Spaniards are fighting for their right to hand their property over as payment to their bank when unable to maintain their mortgage repayments. When summoned to court to have their property repossessed, they discover that their property has been devalued and is insufficient to cover the debt to the bank.
Furthermore, the bank in Spain looks to family who may have acted as guarantors to claim the difference, often embargoing their properties as well to ensure full settlement of the outstanding debt. This pattern of behavior has generated much debate in Spanish society and generated quite a few family dramas, caught up in the deflating spiral of property values as compared to the beginning of the crisis, where banks today are valuing property by as much as half of their worth six years ago, whilst holding the original borrower or guarantor to account for the difference.
In the UK, the USA and many countries throughout Europe, it is common practice to hand over the keys to the bank in order to settle the outstanding mortgage debt. This however, has never been the case in Spain.
A private lawsuit was recently filed at the Cordoba Provincial Court on the grounds that the bank had improperly benefited financially through repossession of a person’s home. The property went to auction but no bidders were present, so the bank was awarded the property at 50% of its value (in the title deed), a result the Supreme Court does not agree with, since the latter understands that an attempt to legally claim any outstanding debt should not constitute grounds for an unjustified profit.
Furthermore, the bank can then resell the property to a third party at a much higher value than it was awarded in auction, whilst still maintaining the outstanding debt by the original borrower, a situation that the Supreme Court considers as gross and unjustified, and thefore seeks to strengthen the laws to protect those with mortgages.
In reality, many properties that the banks were awarded during the worst years of the recession, between 2008 and 2011 were then resold by real estate subsidiaries of the bank at far superior prices, entering into speculative practices that have angered its previous owners who have lost their homes for often laughable amounts, and have had to witness the outrageous spectacle of similar cases coming to light reflecting the unjust and immoral practices by the banks, as ruled in this case by the Supreme Court.
Robert Edwards – LPG SPAIN Blog.