Repurchase / repossession - advice needed

OK, glad I'm not the only one seeing more questions than answers, so I'll say it as I see it too.

Why did they take out an interest only mortgage? Because some spiv in a suit offered it?

How did they plan to discharge the mortgage debt at the end of the mortgage term? They didn't?

What is this mystery investment they say they were duped into? A buy-to-let property with an interest-only mortgage?

I think Baz has summed it up, and in fact you can probably sum up the entire credit crunch / financial crisis / property crash in the same way: people simply relied on property prices continuing to rise indefinitely. When they didn't, and when they in fact fell, a lot of people lost a lot of money. And those people who didn't have the money in the first place, but used other people's money to get in on the action, have ended up in the biggest trouble.

That said, I do still feel sorry for anyone facing difficulties, and am curious to know more about this "repurchase" plan. Is that just another word for repossession? Why would it be costly, as the OP has said?

Got it now

Through greed bought a property they could not afford with someone else’s money.

Thought they were Del boy (we will be millionaires this time next year).

From day one stuck head in deep sand.

Now looking for sympathy vote and someone to blame.

Ouch! Bit harsh, Duncan. I was trying to be little more subtle, since I was hoping to hear more from the OP - or at the very least see some more marathon sentences from Ads on the subject (does he ever take a breath?!) but that post has probably ended the discussion for good.

Yes all true, but there is always another side to the way business works (anywhere in the world I guess).

just to keep some sense of even handed ness the lender has to look closely at the borrower to make sure the money they lend out can be either recovered or repaid in the time of the loan, and there should be adequate checks and balances to make sure the contract is a good one.  They are not selling magic pills in the Wild West.

maybe for every greedy borrower there is an equally greedy lender and all the paperwork must be looked at closely to make sure the 'big boys and spivs' didn't do anything wrong.

if they did do anything wrong and didn't discuss absolutely everything and every eventuality and record that they did, then a lawyer may be able to get to grips with the contract on behalf of the borrower as well.  

The trouble is, it's Spain and it's going to take for ever and cost a whole lot more in funding to challenge it, so it's always going to favour the ones with the most money in the end (which to some degree is the same in most countries anyway). 

Brian I fully agree, the banks were the greediest of all.

But what has the OP been thinking about for the last 10 years. Interest only, paying next to nothing, no rental income. Been living in cloud cuckoo land.

No sympathy for this case, all of their own making. Best they can do is throw in the keys.

Can't argue against that Duncan, that's the side of the fence I would drop down on too. 

Here's the other perspective Duncan, and no I'm not affected by this scenario associated with mortgages, but I am nevertheless keen to comprehend the realities from a wider perspective, in terms of how the Banks have compromised (and continue to compromise consumers).

These facts are often hidden sadly under highly complex structures and abusive tactics, by Banks playing the legal system (loopholes and all), which need to be reviewed with open minds, instead of sometimes generalising and blaming consumers without full knowledge of the facts. The ultimate aim being to seek out solutions, to not only act as forewarning to others, but also identify where loopholes exist and are being exploited within the current system.

Apologies if my explanations have been lengthy, but this is a highly complex scenario which I have been trying to comprehend and gain explanations, which perhaps mistakenly I hoped others would benefit from.

If this has caused frustration by doing so, then I can only apologise.

The bottom line however is that Banks have not adhered to their legal responsibilities to forewarn clients from the outset of the risks associated with interest only mortgages, let alone rental guarantee schemes, as legally required (as explained by Maria when she explained in detail the problems associated with floor clauses).

They have failed to register their repossessions exploiting an existing loophole in the system and financially compromised communities in that process.

They continued to flood the justice system with their appeals (even when Supreme Court rulings went against them).

They have not been adequately regulated by the Bank of Spain, as they failed over the years to tailor their lending practices which again should have been based upon realistic and ethical criteria....,

All too many colluded with developers and agents by failing to provide Bank Guarantees for offplan purchase, as required by law,

Just a few of the ongoing Banking failures now being challenged in law.

Banks failures, using complex structures to hide their debts (and in some cases turning a blind eye to corruption, allowing some to even bet on the system to fail to offset their losses), directly led to all too many mortgagees losing their homes.

Their failures to adequately control supply of mortgage products directly compromised mortgagees (such as the OP), as during the financial crisis property values plummeted due to over supply, subsequent lowering of interest rates did not benefit those with abusive floor clauses, and plummeting property values left them struggling with negative equity at the point of mortgage maturity,

Banks then failed in that process to provide opportunities for mortgagees to reassess and discuss alternative financial solutions in a timely manner, well in advance of maturity (as required in law), with yet more being presented with little alternative to Bank reposessions ........and so it goes on.

All I ask is that posters retain an open mind to some of these uncomfortable realities, but at the end of the day we each have our own perceptions about the property market and how the Banks continue to play their part in this scenario, and draw our own conclusions.

I for one think the Banks have a lot to answer for, but of course I take your point about individual responsibility.

Each to their own.

Ads, thanks for your detailed reply (and slightly shorter sentences). It only took me three readings to fully take it all in this time! Where you are "keen to comprehend the realities from a wider perspective", I am merely "curious", but I think perhaps both mean the same thing more or less, and I happen to agree with most of what you're saying, so we're probably on much the same page. I do have a couple of points I'd like to make though.

That the "facts are often hidden sadly under highly complex structures and abusive tactics" and that "this is a highly complex scenario" may be true of the wider subject, but in the context of the OP I'm not so sure - I have a feeling that Duncan, Baz & Brian are probably closer to the mark. The investment vehicles used to disguise what was really going on may have been highly complex & sophisticated, but the basic problem of borrowing money to buy things you can't afford (and don't need), without really giving much thought to how you're going to repay the loan, isn't so hard to grasp.

Banks may well "have failed to register their repossessions..and financially compromised communities", but that's hardly relevant in this particular case - the OP's lender hasn't actually repossessed the property (yet). As for flooding the judicial system with appeals, bogging the system down - even with their undoubted influence & resources, I seriously doubt that the banks could really do much to make the Spanish justice system move any slower than it already does. No argument about the lack of adequate regulation, lack of ethics, collusion with developers & agents, corruption, failure to properly advise customers etc. etc - in short "banking failures" - but this is all old news now. It's almost 10 years since the proverbial hit the fan, so unless one has been living on another planet (or cloud cuckoo land), it's surely impossible to not be aware of the situation that arose as a result of all the above, and make some sort of contingency plans?

I remember back around about 2003, going to my bank to ask for a banker's draft to pay for a studio apartment I was buying. The manager tried, with all the charm he could muster, to persuade me to take a mortgage instead of using my own funds. I suggested that he must think I'm nuts, to which I distinctly remember him grinning, shrugging his shoulders, and with a slightly bashful look saying, "well, at least I tried, right?" I had no crystal ball; like everybody else, I had no idea of the pending catastrophe, but there was nevertheless a sense of self preservation that prevented me falling for his patter. 

To paraphrase: I for one think individuals have a lot to answer for, but of course I take your point about the banks' responsibility.

I don't see this case as so much the banks fault, the company in question ran seminars where you turned up, seems after you pay a fee,  gave you it also seems a detailed report on how to make money out of property, buying it, renting it, or selling it on after it's increased in value.

 Looks like they would lend money to a corpse providing you brought it along, pretty much like a Car Finance Company years ago...IE...If you were standing up and breathing you got the car and loan, you really don't want to know how much you paid back though, these schemes seem to be set up for people who cannot get finance anywhere else.

Believe the spill they tell you, get the money, buy the house, pay next to nothing back, hope in the long term, say 10 years the house price rises, come judgement day the original house price and loan has to be paid back if in the meantime the buyer didn't pay any of the capital back....In steps the bank probably because of some sort of banking laws, who want the loan paid back because they had to cough up the money.

The buyer had a house which they paid hardly anything back on, they believed the price would rise because this crooked company told them so, they believed they could rent it out...Like the many other thousands did also.

This company ran these seminars in the UK and many a wise person fell for them...And lost out big time.

All this is down to people with brains, how is it the banks fault?

Good to know in the main that we are on the same page so to speak Roberto.

Where you make mention of "old news"perhaps it's worth mentioning the delayed impact on mortgagees as maturity nears and  the need to remain aware via this ongoing educative process of options available, depending on individual circumstance, and the fact that Supreme Court rulings are slowly making banks accountable for their malpractices and failures.

But here's where I wish that the legal fraternity would also seek to look at the impact they could make if they would consistently use reporting mechanisms to effect change and review of loopholes in the existing system to the benefit of all. But also for individuals to request that their legal representatives follow this through. Unfortunately those who continue to dismiss this as "unrealistic" do a disservice to structures intended to protect.

Baz,

Sadly you only have to look at the detail of rulings at the highest levels against the Banks to recognise the malpractices and failures to inform as required in law, to failures re illegal mortgage clauses, failures to regulate and non provision of bank guarantees, etc etc to comprehend the uncomfortable truths.

Yes ads, fully aware of how the banks are, certainly I am not a friend of them.

I have only posted what on the face of it is how it looks to me because like us all here we never get the 100% full picture, no doubt I could be well of the mark sadly though I am meeting quite a few people who are getting into much the same situation, looks like another growing problem for years to come.

Well, we've almost certainly collectively scared off the OP now, which is a shame since we'll probably never find out the"uncomfortable truth" now, but never mind, it's an interesting thread anyway.

Ads, where I said it's old news, you said the "delayed impact on mortgagees as maturity nears and  the need to remain aware via this ongoing educative process of options available", suggesting that because in many cases perhaps 10 years have passed since these borrowers took out loans, it's somehow understandable & acceptable to have forgotten, and that somehow absolves them from any personal responsibility. How would you feel if someone crashed into you, but said, I took my driving test 10 years ago, I've forgotten how to drive, nobody reminded me, so it's not my fault? The issues discussed here fortunately have not affected me but through the media & forums such as this, I am aware of them anyway, so how can anybody who is directly impacted not be? Same goes for unrentable "investment" property (I think the correct term in the investment world is "junk"): look back at many of my posts from the early days of EOS, and you'll find I consistently warned of the folly of buying on the kind of out-of-the-way urbanisations that these schemes typically promoted. Baz mentioned car finance - well we all know that's going to be the next "crunch" - don't we??? Again, no crystal ball here, just keeping up to date with the new news.

I'm no friend of the banks either, and I don't think any of us here think they're innocent. They are being called to account, but if it's taking longer in Spain than elsewhere, you have to be realistic and accept that Spain is different - it's one of the reasons we all love it, after all. But if you can't stand the heat, get out of the kitchen - or maybe don't go in in the first place, if you don't know what the heat is like.

This message was last edited by Roberto on 26/09/2017.

This message was last edited by Roberto on 26/09/2017.

This message was last edited by Roberto on 26/09/2017.

This message was last edited by Roberto on 26/09/2017.

Roberto I'm not sure the driving analogy is perhaps the right one.

I think the lenders and their agents were also gambling because, even if an uneducated person bought under the circumstances we are discussing, they have to service the loan for 10 years or so.

Then if the banks and agents have to step in, they also gamble the property is worth much more on repo and will sell in a short time.

so really, its backfired on both parties and it becomes a bit of a bun fight to come out of it with finances intact.  That's why I was saying (and I think Ads) that the paperwork and original arrangement has to be scrutinised to make sure it's fair, legally I mean, and it's going to be finished off equitably.  

I shall put my head above the parapet here, and hope it isn't shot off. Our situation is a little different, but there are similarities.

We purchased using a mortgage with a 10 year interest only period, 9.5 years ago (high LTV of 95%, should've listend to Smiley!!). The remaining 20 years is repayment. We bought from NSJ (think about it, them who can't be named!!), used our own finance (GE Money via Deutsche Bank) and our own solicitor. The idea was to buy the apartment as a starting block, with the intention of moving out to Spain when my Son left school and selling our house in the UK, then selling the apartment and buying something bigger for us all. We both had jobs lined up with our respective employers, so everything was hunky dory. However........  My Wife got a promotion at work which moved her to a part of the business where she had to be office bound for a majority of the time, so the move was put on hold. In the meantime the credit crunch hit and prices plummeted. We were/ are now in a situation where we couldn't give it away, let alone sell it. The repayment part of the mortgage kicks in in December and monthly payments will rocket. Yes, you could say we put out heads in the sand by hoping the market would improve. Yes, we should have put aside the money we were saving with low interest rates to be able to pay a lump sum off (our UK mortgage allows us to overpay, so when rates go down, or we re- mortgage to a fixed rate, we still pay the same amount but as an extra payment), but we didn't!! Instead we continued to hope the market would improve, as it has done in the UK and we would be able to sell with a minimum loss. We have however put aside 10k from beginning to overpay to an account of our own to help pay the extra payments. I don't think 10k will put a dent in the monthly repayments.

Our mortgage company has already said they will not offer re- mortgages as they want out of the market and have already transferred us to a new company they set up specifically for Spanish mortgage purchases.

I also spoke to Maria a couple of years ago about dacion, if that is what the OP was suggesting. However, the cost in leagal fees was about 5K€ at the time and I decided that money would be better put aside to pay off/ pay the mortgage in the future.

Mark

Loving Spain doesn't prevent you wanting the corrupt elements and malpractice reformed does it Roberto? Surely you're not suggesting you love those elements that have the potential to cause such devastating effects as losing your home or your life savings? 

It takes courage to tackle the Banks and make them accountable in this day and age....likewise its hard work to keep defending against the mindset that generalises and implies innocent people who placed their trust in a system with so called guarantees supposedly in place were to blame, or expect them to be wise PRIOR to the event that devastated people's lives ( not forgetting crises and subsequent knock on effects that affected  property prices to collapse were caused by Banks lack of regulation and compliance in the first place). 

All too many have sadly turned a blind eye to the corruption and malpractice across the real estate industry in Spain, and all too many have unwittingly accepted this as the norm " if you can't stand the heat then get out of the kitchen".

I would ask the question has this turning of blind eyes helped Spain, or is it those who during this last decade and beyond, have demonstrated great courage ( including some Spanish lawyers who dared to put their heads above the parapet, so to speak) and tackle this head on, I.e. tackle the indemic lack of ethical principles within the financial institutions, the real estate agents, the legal fraternity and developers ( still much to do however!)

I would argue that to turn one's back on abusive practice in all its many forms, or ignore loopholes in a system that " allows" abusive practice to thrive in this way, does great harm to Spain and it's wonderful people, from wherever it emanates.

Yes ads it's important to fight for your rights, even if it costs and even if people say you have no chance and laugh.   In the end it's the fighters who make the difference. 

Mark.   It's a bad situation your finding yourself in, but with 10k saved and the repayment mortgage kicking in in December you should be able to make a 'capital' repayment and reduce the principal sum?  

If you can make a personal loan here in the uk for some more money, you can again pay most or all the principal off and have a reduced percentage rate secured over here?  

Im assuming a flat/apartment before the credit crunch would be around 70k, for example, and you can settle the debt by paying it off.  

defending against the mindset that generalises and implies innocent people who placed their trust in a system with so called guarantees supposedly in place were to blame,

Ads where, and what, are the so called guarantees you speak of, not forgeting this post is about borrowing money with only a small amount of montly interest,  knowing the borrowed amount had to be paid back under the agreed loan term.

Baz,

I was referring to a mindset of people who suggested way back when that Banks would never be made accountable with regard to non provision of Bank Guarantees, to act as an  example of how Banks HAVE now been made accountable.  I seem to remember that these same people  suggested it was the fault of the "innocents" at that time.

In terms of the situation with regard to interest only mortgages however, if it can be demonstrated that the bank did not adhere to correct legal processes from the outset or during the ongoing term or at maturity then I wonder if these instances could be used to gain a better negotiating hand with the Bank ? No doubt a respected independent legal representative  could advise based upon the specific individual circumstance. But having said that, Supreme Court rulings would need to have been established to support such claims, for this to be considered a realistic way forward.

Briando's suggestion sounds an interesting alternative.

It really makes my blood boil when you consider that prices collapsing in this manner, which lies at the heart of this scenario, was brought about by the banking crisis and in part the lack of Banking regulation to control the issuance of such mortgage products without adequate financial appraisal ( constraints) and forewarning of the associated risks.

Mark.   It's a bad situation your finding yourself in, but with 10k saved and the repayment mortgage kicking in in December you should be able to make a 'capital' repayment and reduce the principal sum?  

If you can make a personal loan here in the uk for some more money, you can again pay most or all the principal off and have a reduced percentage rate secured over here?  

Im assuming a flat/apartment before the credit crunch would be around 70k, for example, and you can settle the debt by paying it off.  

It's not as bad as it could be Brian, at least we are "reasonably" prepared for the increase and have an idea what it will be costing (certainly nowhere near as much as the OP anyway!!). We have the options for the money saved, pay off some capital or use it towards motnhly payments. I am not sure 10k will go an awful long way as apartments before the credit crunch were about double your estimate (just under half your estimate now). We don't have enough collateral in the house over here to secure the funds, ironically it would have to be over a shorter period too as in the UK mortgages generally are to 65, our Spain mortgage is/ was 30 years.

We knew what we were getting into at the time, but didn't expect to still be there now. But hey, you live and learn .

Mark