for a holiday home in Estepona.

The Olive Press revealed in December that the Chattertons face losing their 320,000 euro home in Wiltshire after Banco Sabadell got a European Enforcement Order (EEO).

The new court ruling is expected to help the couple, both paramedics from Chippenham.

Wendy Williams

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  1. Who cares a fig about Moody’s? The judge is correct, a wise ruling from Spain, but is there any appeal by the bank? Most cases are lost that way unfortunately.

  2. fred I have had many a chuckle at your comments in the past however i think you are struggling with basic economics on this one.
    when you borrow money it is important and honourable to pay it back, when you take a loan it is secured on the property you chose .no one forced these people to purchase at the price they paid so when they default it is their fault and not the fault of the bank , the valuer and the broker.
    People who come to Spain need to remember it is an economy not a bloody theme park for them to play in, if you cant afford it dont buy it.furthermore from your tone you seem to hate all things Spanish and everything about the culture so my question is why dont you just b*gger of home you whinging pom.

  3. Well we’ll have to differ on this one Louie. It happens, lol. I think giving back an asset which was (over)valued by the bank to begin with, consistitutes a fair termination deal, even if it’s in negative equity. Spain has taken the purchase costs and lots of (now worthless) “legal fees” from hardworking people, and of courses taxes and other costs, don’t forget.

    If the Spanish economy is so crap that’s not the housebuyers fault, is it? Who overvalued Spanish properties so much? Who cocked up the legal and planning systems? Spain did. Lets face it, Spain has been run attrociously. They were greedy and spent most of their EU grants on low quality concrete buildings and didn’t give a fig for the environment or the long-term consequences of their actions.

    I don’t hate all things Spanish, Louie, you’ll see that on other threads, so read some more. I expect you dislike some things about Spain too.

    Btw, “whinging” is just another mans freedom of speech and you’ll just have to live with that. Is Loopy Lou your brother btw?

  4. Well there is a 1st >>> FRED IS RIGHT !

    Spanish banks overvalued badly build rubbish construction giving mortgages up to 120% (maybe even more)

    Guess why

    BECAUSE they were making a bundle in commissions and fees on it (world leader – 8th biggest economy remember those words ?) —- they even gave out money to unemployed going on the money speculating train …….

    so Yes in great part they are at fault at creating a speculative bubble that every 1st year economic student could have told you will go bust >> more sooner then later !!!

    In California they had a similar real estate bubble burst and the banks are revaluing the properties because it is the only way out while re stimulating the market.

    The banks philosophy is cut your losses (or write them off taxes) and move on >>> better to get 30% less then nothing or a property that is never in ten years going to recover its original purchasing price

    Not saying the imbecile Spanish politicians aren’t also at fault but thats a different story and now just because they don’t want Moody to paint them bad……. Confidence in Spain ? PLEASE

    So its la “cuenta por, or in este caso, sin favor”

  5. Right decision … the banks should be responsible for their vaulations. If they get them wrong, then they deserve to loose out. A sensible Spanish ruling, for a change!

  6. Banks colluded with agents, developers and lawyers to sell over-valued property to foreigners based on a conviction that the gravy train would continue to roll for ever allowing them all to line their pockets at the expense of the very people now in difficulty.

    These people, for the most part, took all reasonable steps to do things correctly and expected their lawyers to protect their interests and the banks to only lend on what the property was worth at the time. The banks speculated and now they are the ones that should get their fingers burned. They, along with the agents, set the property prices in the first place.

    That being said, the banks have ruined the lives of millions of people all around the world in recent years, why should they behave any differently in this case?

  7. I wholeheartedly agree with everyone here. With the exception of Louie Lou of course, who appears far too grumpy for a grown-up discussion. Have you tried eliminating gluten from your diet LL?
    For the educated posts, you are spot on, and being a victim myself, all one needs to do is remove ‘Spain’ and slot in ‘Cyprus’. The banks are responsible for over-valuing the properties they sold. How can you expect an unqualified home buyer to understand the intracacies of home buying? Perhaps it’s just me, and everyone else knows how to conduct their own architectural surveys, accurately predict rental yields per square footage and conduct due diligence on the bank, lawyers and developers. Anyone who blames the buyer-victim is simply lucky to have avoided being scammed.

  8. Never been called grumpy before , when what I was saying was wat I was brought up to belive is basic human decency , you borrow you pay back.. or perhaps some of the people on this forum feel that to avoid paying back its ok to scream victim i was cheated ….. let me of with what I owe you…

    and yes Stella I do understand price per square meter , I am aware how to carry out due diligence and I understand the law society compensation scheme . I also understand percentage rental yields , AND I UNDERSTAND THAT THE VALUE OF INVESTMENTS CAN GO DOWN AS WELL AS UP .
    furthermore please dont personally insult someone you dont know because you screwed up !!!!!!!!!!!!!

  9. When mortgage loans against property were sold to British buyers it was empasised by the banks that a loan would be for 80% of the value of the property to protect against default. They assumed that the value of property would never drop below the outstanding loan. This is massive misselling and misrepresentation.
    If they chase shortfall through British Courts surely they should conform to British standards. Something it is blatantly obvious they do not do.
    Does anyone know if this judgement has been overturned or being contested, or if the Chattertons have lost their home ? This is my main concern.

  10. I can see both sides of this argument. Louie Lou is right in the assertion that those in this situation went into Spanish property ownership with their eyes wide open. You most likely did so because you were enticed by the favourable exchange rate, low interest rates, high valuations, availability of easy mortgage finance fixed for a couple of years and most probably at 100%+ of value. Crying foul on the grounds that it was all too complicated and how where you to know the pit falls and complexities exposes an acceptance of naivety beyond belief. You bought the property in a free market economy and it was your responsibility to evaluate your decision. Caveat Emptor – Let the buyer beware.

    On the other hand and being in the same situation of sitting on a pile of negative equity I do have some sympathy with the honeytrap argument. Fair enough this is where we are at but the banks, long gone developers, solicitors are also complicit in this debacle. In the UK commercial lenders have been suing valuation companies for years now on the basis of failing in their duty of care to adequately appraise for market movements in price reflected in their valuation reports. If the banks were self valuing at sometimes up to 150% of value then surely there is a call for negligence and they are also culpable in accepting some responsibility and some of the pain.

    I bank with CAM and some of the horror stories I have read about them defies belief. Far from accepting that they should work with their customers to try and improve the situation they steam in, start repossession proceedings and then flog your / their property on their new property website under big banners of 50% DISCOUNT!!! On our complex the community has had to take legal action against CAM for unpaid community fees on their repossessed properties. The upshot of that is that not only are they prepared to repossess property and sell it off in a fire sale undermining what value the people who haven’t defaulted have left they are also prepared to see yours (and their value) undermined even further as the estate goes to shit.

    So to sum my rant up, I think Louie Lou is right you should honour your commitments but in this instance if there is an opportunity to push back some of the pain to the irresponsible reprehensible bank then why not. If a court judge in Spain has some sympathies with this approach it can’t be that farfetched can it ?

  11. I would think so as legal experts at the time thought the UK courts would throw it out due to lots of unfair clauses in Spanish mortgages.

    Would be interested to know though.

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