Repossession

We have fallen into arrears with our mortgage. This is the second month and the bank will start repossession next month. We have paid some ofthe money but not the full amount.

We tried asking the bank to increase the mortgage (in order to consolidate our debts) and to extend  the term. They kept us waiting weeks for a reply and then refused us because payments had been made late. 

The payments are late because I get paid during the middle of the month and the mortgage goes out on the first. Having got behind we are now struggling to catch up.The bank won't change the date of payment.

We have asked them to just extend the term, thereby reducing the monthly payments, but they won't do this while we are in arrears. Had we known they could do this we could have done it before going into arrears.

The don't do intrest only mortgages.

We realise that we must lose the house but is there anyway we can by some time to try to sell? Its a fantastic property and I'm sure it would sell at the right price.

In the UK there are companies that can stop repossession, by negotiating with lenders. Is there anything like that in Spain?

I keep hearing that the banks don't want to repossess but they are being totally inflexible. With some help from them we would be able to manage the payments. Its so frustrating!

I'm just looking for any advice at all.

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Dear Lindie we regret the predicament in which you are in. Please care to visit our website and take a look at one of our featured articles on Bank Repossessions in Spain:

 marbella-lawyersdotcom

As we've made less than 10 posts we are unable to paste the full link, sorry.




This message was last edited by Lawbird on 9/2/2008.

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Thank you. I have seen the site and the article frightens the life out of me, hence the post!

As lawyers is there anything you can do to help in this situation or would I just be running up more bills and getting nowhere for it?

I contacted an agent today to ask about selling the property as "distressed". He said that as long as I make one mortgage payment every three months, the bank won't be able to start repossession, as payments would be being made. Do you know if this is the case?

At the moment they have stopped my bank cards and I can't pay for anything and of course the direct debits for the bills won't be paid! I don't get my mail very often so I'm just hoping I manage get my telefonica bill before they cut off my phone and internet! I know there's one due soon!

Another problem we have is that the court has awarded us 24,000€  costs against a builder who caused us awful problems and huge bills, last year ( this is a major factor in why we have problems now). 

Although we have paid most of the lawyer's bill, the last part is still outstanding. (We have informed them of the situation and said we will pay it as soon as we can). However, until its paid, they won't attempt to recover the money from the builder. If we could get that money, we could clear the mortgage arrears and pay the bill!!!

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Are you able to make any payment to the bank at all on a monthly basis? Banks in the UK back in the early 90's were quite inflexible about non- payment (I know, my house was repo'd). 

I have just spoken with my wife and she works for the mortgage arrears department in Barclays, but in the UK. Yes, I know the rules are different in Spain, but this is worth a go.

If you have your mortgage account number, make a sensible payment into it every month. So long as it isn't a silly amount and is realistic, in the Uk it is highly unlikely the payment would be returned to you, in Spain it may be or they may accept it. If the payment is returned, keep a record of the payment in and out and keep the returned money in a separate account. Once the court date is set for the repossession hearing, if at all possible, you should attend the hearing. You should provide your evidence that you have been trying to make an effort to try and keep the arrears from spiralling out of control. Normally (again this is only really relevant in the UK, but you never know) the judge will look more favourably on a defaulter that is trying to make an effort and has a plan for repayment, and also takes the time to turn up in court. If you do not turn up, the case will go against you and thet will be that.

Hope it may be of some use.

Mark

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Thanks Mark.

We are still paying money into the bank but by the first of each month we are overdrawn and there just isn't enough for a full payment. There should be this month, as the bank has frozen our account and won't pay anything out on other bills until we have cleared the arrears.

There seems to be a lot of help around in the UK but it is just so different here. The bank just doesn't want to talk to us or attempt to help.

I'm wondering if a lawyer would be able to negotiate with the bank with a view to us just handing back the keys and not incurring costs on either side. It makes sense to me but the bank is so inflexible I just can't see them going with it.

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"He said that as long as I make one mortgage payment every three months, the bank won't be able to start repossession" . This "advice" is innacurate. Banks after 90 days (3 months) of arrears are legally entitled to start a repossession procedure. Another matter being if they decide for whatever reason to hinder it or even stall it. Only they have this prerrogative.  If you pay one out of three installments you can be repossessed if they wish providing 3 months have gone by since the first arrear. Please read similar questions relating to mortgage loans & arrears replied in our website (marbella lawyers dotcom questions on property law archive).

The problem is that on you taking on a mortgage loan in Spain you have unlimited resposibility as per our featured article on "Home Repossessions in Spain". 

Foreigners don't realise that you just cannot walk into a Spanish bank branch hand over the keys ("Efecto Sonajero" in Spanish jargon) and walk away at a wave of the hand.

The property still belongs to you, not to the bank. The debt goes personally against you. Which means that if the property is in negative equity (i.e. if house prices should fall) then the outstanding balance is owed by you. Spanish banks can and are already chasing up the debts in the UK. They may outsource it and hire local UK law firms or else debt collection companies or sell on the non-performing mortgage to specialised companies for a fraction of the nominal value. The latter will chase you. It's true that this is often an expensive process for Spanish banks so they will always be reluctant on doing it. It will of course depend on the amounts owed. Bear in mind the default interest rate is a normally between 24-27% compound intetrest p.a. (not simple interest !). So the debt will mount indeed very quickly over time.  

Spanish banks are very surprised at this phenonmenon and have been caught off-guard because they are used to dealing with Spanish customers who no matter service their mortgage in time. Whereas many foreigners are just walking away as if this was the US thinking no further consequences will arise from this.

The ability of a solicitor to act on your behalf is honestly very limited due to the on going credit crunch as banks themselves are finding increasingly hard to secure finance lines. A number of solutions would be:

1.- Negotiating interest only whilst the property is put up for sale or just to weather off the storm meanwhile. This option is now not feasible as Spanish banks seldom grant interest only and if they do it's really just as a teaser really for one year. Now with this credit crunch they are reluctant to even grant that one year.

2.- You may extend the mortage repayments to an additional number of years. The drawback is that on doing so the amount of interests you pay on the long run is increased dramatically. So it's only an option only for those who are left with no other really. The Government is now allowing this change free of charge to the struggling mortgage borrowers. So you will not pay for Notary or Land Registry fees on doing it.

3.- "Dación en pago". This is basically handing over the keys back to the bank and signing a deed at the Notary by which the bank commits itself not to chase you for the debt and consider it discharged for good. The catch is that the property must not be in negative equity. This is more difficult than people think because due to the easy credit of the last years the Loan To Value of properties was really high, too high in fact, hence all the bank related problems we are reading with massive downwritings. People borrowed far too much and now thier properties may have fallen below their loan. If thsi happens the Lender will be very reluctant to agree to thsi "dación en pago" (hand back the keys) because the collateral has no or little equity left.

4.- If you already have run through the numbers and you are convinced that you will no longer be able to service your mortgage, rather than defaulting and being repossessed, you should very seriously consider selling the property as a distressed asset. The catch again is that the property should not be in negative equity. The more it is the least likelihood there will be anyone interested in it as they in turn are regarding the purchase as an investment and the numbers need to stack up to make it worthwhile for them.

If you still have doubts Lindie please phone us and we'll explain further.    

This message was last edited by Lawbird on 9/3/2008.

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Try this company, they stop repossession and offer to buy the property from you,. they say you can still live in the property afterwards. Tel:900 666 999 Good Luck

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Thanks Chris, I'll try that number in the morning.

The bank won't do interest only or extend the term so we will need to look at the dacion en pago. 

We don't have negative equity. I have already spoken to someone about a distressed sale and are waiting to hearback from them.

We do take our mortgage resonsibility seriously but unseen events have crept up on us very quickly. Given the chance I believe we could sell the property for a reasonable price, fairly quickly, but time is the problem as we are into the second month of arrears.

I have a potential buyer very interested, at the asking price, but he is arranging for an architect to view the property before commiting himself and itsall taking time that we don't have!

If we find a buyer after the repossession proceedings have started, will we still be able to proceed with the sale or once started it that it?

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LIndie despite what are I am sure Chris' best intentions you need to be extremely careful with these companies. Basically they roll the interest up into the debt and they will only take on property that has significant equity in it. I have spoken to a coup'le of them myself to establish exactly the sort of service they offer and it should be considered as a short term solution only for someone that is looking to sell. When asked they were very vague about interest charges and start up costs but from what I could make of it they were extremely high - when I suggested that really with the terms they were offering they should only really be considered as bridging finance they agreed with me that was probably the case. Please please ensure that you know exactly what you are going into before you do.

Generally speaking repossession proceedings here take a long time - can be up to 2 years and I have heard longer - speaking to a lawyer today, certainly in Marbella (and he feels this spreads elsewhere as well) the courts are also reluctant to rule on repo as they would prefer client and lender find a solution between them - there are lenders that are changing the terms of clients loans in order that they do not have to take repossession proceedings. I can also state factually that some lenders are offering to take the keys back - even with little or no equity in the property. I guess it depends on the lender and the individual circumstances. If you have a buyer up your sleeve it might be worth telling your mortgage lender - that way they save the cost of the legal proceedings and also the bad debt does not get onto their books. If you are making some payments then generally I have found one can normally find a sympathetic ear - temporarily. AS Lawbird says the Spanish will live on bread and water rather than miss a mortgage or loan payment - lenders here have an attitude of zero tolerance. One wonders if the level of problem debt in the UK would be quite as high as it is (credit card balance transfers etc) if lenders there adopted a somewhat more prudent approach. We are all consumers at heart but the "want it now" philosophy has a lot to answer for - the fact that lenders make it so easy to borrow in the UK has probably made a rod for their own backs - then again if people are willing to pay extortionate interest charges on credit cards someone is always going to exploit it - hence UK banks massive profits over the past decade and more.

Subject to the work that was done by the builder is there no way yoiur lawyer could turn the civil offence into a criminal offence also - you do not say why the action was taken - a lawyer friend of mine pursued just such a claim against a builder who had done defficient work - I do not know specific details - but not only did he press a civil action he also threatened a criminal action owing to certain procedures that had not been followed by the builder - the criminal action never took place as the builder paid the damages almost immediately the threat was made and ULTIMATELY the people that brought the action were satisfied. 

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Thanks Smiley,

I'll be careful with whatever we do. As we are looking to sell it may still be cheaper in the long run than being repossessed. My husband is going to look into it.

Like the bank, the insurance company won't discuss anything with us while we have a debt outstanding. I wish we had known about taking the criminal action at the time. It just didn't occur to us. We are going to suggest to the lawyers that if they could recover the money we would pay them a premium for doing so. That way we would both get something.

I'm pleased that you are hearing that some courts are reluctant to rule on repossession as all I've been hearing is that once it starts there's no stopping it and the outcome is inevitable! We are with Solbank and they are just so inflexible that I'm finding it hard to be optomistic aboutthe outcome.

Thanks to you all for taking thetime to reply.

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Good luck Lindie, I really feel for you in this difficult time. I hope that you re able to come to some amicable agreement with the bank.

Jules

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This message was last edited by marinagm on 9/8/2008.

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Thanks Jules. I need all the luck I can get at the moment!

The good news is that a friend has offered a loan which which I can clear the arrears.! Hopefully it will buy enough time to sell the property. There is a buyer interested who is returning to Spain soon for a second viewing. I also had a viewing on it this morning, but the it was impossible to read the client so can't tell if he was interested or not. Still, there is hope!

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Good luck Lindie.

The impression I had from previous threads was that it was the arrears that were causing the problem and that consequently there were late payments but they were only being taken off the arrears. Presumably once the arrears have been sorted ongoing mortgage payments then should not be too much of a problem until you come to sell. Its nice to know that there are still some people one can call on and consider true friends to dig someone out of a hole like this. I am sure that you are extremely grateful.

Repossession proceedings are so long winded here that I imagine once the arrears are cleared it will stop any process that Solbank have started. But if they get tetchy then stamp your feet / it is not in their interest to have a bad debt on their books and if necessary ask them to escalate the discussions to a more senior person, if necessary taking it all the way to the top of the tree.

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Lindie
Unfortunately I don't have any advice to offer you but I just wanted to wish you the very best of luck - it's not an easy time at all.
I imagine there will be many people viewing this thread as lots of us could quite easily end up in this situation ...... thankfully you seem to have a good friend who is willing to help you out a bit (not sure that most of us would have the same).
Please keep us informed, and, again, I'll be keeping my fingers crossed for you. Good luck

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No words of wisdom from me either Lindie, but just wanted to wish you.....................

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Just to update...we have been managing to pay the mortgage, just about. I have found full time work which will last until next spring, thank goodness.

We have asked the bank on numerous occasions to allow us to extend the term of the mortgage in order to reduce the fees. (I understand they are legally required to allow this), finally, today they have said that they think we will be able to have an interest only period of a year (they previously said they never allow this!). This is fantastic news for us as it will reduce our payments to a manageable level and give us a chance to sell the property.

We have an interested buyer, but I'm trying not to get my hopes up on that one just yet, but fingers are tightly crossed!

Thanks to you for your best wishes and good luck to anyone facing similar problems.

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Good luck Lindie - hope it all works out for you.

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Congrats... and hope you can sell soon.

Maria

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A further update....

We didn't manage to sell. Our buyers dropped out as they couldn't get a mortgage!

We never did manage to switch to an interest only mortgage as our bank manager left and the new one couldn't find any record of our request! We didn't persue it at the time because we were managing.

My job kept us out of trouble, but sadly it has come to an end in the spring and finances are becoming very strained again.

We are going to write to the bank (no more verbal communication) and tell them we are struggling. However an interest only period of a year will, I think, just see us back in the same position this time next year.

Am I right in thinking that there is a legal requirement that they must let us extend the term of our mortgage?

Can anyone advise on the best approach to take? Is there anything else that I can do?

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