Opinion and advice on foreign currency mortgage

I was wondering if anyone can shed any light or indeed have themselves have a foreign currency mortgage.  My predicament is this I came over to the mainland from a Spanish island to start a new life.  I had sold my house there and made a nice little profit and came to the mainland.  I have friends here who introduced me to an English estate agent who sold me an apartment on a very nice golf resort. He mentioned to myself and my friend a 'foreign currency mortgage', arranged meetings with a bank manager who explained how it worked (or seemed to explain how it worked), indeed the bank manager himself had a FCM as did my solicitor.  The worst case scenario I was told was that my monthly payments would be the same as payinging in euros.  This was in 2007, all was well until the crisis hit.  My monthly payments have more than doubled and after 5 years of paying I now owe more than 70,000 euros MORE than I orignally borrowed.  Plus of course the value of the apartment like all property has depreciated.  The estate agent has disappeared back to the UK leaving a string of debts and disgruntled customers and the bank manager has hounded me for years to keep up the payments even asking at one point if I had any friends or relatives who would give me money so that I could give it to him! I have since found out that this type of mortgage carried a huge risk,, indeed I was told recently by a friend of mine who mentioned this type of mortgage to a financial advisor in the UK that  he 'nearly fell off his chair in shock' as this type of mortgage should only be offered to someone in the 'know' financially and willing to take the risk.  Basically its playing the stock market with currencies.

I am struggling to find work and have missed 3 months mortgage.  The bank manager has offered me a deal.  Walk away now, give the bank the apartment and they wont pursue me through the courts and I wont get a bad credit rating, however I lose over 122,000 euros deposit and of course the apartment leaving me with nothing.  I don't what to do.

I would really like to know if anyone else has this type of mortgage, their opinion and is there any advice anyone could give me.  i do feel that this mortgage was misrepresented to some degree as I would never have taken it out had I known that in time I would have owed more than I borrowed. 

Sorry to hear about your predicament.

Foreign currency mortgages were all the rage a few years back.  They sold it as though you could actually save money, especially in the long run, and that they were easier to get too.

Of course, many also failed to mention that it could also cost you MORE money in the long run.  Being investment based it can go either way, and depending on exactly the mortgage you have, they can be very high risk, which is, unfortunately, what has happened to you.

Your agent probably wasn't a financial advisor and only a proper IFA should have sold you a mortgage like this. I know people in the UK who have successfully had money returned to them relating to bad property investments in Spain based on the fact that these advisors should never have pushed such high risk investments to their clients.  So even IFAs sometimes get it wrong, let alone non-IFAs.

It may at this stage be worthwhile talking to a lawyer in Spain and reviewing your mortgage agreement, to see if the bank was negligent in any way.

I can't think what else you could do.

I'll ask a respected mortgage advisor (Patrick Robinson, "Smiley" on the forums) to read this thread and see if he has any advice for you.

Justin

Hi Angelita - like Justin I am sorry to hear of your predicament. There is little you can do I am afraid other than what Justin has suggested. Depending on who the lender is (Lloyds International Hong Kong/Singapore???) you may have some redress with the consumer rights groups in Spain because I have a suspicion they may have been lending here without a Spanish banking licence (as I say I am not 100% certain). However I do know that Lloyds Internationals product latterly insisted that anyone taking an F/X mortgage either received salary or had investment in the selected currency. If Lloyds is the lender maybe somebody filled in a box on the form without your knowledge.

As Justin says FX mortgages are extremely HIGH RISK and never ever for the conventional borrower unless it is via a managed fund where currency risk exposure is being monitored.

They were heavily sold in the UK in the late 80s (Swiss Francs usually) where interest rates were at about 3% against UK rates at about 8%. I used to be an interbank currency trader at the time and a UK IFA offered me one of these mortgages - I knew the currency and worked with it every single day and my view was that it was extremely bad advice - I dont believe one should gamble with ones home. In the 90s the Council of Mortgage Lenders in the UK banned advising on them unless the borrower was paid in the currency of the mortgage debt.

They were being pushed on the Costa del Sol in 2007 and 2008 (think they dried up then) by people not qualified to give advice or a recommendation as to suitability - I was approached by a company marketing them and when I asked the question what about the currency risk the MD of the company pushing it didnt have the slightest idea what I was talking about.....just kept focussing on the fact that payments would be x in yen, y in swiss ......which all looked very attractive alongside the z in Euros. Some of the products I have heard of even have a clause whereby the lender can demand at 24 hours notice a lump sum settlement if the debt rises significantly owing to currency fluctuation.

I know that none of this is of benefit to you but hopefully anyone else that reads this thread will be more educated about how risky these products are.

I think there is little if anything that you can do other than to speak to your lawyer (hopefully a new one bearing in mind the advice given by the former) and establish if you have any rights under consumer laws against the lender (or even the original lawyer) that recommended this type of mortgage. Beyond that I doubt there is anything further you can do.

Sorry......

Thank you both for your prompt and illuminating replies.  One point I did not mention was the fact that I have only  recently realised that the bank has never supplied me with any mortgage documentation or the 'nota simple'.  It would not hurt to have a lawyer look it over.  The bank is the Banco de Valencia by the way which is itself bankrupt!

I guess what might be worth doing in conjunction with a lawyer is establishing with the Bank of Spain if it is within the law for a Spanish bank to offer foreign currency mortgages.........The BOS controls all mortgage lending within Spain and they have specific directives as to what lenders can and cannot do.......during the boom years these directives were largely ignored by the banks and for what its worth in my opinion the BOS stuck its head in the sand ...... times were good, a booming construction industry, record levels of lending and new business for the banks ........ the rest is history! My point is that Bco Valencia probably introduced the product with the aim of attracting new business with a product that was always going to look sweet against the competition because the payments would be lower ...... however the BOS has always tried to exert some form of control over the banks in Spain since the late 80s within the realms of what might be considered to be "exotic" products..... a couple of major banks went belly up for trading in financial products they were not qualified nor had the risk management systems in place to get involved with (simplistically arbitrage)....all they could see was $ signs.

I have never considered it before but I wouldnt mind betting there is some form of mortgage law that restricts lending on FX mortgages.....long shot but it might be worth looking into.

As to your remark about never receiving any documentation...... thats a story all too common  with all Spanish banks I am afraid

Hello Angelita sorry to say but my opinion on your situation is not good.

Thank you for your opinion Steve but as I said in my original email I had just moved over from another Spanish island.  I did not come straight from the UK, this was in fact the 4th time I had bought property in Spain without any problems.  The only difference I can think of is if for want of a better word you are 'dodgy' on a small island, whether you are an English builder or a Spanish bank manager  you can be very sure everyone will hear about it.  However the mainland is a different story altogether and people can scam people for years without any recourse.  I am going to take advice from my own lawyer first who is honest, good at her job and cheap!  The fact is I can't afford an expensive court case anyhow, paying this damn mortgage has taken nearly every thing I have. I have been very grateful for the replies I have received, some very good advice given.  Thanks

couldnt agree more with what you say dumbuny

i leave shopping lying around in the supermarket nothing ever happens little children run  ahead to hold the door open for me

was on a cafe terrace yesterday when brits complained about the smokers i would have thought the ashtrays on the tables might just have given the game away wonder whos fault that was?

Nice to see a sense of humour!