Baz,

It's the fact that there are instances you describe of people unwilling ( or in many cases unknowing of the true risks involved with these products due to the lack of adequate assessment and forewarning mechanisms in place)  having to face the realistic longer term consequences, that you and others have rightly identified, exactly why you need sound and effective regulatory structures in place to curtail such products and where necessary control their issuance.

Especially when as recent history has identified, encouragement to use these financial products during periods of economic instability or within countries where  the justice system struggles to cope, or loopholes exist that are open to abuse etc, that problems have arisen in the first place. 

Perhaps the conclusion to this is to prove how good regulation within the real estate and financial sectors with Banks being made to demonstrate responsible behaviour, together with an effective functioning justice system are all interlinked and become essential prerequisites to curtail longer term problems. 

It does rather seem, Ads, that although you admit that there is an element of shared responsibility, you keep coming back to your "uncomfortable truths" and appear to want to lay the blame entirely at the banks' doors. Even the statement of the "BANKS FAILURES THAT LED TO PROPERTY VALUES COLLAPSING" is debatable: one could equally say that property values only "collapsed" because they had already artificially inflated, due to the enormous numbers of inexperienced speculators flooding the market. Sure, the banks aided and abetted by funding the boom, but they didn't exactly create it in isolation.

A few years from now, perhaps, many people who are buying brand new cars that they can't afford using financial products that they probably don't understand, will be bleating on about how they were tricked into borrowing money they shouldn't have. But it's already all over the press like a rash, so who will be to blame then? I could try using an anology again, but a simple proverb should probably suffice, as it has done since Biblical times - if you play with fire, your fingers will get burned. 

You can regulate industries to your heart's content, but history has shown that if individuals act irresponsibly, there'll always be someone waiting to take advantage of them. Sad but true. Perhaps we should try to regulate individuals' behaviour too? Perhaps personal finance should be part of the national curriculum?

I think where the misunderstanding is arising is that I refer to the worldwide banking crisis caused by Banks lack of regulatory stuctures to control the prevelance of doubtful products that have already demonstrated the potential to cause immense damage to economies, but beyond that the need for country's banks ( Bank of England, Bank of Spain etc) to demonstrate sufficient responsibility via their regulatory structures to effectively monitor and take swift action against abuse and malpractice ( demanding compliance via enforcement measures) but also control the use of products such as interest only mortgages that in times of economic instability, if not properly administered and controlled, can lead to the proliferation of reposessions and citizen financial hardship.

Totally with you ads!

I think Roberto is correct. The OPs seem to be suffering from long term mental illness.

I agree the financial institutes and those who are supposed to control them are deceitful and corrupt due to self interest, but not guilty in this particular case.

I give up! I ran out of breath around about "potential to cause immense damage". Ads, are / were you a politician?! How is it possible to use so many words in one sentence?

Ha ha!!!!

I am no politician and want them to be made more accountable for their false promises too!

We all have a role to play in making our world a better place and understand these horrible complex products that all too often are not fully understood ( or have hidden clauses).

By the way, thanks Maria for your support. 

Forgive me for trying to simpify things guys!

I said earlier the issue of the OP and others is made up of the greed and salesmanship (or conmanship!!) of the first two parties, but then supported by the offer to lend by the bank.

I am just saying the bank, being the last in the process and facilitating the whole 'deal' have the power to make these purchases possible and must do so in accordance with the law and have to be regulated accordingly.

The greed and salesmanship are age old problems which come and go with the ages, these factors have to be in place for the lender to become involved.  All three 'symptoms' are involved in catching a cold, if you can nail down the conman, your well on the way to stopping the other two acting improper.

How about stopping interest-only mortgages as a start point?

Don't they in essence encourage unrealistic debt and increase the risks given the current economic climate and growing unpredictability of future house values, interest rates, inflation, etc. Where's the sense in that?

Either that, or regulate the Banks to issue comparable statements prior to issuance (and annual statements thereafter), with compulsory provision of other fully itemised alternative mortgage options (standard repayment) to demonstrate the longer term value of more consumer-orientated less risky products?

The intention being to provide far more transparency, FULLY itemised in terms of accrued interest at varying points in the term, with sufficient comparable detail (in an easy to understand format I hasten to add), to provide the mortgagee with enough information to make a far more informed/educated choice.

Surely there must be a better way than the current system which almost encourages "head in sand" mentatlity on the part of the interest-only mortgagee, and abusive greedy mentality on the part of the financial provider or agent who may have little interest in ethical considerations or the impact on the wider economy.

Great idea ads, perhaps when you become Governor of the Bank of Spain. Send of your CV now.

What makes you all think that the original poster ..has not lived in the property for the last 10 years at €122 per month ...why else would they be worried about the bank repossession taking place now ...if they did live in it themselves they would only be doing what thousands of people are doing all over Spain.. Just like the stupid people next door to me done ...they bought on interest only for 10 years in the hope that the property would rise in value ...to cover the short fall  I know of several case's that has involved bank repossession and it involved interest only mortgages.

Ads

Surely there must be a better way than the current system which almost encourages "head in sand" mentatlity on the part of the interest-only mortgagee, and abusive greedy mentality on the part of the financial provider or agent who may have little interest in ethical considerations or the impact on the wider economy.

Isn’t the head in sand mentality just typical of Spain? Where banks are more immoral than almost anywhere else.

Exactly why Windtaker we need to closely examine the reasons and background circumstances from a far wider perspective, to comprehend ALL the factors that  have led to repossessions in Spain and the proliferation of such a risky product that appears to have contributed to such a dire outcome.  

But we all need to do so with open minds and a willingness to strive for effective solutions that will benefit and better protect all in the longer term.

To point fingers without reviewing the whole, or  be tempted to make generalised assumptions does not solve the problem.

We need to debate various options on forums such as EOS ( preferably without personalising 😉) and try to persuade those in Spain who demonstrate equal concern to be as proactive as possible.

Hence my plea to the legal fraternity to use the reporting mechanisms in place to protect and endeavour to effect reform with greater accountability of the powerful financial institutions in that process.

Hugh, 

Just seen your post and  I can relate to your observations, but we have to have faith in those with sincere intent and intellectual capacity, to improve the status quo. Those from within who are also striving for well overdue change.

Sadly these things take time but given sufficient momentum and comprehension and BELIEF in their ability to gain reform, I still retain hope. 

Interest only mortgages became a good product when the mortgagee invested in a product that could perform better than the interest they paid to the bank.   The bank used to insist an investment was in place to protect their investment and payment term.  

It went pear shaped when the same financial institutions sold very dodgy endowments.    

Since then the interest only mortgage is hijacked by landlords who have enough capital to buy a portion of a house.  

When exactly did a house become such a disrespected commodity?    Funny old game innit.  

The same thing appears to have happened with car purchase financing in the UK with the prevalence of PCP loan schemes.

Whatever happened to the option to have a repayment scheme where purchasers were paying off their car loan each month, for a set term, as opposed to a scheme which encourages an accumulation of debt?

An informative article worth reading ( the Guardian June 2017) identifies some uncomfortable realities ( and similarities to interest only mortgages). Check it out as it's quote an eye opener.

https://www.theguardian.com/business/2017/jun/10/car-loans-personal-contract-plans-vehicle-financial-crisis-pcp

“the industry’s growing reliance on PCP has made it more vulnerable to macroeconomic downturns”......

“PCP car finance relies on the lenders’ ability to realise guaranteed future values, which can only happen in a strong used car market; but if hundreds of thousands of diesel drivers were to use consumer law to return their PCP-financed cars early – passing the early-termination losses back to the lenders – the cost would be so great that many finance companies wouldn’t be able to cope. It’s no exaggeration to speculate whether this could become the next financial crisis,”

Sound similar?
 

Yes it does sound familiar Ads.   

The strange thing is though, if you buy a car on pcp the manufacturer gives you extra discount as a contribution and if you then pay the loan up within 14 days cooling off, you only pay peanut interest for a few days but keep the extra discount/contribution of the manufacturer.   

Every cloud as they say!!

Spanish financial institutions could be a little more flexible in the administration of the products they offer. Overpaying a UK mortgage with no penalty has been a thing for the last 20 years or so. Spanish lenders seem to shy away from from this, and making a large payment seems to have red tape involved at all levels (I believe it is a change of terms, therefore must be notarised, or have I been lead up the garden path?). As interest rates decreased, it would have been easier for us to keep paying the same amount to the lender, with the overpayment being used to decrease the capital, but my lender wouldn't hear of us doing such a thing. We therefore (stupidly) allocated it elsewhere and that overpayment is not now readily available. Our situation is maybe different from the OP's because we have purchased a 30 year mortgage with 10 year interest only, so the repayments were outlined at the outset. That said, the lender is now "trying" to be a bit more flexible in their repayment structure as they now allow payments in excess of 5000€ to be made with no penalty. 

Also had a recent valuation from a local (reliable) agent we know and have been friends with for many years, and although prices are rising, we are still in negative equity of around 50% of purchase price, a lot less in reality if we want to sell.

I know we made mistakes in the purchase process and I know our circumstances have changed, I don't blame anyone except me. That said, it doesn't make me stupid, greedy, ignorant or any of the terms that have been bandied around about people in similar situations. Wishful thinking maybe? Every situation is different, similar maybe, but different.

Mark.

Good point Markfish with regard to the benefits of more flexible mortgage arrangements. 

Where you observed the following, I wonder is this the norm with Banks in Spain?

" As interest rates decreased, it would have been easier for us to keep paying the same amount to the lender, with the overpayment being used to decrease the capital, but my lender wouldn't hear of us doing such a thing."

Seems very short sighted not to allow this option given the increase in repossessions.

For those struggling with interest-only mortgages or under the threat from repossessions can I suggest that you see the thread titled

"Steps for Claims on Floor Clauses in Mortgage contracts" https://www.eyeonspain.com/forums/posts-long-22680.aspx

as there's some great practical advice being given re claiming refunds and re-negotiating options with the Banks.

Good luck to all.

Going deeper into this matter of sale of mortgage contracts to  vulture funds:

An action by which you

(1) ask the nullity of the clause by which you renounced to notification of the sale/cession,together with other abusive clauses ( floor clause, expenses, anticipated maturity...) and

(2) request information on  the value your mortgage loan contract was sold for for the sake of exercising your legitimate rights to re-purchase of that debt is possible.

In many ocassions sale price is even  lower than  5% of the amount it was lended to you.

Contact us if you need more info on this