Possible Bank crash - how does it affect my existing spanish mortgage?

With the present Bank financial crises, if my spanish bank should crach, what would happen to my existing spanish Mortgage?  Would it be called in, written off or bought by another lender? Any information would be grstefully received.

S Buckley

 Bought by a secondary mortgage provider.  It happens all the time, sometimes without the borrower even knowing about it.  It's one of the reasons UK got into so much trouble by buying up mortgages from US lenders who then defaulted.  Unfortunately, it wouldn't be written off but you wouldn't be made to pay the balance either.  

 you wouldn't be made to pay the balance either.  

in your dreams

 I meant you wouldn't be made to pay the balance immediately.  

 quite so!  having read your posts before it did take me by surprise. 

 Many thanks to those who replied to my question. The whole thing a bit worrying.

Any ideas how to sell a beautiful house in the mountains, apart from the obvious?  Are there any investors out there prepared to acquire a house at half it's value?

Hi Rosie - as Bob has said the mortgage would be taken over by another lender. There is actually a provision for it in the Mortgage Deed although rarely do people have it explained to them that the lending bank can sell the debt for whatever reason to another lender. Terms and conditions however have to remain the same so there can be no immediate foreclosure.

In fact in Spain, Mortgage Law is such that whoever's money you borrow the tacit acceptance is that you are borrowing from the Bank of Spain (essentially lender of last resort) and thus the Spanish Government.

As to selling your beautiful house in the mountains - suggest you work as many agents as you can and find as many property websites where you can load the details and photographs - many of them offer free listing service. There are lifestyle buyers and investors out there but in the current market in a position to drive a very hard bargain so while this may sound harsh, maybe it is not priced aggressively enough to attract interest.

Dear All,

given that the bank would lose money re-possessing and selling on, could a shrewdy buy a mortgage at some sort of discount?

Regards

Norman

Not exactly sure what you mean Norman........ if you mean could a buyer purchase the property using the existing mortgage (i.e. subrogation from the current mortgagor to the new property owner). In theory yes this can be done if the new owner fits lender requirements. If you mean would the bank consider transferring the mortgage to a new mortgagor to buy the property but reducing the size of the mortgage debt simultaneously, I doubt it........its an interesting idea but getting a Spanish bank to apply logic at any time is unlikely. It would also assume that there is a threat of repossession and Rosie hasnt indicated that to be so.

Thank you Patrick,

yes you have got the idea, it occurred to me that if mortgages are freely tradeable and the Spanish ones are the toxic debt they are currently they could only be traded at a substantial discount.

I was really thinking of those people in severe difficulties who are about to hand the keys back and run, if they could find a benign lender to effect the trade at a discount, that discount may be sufficient to allow them to continue paying a reduced sum and perhaps survive.

I guess there may be a lot of people in this position, ready to run but with uk assets that they are eager to protect - better to struggle and pay your way rather than live in fear.

I understand that the bank will lose out but that is there destiny anyway and they do have "bail-out" prospects that the individual doesn't have.

Just a thought.

Regards

Norman

Nice (and interesting) concept Norman. Unfortunately the ethos of open mindedness, empathy/sympathy and Spanish banks do not make happy bedfellows. I have lost count of the number of people I have spoken with over the last couple of years wanting to switch to an interest only product to reduce their monthly payments. In the times when interest only was an option the cost of transfer invariably made it unfeasible and the only suggestion I could make was to suggest the "victims" asked the existing lender to switch them to interest only ............ 99% of them had already tried that route to met with a categoric NO!

Headinsanditis is prevalent in the banks here and logic does not prevail. While I would emphasize it is only a temporary solution (and perhaps not to be applied across the board) my argument would always be that it is better to at least have a client servicing the interest charge than to possess the property - 1. It adds to the toxic debt book and 2. The bank itself is penalised financially by the Bank of Spain for every repossession on the books. The important thing is that it alows time for things to improve (we all live in hope). Unfortunately these days the transfer option is no longer available but you would think that the banks might have started exercising some discretion when clients pose the question.

Thanks again,

I wonder how mortgages are actually traded, is there a specialist market with listings and perhaps even auctions???

who would know?

Perhaps the "bail out" terms will require some to be written off the books?

Regards

Norman

I suspect that after the last fiasco mortgages are no longer traded. In fact I am not sure they ever have been in Spain although there is an outside chance that when GE Capital and GMAC opened a book for Spain they were capitalised and sold on (being US banks that operate that way they were the first 2 to close lending operations in Spain - and if memory serves me correctly the only 2 other than any that went bust or were taken over).

When capitalisation and mortgage book trading was active it was never a publicly quoted market and there was no index or listing for it. Bear Sterns would pick up the phone to Lehmans who would pick up the phone to Goldmans etc

 Our mortgage is interest only with Lloyd's Int, ex Halifax.  If our mortgage were to be transferred, would it continue as interest-only on the same terms or would the new lender be able to change either the type or the terms ?

Why have some banks not accepted for an owner to make a cash offer for the current real market value regardless of what that person contracted to pay years ago?  IOW, if Mr X bought an apartment in 2007 for €250k and repossessed apartments in the same complex are now selling for half that, why would a bank not accept a cash settlement for the current market value of €125k?  That way it is never written off, it is sold albeit for a lower price than originally contracted.

Has this really happened ?

someone in spain had a mortgage it was 200.000

the Bank as written off 170.000

leaving a ballance of 30.000

THIS IS WHAT WAS ON ENGLISH TV LAST WEEK

If this has happened will they let us off for some money and how can we do it

Most banks all around the world are now technically insolvent. This has been allowed to be hidden by spineless, bought-and-paid-for government puppets permitting them to mark their assets to whatever they (the banks) think they're worth (read: 'fantasy') rather than using general accounting principles of marking them to market. 

That's the main reason that these toxic mortgages won't be sold at a discount to the general public directly, because the full loss would then have to be reflected on their balance sheets - thereby exposing the fact that they went bust years ago. And no one really knows how bad the resulting derivatives tsunami would be.

And why would they bother when they can slice and dice the mortgages into tranches containing some good, but mostly bad, debt and sell them as CDO, MBS, SIV (and a plethora of other alphabeti-spaghetti acronyms of mortgage securities) to 'investors' (read: Your pension fund'). But first, they get/bribe the ratings agencies to rate these tranches at AA+ or above.

So, in a way, you're already buying them if you have a pension or mutual fund - but at a premium to what they're actually worth rather than at a discount. A nice way to kick-the-can down the road before not-yet-retired Joe Public fully realises the extent of the losses (read: 'Theft').  

Any shortfall can then be made up by 'betting' against these loans performing by using derivatives like CDS (swaps) and/or government bailouts. It isn't really a bet because there is no doubt that the loans won't perform. They know they won't.

This results in even more losses for 'someone' - guess who that someone is ultimately? So, now you get to pay twice. What a deal :-)  

I know this is sounds like a cynical view but it is entirely factual. A search of "Goldman Sachs bet against its own deals" will return a million and a half hits - but no one has been indicted, let alone imprisoned. 

Does it sound likely that the orchestrators of that racket and worsening moral hazard would write off the personal mortgage debt of milions of people - or sell it cheap to anyone when they can get full price selling to the pension funds of those same millions? 

Thank you x 3,

Are the people that look after my pension pot that stupid?

can I print out and send it to them?

I am always asking people to "tell it like it is" but that is strong stuff - you are almost saying that no one can be trusted - much like the american financial commentators.

For this simpleton to be told that the banks are to be reformed by making them hold 4% reserves rather than 3% is to me mind boggling, it does not sound to me enough to fund any business against possible withdrawalls.

There is so much I do not believe possible or understand.

Regards

Norman

There is a documentary called Inside Job on DVD which is well worth watching to get an idea of what JD01 is talking about

http://www.sonyclassics.com/insidejob/

<<"Are the people that look after my pension pot that stupid?">>

I don't think 'stupid' describes the entire mindset of everyone involved.

While it might apply entirely to some - and to some smaller degree to most of the others - more mendacious adjectives are more apt for ALL the people at the top who either deliberately caused this to happen or did nothing when they should have been preventing it. Most of the others are simply ignorant of the scale of the problem. 

<<"can I print out and send it to them?">>

Sure - it's nothing they don't already know and it's nothing which hasn't been written about extensively for at least the last 10 years. Just because most people are only now feeling the effects doesn't mean that the seeds were only recently sown. They've been too busy worrying about soap storylines or Man U's goal difference. That apathy is going to prove to be very expensive. Unfortunately, the bulk of the bill will be paid by our kids - and theirs.  

A question I'd ask you is: Just assume for a moment that they are so corrupt to have caused and allowed this to happen. Would you really expect them admit to it when you print out the allegations and send it to them? Apologise? Give back all the money they stole? Promise to never do it again? And I mean a real promise - not the Cameron, Blair, Brown, Bush, Obama kind.

<<"you are almost saying that no one can be trusted">>

Trust is earned. I can't think of a single thing that's been done to warrant ANY trust but there have been a ton of lies to generate distrust. So much so that we now have classic quotes like this one from Jean-Claude Juncker, the man who is the head of the Eurogroup council of euro-zone finance ministers: 

'Mr. Juncker says he has “had to lie” and, speaking about touchy economic topics, “When it becomes serious, you have to lie. 

Let that sink in for while. When 'it' becomes serious, 'you have to lie'. Not, 'you could lie' or 'you may lie', which would have been bad enough. No, in actuality it is much worse. When things get serious 'you HAVE TO lie'.  

So, how many times do we have to be lied to, in increasingly shameless and bald-faced ways, before we wake up to the fact that the glaringly obvious is no longer 'strong stuff', as you call it, but the new norm? 

This is not your father's economic downturn.

History shows that every generation just can't believe that such levels of criminal behaviour can exist amongst its leaders - until it becomes forehead-smackingly ridiculous to deny it any longer - by which time it's too late.  What we are living through now is by far the greatest theft and transference of wealth in the history of mankind. So, you are right - tinkering with insignificant levels of reserve requirements isn't designed to do anything but give false hope and keep the pitchforks at bay. 

What needs to be done is not an option that they would ever consider because collapse would be immediate and brutal. And just like a debt-junkie or addicted gambler, the current policy seems to be to put off that unavoidable and inevitable collapse for as long as possible, pray for a miracle and panic every time we reach the edge. That's quite a manifesto to run on isn't it? - but rest assured, we'll vote for it :-). 

I think that the short answer is that no-one (including, or perhaps more aptly, speciifcally) the banks have a clue what to do.

This current scenario is one they've never faced before, and no-one had the wit to think about any form of contingency plan, just in case it did.

A contact in UK, who surrendered his keys 2+ years ago, recently wrote and told me that he'd just been contacted by a German investment company.    Apparently, his previous bank had sold the debt on (one can imagine for how little) and the German finance house is obviously expecting to make a killing.    

They'll be lucky with him: he's transferred every asset possible out of his own name, and has gone into voluntary bankruptcy.

Not a pleasant prospect, but needs must when the devil is breathing over your shoulder.