Chasing mortgage debt in the UK

Norman, a 30% deposit isn´t required to buy in Spain, I don´t know where you´ve plucked that figure from. I have a 90% mortgage and in fact could have had 100% albeit with a slightly higher differential.

Your interpretation of what a reasonable man thinks is of course, what you think. 

My interpretation is that if you borrow money you have to pay it back. 

There are thousands of families here that have been evicted from their homes and on top of that have had their future earnings embargoed for the next 15 years. And it´s not a few euros a week, someone on a wage of 1600€ a month can expect to have 600€ a month deducted at source. It is brutal and reinforces the fact that buying a house as opposed to renting one is a massive commitment here in Spain.

Orinoco, any Spaniard in the situation you describe - evicted and owing money for 15 years - would be brain dead not to file for bankruptcy. If it's too complicated to do this in Spain - which it probably is -  then the debtor should catch a flight to UK, rent a room to establish intention of residency, and file for bankruptcy in the UK. This bankruptcy will apply in Spain. He will be discharged as a bankrupt after one year, as is the UK law. I expect he would have to spend a bit of time in UK while the bankruptcy is being filed, in case the Spanish bank contested his UK residency. But hey, a few months in a bedsit in Swindon is a small price against fifteen years of being broke. Probably qualify for benefit, for that matter.

Yes Guy. Quality advice.

Dear All,

well this reasonable man doesn't think that is how things should be.

At least if it is, then the villain once again is the lawyer who failed to warn all of the facts.

In fact it is a basic nonsense, what is all the rigmarole for?

Why pay surveyors to value the property?

Why have solicitors to ensure that the money is only spent on the purchase of the property?

Is this just a fraud to con the unfortunate purchaser - what sort of consumer protection is this?

If the general public are being routinely defrauded in this way then the consequences are enormous and widespread.

If this truth was common knowledge who would buy at all?.....and at what price?

the market value would be miniscule if based on personal loan values.

if foreign buyers are buying without this knowledge then no wonder there is complaint about them pushing up prices.

to be viable the Spanish prices need to halve again at least.

The ruling needs to be upheld and reinforced.

Regards

Norman

As Orinoco says:

 'My interpretation is that if you borrow money you have to pay it back'.

Dear All,

the "rigmorole" it seems is supported by Wilkipedia...........

In other words, the mortgage is a security for the loan that the lender makes to the borrower.

The word is a Law French term meaning "dead pledge," apparently meaning that the pledge ends (dies) either when the obligation is fulfilled or the property is taken through foreclosure.^[1]

But there is a warning that things may differ worldwide

My proposed guaranteed 70% mortgage was not available because of my status

I wonder what status you would need to be offered 100% in Spain, perhaps a lack of need for one?

Regards

Norman

 So, the debt ends when the house is repossessed.

No, it isn't.  How about the person who has a mortgage and then takes out a second mortgage?  Perfectly possible a couple of years ago.  Do both lenders lose out when he can't make his repayments?  I don't know what part of the world the poster who thinks you can walk away from a house loan (which is what a mortgage is) and not pay the difference but it certainly isn't Spain or the UK.

Dear All,

as I read it second mortgages do not have non recourse protection.

Regards

Norman

 From the MoneyWeek website:

In the UK, if a mortgage borrower is unable to service the loan and has to return the keys to the lender, the lender will sell the property and the borrower will be personally liable for any shortfall between the sale receipts (after costs) and the loan amount. In England the bank can pursue the debt for up to twelve years from the date of any default in payment, and the interest on the debt for up to six years; in Scotland the bank can chase payment for up to twenty years.

Worse, any acknowledgement of the debt (even by phone) by the defaulted borrower during this period can reset the clock and extend the liability even further. Thus, in the Mail on Sunday a couple of weeks ago, there was a revealing story of a man who was pursued by HBOS bank last summer for over £26,000, the legacy (principal plus interest) of an £11,300 debt from a house repossession in 1991, sixteen years earlier!

The quotes from the Wiki site are primarily to do with the USA and not Europe.  Although debts can be pursued in the USA, the same as Europe,  courts are reluctant to do so because of bad record keeping by the lenders (loans are often sold on to other lenders) and because of the increasing realisation that there is little money left to pursue.

 Plus there seems to be some confusion over recourse and non-recourse loans.  It is the non-recourse loan that is based purely on the asset,  These are usually granted to corporations and businesses.  A recourse loan is exactly the same as a personal loan which must be paid back and simply handing over the goods does not count.  

I read all this with interest.  I think something most have forgotton, when dealing with the Spainsh banks is, a lot depends on which bank you are dealing with and even which branch. 

They all have thier own ways of doing things.  Unfortunatly I am with Caja Madrid who according to our lawyer are even harder to deal with than Santander.  And once the situation has been passed to the banks lawyers, ie the bank has washed its hands of you.  You no longer can speak to the bank should your situation change.  Also many of the small banks like Cam have now been taken over by the bigger ones  and so any process you might have been in the middle of will now change as it is merged into the larger banks debt collection department. 

We have now been advised by a lawyer that the situation is with the lawyers of the bank and there is nothing now that can be done, unless we pay off the whole mortgage and costs in one go!  The lawyers will not discuss or come to an agreement because they will not get paid either as much, or at all if the house does not go to auction.  We have been advised to leave the country and walk away.  This is the second lawyer and he hates the system too!

The bankrupcy in the UK situation is news to me, and I shall look further into it.   I believe also the time limit on reposesions has now been changed from about 72 months (6 years) to less, sorry I cant remember the times but it was in the local English paper a few months ago.

Its the not knowing what to do or what is happening that is so horrible, even when you have tried to do what is right.

island babe - google "bankruptcy tourism".

Thanks Guy,  we are stuck between a rock and a hard place. We released our pensions to sort the problem and get things sorted.  However, its not enough to pay off the whole mortgage, so the bank wont talk.  So now we cant go bankrupt either!  Not that I really want to.

There must be another solution! 

I find it interesting that those on this thread following the line that we are all responsible for our mistakes don't seem to be highlighting the double standards being applied to institutions such as banks that are regarded as "too big to fail" and are then bailed out with huge amounts of public money and the "little people" like ourselves who are quite relentlessly punished for our mistakes.

The bank with whom I have my mortgage has been merged with another Caja and is, I understand, in receipt of massive capital injections from the Spanish central bank. Its responsibilities in the transaction that allowed me a 110% mortgage ( yes they were available and without any financial checks being done on my creditworthiness) on a property that was clearly with hindsight overvalued even before the slump, have essentially been forgiven. As I struggle to keep up my mortgage repayments on a property worth perhaps 50-60% of what I paid for it and unlettable at any level that will cover more than 50% of my mortgage payments I haven't noticed any forgiveness on the bank's part. 

Put simply both the bank and I were irresponsible when I took out my mortgage. I could argue that the bank was even more irresponsible in that it knew the market better than I did. Only one of us seems to be paying the price.

I shouldn't really bite again.  But ....

If the price had gone up you would not share your windfall with the bank even though it allowed you to purchase the property in the first place. So why would you expect it to take a hit if property goes down in apparent value?

We all know that property can go down in price as well as up.  It is always a gamble that we have to take.    Similarily we cannot assume that our jobs are 100% safe and secure thesedays.   But i find it hard to make your particular bank culperable for you loss when you wouldn't  of shared your profit had there been any.

I appreciate that the rapid house price fall is down to the world (err USA) economy crashing due to predominately US bank failures and their citizens defaulting on their mortgages but we still have to make individual judgments when we invest in property (or anything else).

I do feel for people in these situations but i cannot blame the banks for issueing mortgages.  We would of all soon moaned if banks hadn't been lending money back in the heydays..  It was always a gamble.

Are you sure the banks don't take some of the profit?  When we sell, depending on the deal they can take extra interest from early closure of the mortgage, they can up (or down) the repayment rates at will and you have no involvement in the decision.  And as anyone who has been in business in the UK, the banks can forclose on the deal at anytime they see fit, just because they have changed policys.  There are loads of little ways they banks cream of little bits of any profit made.  Weather its enforced insurance plans, or admin costs when you take out the mortgage, they do well what ever anyone thinks.  Its the boiling frog situation, we all forget the little things.

I know personally someone who has been through this process of attempting to defend an EEO in the UK courts, being persued by a Spanish bank for non payment of a Spanish mortgage.

The legal advice obtained from UK barristers was that they had NO defence as an authentic instrument had been used.

Two UK Judges heard the case and had no option but to make the charge absolute.

Both Judges stated that the Spanish procedure had been properly followed and that they had NO juristiction to strike it out.

The judges had sympathy with the clients but were unable to use their discretion to halt the process.

Persons who were consulted were, Viviane Reding, the European Commissioner for Justice, the Spanish Minister for Justice in Salamanca, the UK Ministry for Justice, Mr William Haige, Foreign Secretary and MEP Ashley Fox.

All of whom COULD NOT offer any defence to this process.

I implore anyone who has any concerns in this area to seek advise from a UK lawyer who specialises in client protection PRIOR to issue of an EEO.  This includes anyone who has a debt or potential debt within Spain. 

 I have read a lot about chasing a Spanish mortgage debt through the courts in the UK and I find it all very odd. A mortgage to me is a loan taken to purchase a property and the property is the security for the loan. i.e you fail to pay the mortgage the lender takes the property. From what I have been reading this doesn't appear to be the case.

There was a case you identified some time ago about a family in Wiltshire I think their name was Chesterton or something similar do you have any information as to the resilt of their case as I am sure there will be a lot of people in or about to enter this situation.

From what I have been told, a mortgage in Spain is a personal loan not a loan on a property. According to some lawyers if you ask for a dacion through legal channels and it is refused it is more difficult for a bank to pursue the debt in the UK. Not sure how accurate this info. I too would be interested to know if anyone has first hand experience of thisas I am in danger of being in this unpleasant situation.

it is possible to get a dacion even where you are in negative equity, because we have done it. We had a 100%  35 year mortgage and all the usual initial problems - builders electricity, no first occupation licence etc: which took years to sort out .

You need to get good lawyers - we used Costa Luz  who were exceptionally good - and of course you need to have a bank prepared to talk. Our mortgage was with Caixa Galicia, now NovaCaixa.  Following on a point made earlier you must start negotiating with the bank itself when you are still regarded as a customer in difficulties, not a defaulter. I don't know what happens once your case goes to their lawyers but I suspect the outcome might have been different.

Our bank was, in retrospect, reasonable. They re-valued the property,  which showed our house to have fallen in value by 35% from their initial valuation, which was obviously inflated to allow them to give us the size of mortgage they did. Their new valuation was probably a fair one and higher - much higher-  than we would have got in a forced sale. 

This still left a sizeable gap between the current value and the outstanding mortgage and we negotiated a deal which effectively split the difference. This was far from painless but represented only just over 2 years of mortgage payments. When the alternative was paying for another 30 years towards a constantly depreciating asset. it seemed a no brainer.

I should add that we completed our negotiations a year ago, and things may have changed. However  banks generally have never been so unpopular - perhaps even more in Spain than the UK . This, along with recent court judgements, and the fact that they are all receiving, or are about to receive, huge taxpayer bailouts makes it very difficult for them to retain the moral high ground. After all I have taken my loss on the chin, with no one offering to bail me out!

To clarify some misconceptions a mortgage is a personal loan where the lender (bank) agrees to lend an amount of money to the borrower. The borrower has a choice of paying a higher interest rate if he/she does not offer some security (in this case a house) or a much lower rate if the loan is secured (against a house). The lender decides if the security is acceptable and depending on his idea of what he would get for the security if the borrower defaults, what interest rate to charge. (If you look at, for example, your credit card, the rate  here is high as there is no security for the lender.) When you borrow money for a mortgage both sides are taking a gamble. The borrower is gambling that the price of the house will increase and the lender is gambling that the borrower will pay. As far as the lender is concerned he has lent money to the borrower and if he defaults in his monthly payments then the borrower still owes the lender the outstanding amount. If the lender agrees that the equity left in the property is enough to pay off the loan then so be it. However if you have borrowed 100 and the amount your security fetches is only 50 then YOU still owe the lender 50. The mere fact that this mortgage is a large amount it is still a personal loan to the borrower. It was your responsibility to make certain, as much as you could, that you could repay the lender what you borrowed. All the terms and conditions of the loan should have been explained to you before you signed on the dotted line and if not WHY DID YOU SIGN? Take responsibility for your own actions. If we look at the other scenario of there not being the crash that we are in now but the house had doubled in 'value' would you expect the lender to come round and say " well I loaned you this money and you have made a profit so I want it as it was my money in the first place"

We must all take responsibility for our own actions. Nobody held a gun to our heads and said you must buy this house. It was our own decision. You made a mistake, a big mistake! Nobody 5 years ago saw the crash coming. Yes there are a lot of doggy bankers out there and even more doggy estate agents but the bottom line is you signed for the house, you signed for the mortgage therefore you must accept it is partly your fault when, as now, something goes wrong, as you decided to buy.

As in the U.K. as soon as you start to get into 'trouble' with your repayments contact the lender to try and sort out a solution. Do not bury your head in the sand and hope it will just go away. However once you find yourself up that creek without a paddle don’t just run away.

Another thing to realise is that here and nearly everywhere else in the world the lenders are not lending their own money. They are borrowing it exactly the same as you are, whether it be from depositors or from the 'market', they are not using their own money.

I am not writing this as 'holier than thou' but as an owner who has seen my house lose 50% of what I paid for it but still accept that I and only I made the decision to buy. And no I can not afford to take that amount of a hit but it has happened. I do have a lot of sympathy for members who are in deep trouble but still state that it is partially their own fault, not totally but partially.

( I will now put on my dagger proof jacket to deflect the many knives that are about to come my way)