El blog de Maria

Four of Spain’s biggest banks, Santander, BBVA, CaixaBank and Bankia, have taken account of the legal challenge regarding the floor clauses and have launched an image cleansing operation that will, among other aspects, implement a new generalized model of mortgage deeds in Spain.

The objective is for the Bank to assume some of the administrative costs related to opening a mortgage, which until now have been automatically imposed on the borrower.

A recent Court decision by the Supreme Court has called into question the situation where all mortgage opening costs are imposed on the borrower, including taxes, commissions and other costs incurred in preparing, rectifying and processing mortgages. The Supreme Court has been particularly incisive in dismissing two appeals filed by BBVA and Banco Popular against a complaint filed by the Consumer and Users Organization (OCU).

The big Banks have set up a working group with the collaboration of the AEB (Spanish Banking Association) to find a solution that can be adopted by common agreement among the main financial groups in the country.

The Supreme Court finds that the guarantees incorporated in the deeds are adopted for the benefit of the lender, which does not allow reciprocity when distributing these types of expenses, which usually always fall on the client. This criticism has been instrumental in the proactive attitude of banks to change contract models and to avoid future court cases.

To that end, the expenses of the Property Registry, which ensure the rights of the creditor against third parties, are directly assumed by financial institutions.

The other two large items that decisively increase the cost of mortgages are notary expenses and Stamp Duty; this last one being the most important of all charges that a holder of a housing loan has to assume. At the moment, banks do not seem so committed to the cause of admitting responsibility for such expenses, but it is very likely that social pressure results at least by establishing agreements to distribute the amounts in the future, so that the client only has to assume half the bill that involves the contracting of a mortgage loan.

Financial institutions expect the forthcoming Supreme Court rulings to recognize these efforts with borrowers and help determine Supreme Court case law in a less negative sense for their interests. Not surprisingly, this new attack on the Banks could cost around 18 million euros, a figure resulting from multiplying the six million mortgages registered for the 3,000 euros that, in round numbers, formalization costs imply. In short, a hole that, taken to its final consequences, is four times more than the famous floor clauses.

Sanlúcar de Barrameda, Cádiz, Costa de la Luz, South western Spain