By submitting the Code of Good Practice Banks committ to deal with mortgage debtors in a certain way.
Unemployed home owners, whose circumstances qualify, have an option to:
a) restructure their debt,
b) reduce it, or
c) go through dation ( keys back to the Bank) of the mortgaged asset.
a) Debt restructuring: can include the possibility to make interest only payments for up to four years, extending the term of the loan to 40 years and rearranging payments for one year at an interest rate of 0.25% above the Euribor rate.
b) Reduction: If despite this restructuring, the home owner is still unable to pay his debts, the bank must offer a rebate of part of the mortgage. The amount of this reduction is dependant on each particular case, but a good press on the Bank should lead the Bank to reduce the mortgage debt ot the current value of the house.
c) Dation ( keys back to Bank): After one year of restructuring, the owner will be able to hand over the property to pay off the debt in full. According to July 2011 regulations on repossessions, Bank will have to take the property for no less than 60% of its value for auction. Generally that covers the whole debt. So the debtor will be free.
What are the qualifying circumstances?
1. Mortgage payments exceeding 60% of monthly incomes.
2. Properties need to be under a value frame depending on number of citizens.
.jpg)
"Balcony with flowers in Albayzin", Granada, South-east of Spain, by perlaroques, at flickr.com