Mortgage Debt That Cannot Be Paid-Is There a Solution?

Many who were purchasing a property in Spain were sadly affected during the crisis when interest was unaffordable and usually due to abusive clauses. Monthly mortgage repayments rocketed. Most lost their homes to the banks who were then able to sell them to new purchasers at bargain prices or to what is known in Spain as the “vulture funds”. Some properties sold at silly prices and a villa could be bought by these funds for as little as 10,000 euros. It was unfortunate that those who had acquired mortgage debts were not able to buy back their homes at these prices. In the case of an individual, banks asked via the courts for the full mortgage pending usually with interest and the added costs of lawyers and court fees to be paid in full.

Many who had lost their homes were left with debts which also included the IBI costs up to the time the banks made the repossession, legal fees and also the community charges. Some will be liable to all these debts even though the banks have sold their properties on. Some owners who were not able to meet the debt, were subject to a European Enforcement Order (EEO). This gave the banks the right to make applications with the courts in the home countries of those affected. If the full mortgage pending on the properties where not paid, then the courts abroad embargoed any assets including homes abroad.

Those who are affected and either have not been able to negotiate with the banks (banks often unwilling) or have not heard from their bank or the courts for some years, should not ignore the matter as eventually they will be contacted.

In some cases the banks have offered the client what is known as “Dacíon en Pago” where the owner hands back the keys and remains debt free. Often the banks have added clauses to this agreement asking the homeowner to pay a sum of money for the bank to oblige. These amounts can be quite high which include covering additional debts. Most were not able to find the large sums asked for and still waiting a resolution from their banks.

Is there no way out? To be able to find the most cost effective outcome, one would have to know the banks system on mortgage debt and have exceptional mediation skills. Unfortunately many banks will not play fair with clients which results in many either finding the money to pay the banks the figures asked or do nothing. If the client owes a few months or more, it is worth looking at the options available. In some cases the mortgage contract contains abusive clauses. If this is the case there could be time to negotiate with the bank bringing the monthly payments down to affordable payments. This can also stall a bank from taking legal action.

A CAB adviser (not within the remit of CAB services) has to date managed to solve the situation for two owners who had a mortgage debt of a few years, IBI and community charges which had built up over the years and other debts. The last case was solved at the end of August 2017. The CAB Spain adviser after tiresome negotiations, was able to reach and agreement with the bank in question. The property has been sold by the bank, the debts of IBI and community paid and the client has a certificate stating that they have no debt with the bank in question. Affected party paid the plusvalia which is now being reclaimed for them.

For those in a debt situation should seek legal advice or contact us at the Citizens Advice Bureau Spain.

Further information below.

Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.