Bank / mortgage problems.

Happy New Year.

Been living near Malaga in Spain for 10 years, 8 of them in current house which we had built for us. Recently things have gone a bit pear shaped due to my wife's business going bankrupt. This has been compounded by the fact that we re-morgaged the house in order to obtain 200000 Euros to invest in the company last year. Earlier this year, we missed a couple of mortgage payments as a result of her redundancy and interest rate hikes. Once my wife started working again we resumed payments. We recently found out that the money we thought we were paying into our mortgage was in fact being used by the bank (Banco Pastor) to pay off some of the debt owed by my wife's former company. Both the company & our mortgage are with the same branch. To prevent this happening I withdrew cash and manually paid it directly into the mortgage account. This situation clearly could not go on, so my wife met the bank to discuss re negotiating the mortgage to include company debt etc. A couple of months went by (we were lead to believe that a favourable outcome would be reached) before anything was heard. During this time we stopped paying the mortgage. Finally they came back to us saying they could not do anything & demanded we pay the 18000 Euros that we owed them for missed (& re diverted payments) plus huge interest. Clearly, we will not be paying this and have told the manager so. He actually agrees with what we are doing & says he cannot do anything as it is in the hands of his bosses in Madrid. Luckily, what we owe on the house is still substantially less than the house's value.  We have attempted to sell our house, but not surprisingly had very little interest ( 5 bedroom villa on 7500m2 plot).

Sorry for long waffle, just wondered if anyone thought we are more likely to be repossessed or have the bank come round and re negotiate the mortgage with us ?

SAd to say my take on it is that you are more likely to be re-possessed, what has the bank got to lose, the more equity you have in the property the more likely you are to be re-possessed I think. I woudl suggest you write to the bank a formal letter making a formal offer (ensure you include the mortgage ref number and every other psosible ref nuymber you can) and give them 30 days to respond.  If no positive response go to the Ombudsman for your bank, if no joy there go to the Ombudsman for Basnco de España..........

I think spanish banks need to get real........our mortgage has gone up 50% in just 2 years, we have not benefitted from any Euribor drops, in fact our mortgage has gone up another 100 euros and they never write to let us know the payment will be changing either.........As a result with the exchange rate the way it is we can pay the mortgage only and nothing else..........and in fact Euribor is now lower than it was when we took the mortgage out.  If our bank would be willing to negotiate to the real Euribor rate we could afford both......at a pinch. But their attitude is inflexible to say the least.

Romeral Spanish banks have an attiude of zero tolerance when it comes to mortgage debt - despite what your branch manager tells you all banks here are entitled to increase the rate substantially if you default or miss payments and it is in the terms of the mortgage deed you signed. Please dont think me unsympathetic but I am simpl saying it as it is. Be extremely careful if they do start proceedings to possess - under Spanish law they are only required to sell the house for the outstanding debt - unlike the UK there is no duty of care to achieve the best possible market price - if you do have significant equity then it may be worth considering dropping the price in order to at least salvage something.

Jewel - rates have been steadily increasing since Nov 2005 but we have reached the end of the upward cycle and rates starting to come down - subject to your lender it sounds as if you have a product that has an annual review or perhaps 6 monthly - this means that on the 12 month or 6 month anniversary of your completion the new rate will be applied to your mortgage and monthly payments should reduce for the next 12 or 6 months. Clearly this was not explained to you at the time you took out the mortgage but then again it wont have been deliberately kept secret either - I can only assume you dealt direct with the bank - if you dealt with a broker then my view is they did not do their job very well if you are in the dark

Has anyone seen any numbers on mortgage defaults? With unemployment currently at 3 million and expected to hit 4 mil next year it's got to have a major effect on the housing market. From what I've read the main defaults are developers going bust but I haven't seen much on the average Spanard or Brit for that matter.

Smiley, we are up to date with our mortgage and have only twice been a a week or two late with the payment, nothing more (yet!).  We dealt direct with the bank, our mortgage is reviewed annually, but in November and the rates as at preceding September are applied, hence our mortgage has increased substantially.  I don´t know why it is done like this.

My big complaint is we have NEVER been advised in advance of any mortgage change, not by letter or e-mail and in November I checked online this year and there was nothing, just the same payment as before, then in December it had gone up 110 euros, with no prior information whatsoever.  With the exchange rate drop this is now unmanageable for us.  I was working before and that took heat out of situation but now I am working but have no regular income coming in........and that is causing us huge problems.  If the bank would reduce our mortgage to the actual Euribor plus whatever their % is we could afford it easily..........

Also, as we were given the option, we specifically said we needed a mortgage payment date after the 10th of each month to allow time for funds to arrive from the UK, instead they gave us the 5th, refuse to move it or allow any leeway so if our money is late arriving we are late in paying all or some of the mortgage.

There is just no flexibility whatsoever even thought for many people this is not a situation of their making.

Hi Jewel as I said to Romeral zero tolerance is zero tolerance ( a week or two late is in the eyes of the Spanish an uncomfortable situation for them). When rates are reviewed in Spain the system takes one (or in your particular case two months for the prevailing rate to be applied to the system). The lender will probably argue that you had the benefit of a better rate being applied to the mortgage at the start of the loan than perhaps you might have had. On my own particular mortgage the interest charge is a variable monthly rate - and the rate I am charged for this month is the monthly rate applicable last month. I am afraid it is the luck of the draw. 

If you have issues with your lender about notification then you should take it up with the bank and confirm they have the correct mailing details for you. Under law they are obliged to send you a monthly mortgage payment slip which contains extensive data about your mortgage. Most lenders will send this to the UK on request - indeed some wont send it anywhere else if it is a non resident mortgage. I am aware that some people do not receive the monthly statements sent out to them - they are being produced but where they are being sent to you must take up with the bank. You can also register a complaint in their complaints book and there is an "ombudsman" you can address complaint to as well although I am not sure how they can be contacted - whether you will get a response or not I do not know but I am aware that breach of consumer law is taken very seriously in Spain.

If you have anything in writing regarding the mortgage payment date then you can also take issue with them under consumer law.

Playing devils advocate while the situation is not of your making (and believe me i do sympathise - I was in a similar situation in the UK in 1996 - thankfully I had an income protection plan) nor is it a situation of your lenders making. You should understand that the Spanish have a wholly different attitude to debt - borrowers here will live on bread and water rather than miss or be late with a mortgage payment. That is their culture and you have to remember that it is Spain where you have borrowed the money so you have to respect their ethos even if you feel you are being treated unfairly. In the UK there are all sorts of "health" warnings - payments may go up etc ..... the same applies here although they do not give you the warnings - there is not so much of a nanny state here and they think it logical people will know payments will go up in the event of an increase in rates.

Finally, one of the reasons lenders here are so cautious is that they are all answerable to the Bank of Spain which is still considered lender of last resort, especially where mortgages are concerned. Essentially it is tantamount to you borrowing the Bank of Spains money - whether it is branded Banco de Andalucia or whatever. Until 2 years ago if a borrower went three months or more into arrears the lender was required to place on deposit 20% of the outstanding mortgage balance with the BOS (without receiving interest). There was a massive amendment to this 2 years ago when the BOS decided to increase the necessary deposit to 100% of outstanding balance. Hence lenders have become very much more cautious (to be honest they werent keen on the 20% so you can imagine how enthused they are about the new provision requirement), this has resulted in them introducing stricter procedures for confirmation of income, loan to value, tighter "income multiples" and perhaps less patience if a borrower appears to be having problems. Some have simply decided it is not worth the risk of lending to non residents - UK borrowers particularly place higher priority on lifestyle than in reducing levels of debt (I am by no means referring to you, but they consider non residents as a generic rather than a specific customer). The Spanish see the well publicised figures for credit card debt etc in the UK as easily as anyone else so they will err on the side of caution. While the situation is not desirable if the bank has a number of clients in a similar situation to yourself they themselves will be worried about how much they are going to have to place as bad debt provision.

Please do not think I am condoning the banks attitude but you must remember you have borrowed money in their country to buy your holiday home so you have to abide by their rules. As a non resident of the UK it would be almost  impossible to borrow money on mortgage to buy property there. 8 years ago I had an approach from the PA of a Saudi Prince (of university age). He had an account with Coutts Bank - his father provided him with an allowance of £4,000,000 per annum. He wished to buy an apartment in London and wished to purchase on mortgage (despite the Arab attitude to the ethics of conventional mortgages). His father wanted him to learn respect for budgetary control (even in its own perspective). The plan was to buy at £2,000,000 and he wanted to borrow 50%. Nobody would even look at it based on the fact that he was non resident - we also offered a family guarantor with a great deal more wealth and income than the applicant. Eventually the only place the money could be borrowed was against a different collateral from his personal bankers - thus to all intents and purposes not a mortgage - he also ended up paying a higher rate than would have been charged on a mortgage at the time.

this subject is being discussed on several different threads, all the more reason to spend time here, but I'd add another reason that the Spanish will eat bread and water before defaulting is the fact many family members co-sign for each other, so if you default your parents brother sister lose their place,  From looking at many places I can also tell you that many Spanish own two places. Some bought with the intention of selling after completion of the second others as an investment property. How this all plays out with 3 and soon to be 4 million unemployed should prove to be interesting..

Agreed Rob many parents co sign with the kids - in fact the reason behind this is that the children dont meet requirements on income so need the parents/brother/sister to stand guarantor. Frequently it is the parents as they either rent themselves or have paid their own mortgage off - many Spanish adopt the ethos that it is better to have a shorter term mortgage (traditionally the maximum was 15 years anyway) thus by the time the children are thinking of buying their own place the parents have probably completed theirs. I believe it likely this will be the last generation to do this as most lenders offer longer term loans and it is more popular with the Spanish to opt for lower repayments and better lifestyle - they are becoming more consumerist as per the rest of Europe now they have products available to them that simply werent there 15 years ago. it has taken them time to adopt consumerism after such a long period of comparative austerity under Franco but they want it and they want it now - just like their Euro cousins. 

Agree that many city dwellers own more than one property - a place for working and a place for the summer and fiestas etc - many of them also own in other Hispanic countries as well - a great deal will depend on how they are affected financially as to how the mortgage market pans out - let us hope that we do not see wholesale repossessions as lenders will start imposing even more restrictive terms than they have already been restricted to - as you know yourself there are lenders that give a sharp intake of breath as soon as the word "borrow" is mentioned - with a market in freefall and default increases and repo increases they will start to reduce loan to value ratios and stricter criteria on income and interest rate increases (margin above Euribor). Hopefully we wont go back to the days of 50% max lending but if the former does happen it will inevitably lead to the latter.

Every silver lining (reducing prices owing to financial hardship etc) has a cloud (more restrictive lending practices). Cause and effect - otherwise known as chaos theory!!

Fingers crossed for all and sundry! 

We have a mortgage on our flat in Benalmadena. I am thinking of chucking the keys in to the Bank. Priority is to make sure my family is ok in the UK, not on a "luxury" item such as an overseas property. Reality is I can't afford to pay for Spain and am not going to jeopardise my family in trying anymore. Any loss i make will be bearable as was only equity in UK house prices, so paper loss (how I'm having to view it!).

Sorry if i am adding to the Brits letting the side down, but have managed as long as i can!

Bank Manager wasn't too happy with the prospect of me giving him the keys when i saw him October - shocked and flummoxed i think, as don't think many people present him with this option!!

Now this is a serious situation / stage, can anyone advise on the process if I was to walk away? Can i be got at in the UK by Banks / Lawyers etc? Am not fussed with being in trouble in Spain to be honest, just want rid of this.

Your help would be much apreciated.

Under provision 1175 and following of the Civil Code, you have got the right to pay your debt "in kind" ( give keys back to the Bank in your case), they need to justify if they did not accept it and you could challenge that opposition in Courts.

Of course, you have got every right to protect you and your family against banks´ voracity

Thank you for your swift response Maria. Understand the UK procedure, but unfortunately, not the Spanish one, so excuse me for pestering you a bit more (or anyone else..)

Is there anything i need to do apart from walk in with my keys and say "There you go".

Will the Banks' Lawyers start proceedings against us?

Will i be liable for any costs?

Can i be pursued in the UK for anything?

Will this affect me comign to Spain again?

Do i need legal representation at all?

Much appreciated.

You need to do it amicably through certified fax, as if they refused, you will have certified date of the handing moment.

I honestly recommend you to lok for good legal representation for that. Any good lawyer in Spain will be able to assist you with that.

Good luck!

Maria

Have answered one of the questions on the other thread - not sure the situation if you wanted to enter Spain again but perhaps Maria can clarify. If the mortgage is higher than the bank can sell the property for then in the eyes of the law it is a civil case (lets say for instance the debt is 50,000€ more than the property can be sold for), there is a system that exists in the eyes of the law here where a civil case can be made a criminal case if the individual concerned perpetrated the "crime" knowingly and there can be a criminal denouncement. Whether this is something that would apply in the event of handing the keys back on a property I dont know and you would need legal guidance as to whether that applies in this case. Certainly if it can be turned criminal then you would probably be advised to stay outside Spanish borders for the forseeable future.

Thanks for your help. May not have the op, but may change my name to Fiona and chance it. at customs. Have a small Adam's Apple and will practice my chat-up lines, so may get through!!!

Smile sweetly and wear your shortest skirt and you should be fine.

Dear Mikey123:

I forgot to answer your specific questions here:

Will the Banks' Lawyers start proceedings against us? I would advise you to be proactive and have them justifying if they refused, then I would start judicial procedures against the Bank.

Will i be liable for any costs?  It will depend on property valuation adn debt. Costs associated if they agreed are Notary fees and lawyers fees. Registry and Taxes will have to be paid by them.

Can i be pursued in the UK for anything?  You might, but... it will depend on the remainder amount and how worth it the Bank sees the procedure. I suspect that, at the end of the day, they prefer a house than a legal battle in the Uk. Have not heard of any of you being sued in the Uk for this reason so far. Anyone there?

Will this affect me comign to Spain again? Of course not. In the worst case scenario, you will be a debtor but not a criminal. Come on!

Do i need legal representation at all? I would advise you so.

Thanks Maria. Will have a chat with Catherine. If we don't win the Lottery, we may be in touch for help, as our Lawyers are about as much use as a chocolate teapot!

Hi all,

Apologies if this has been answered somewhere else.  It is a simple question, which Maria or Smiley should be able to help with.  Basically my mortgage is due for revision on 25th of this month, but when I inquired with the bank today they claim that the revision rate that they apparently use is the Euribor rate from 2 months previous, not the rate on that day as I was expecting.

Now the cynic in me has come to realise that the Spanish are tricksy blighters and I am wondering whether this is a swifly implemented tactic because the difference in the Euribor rate between November and now is about 2% or a couple of hundred euros a month. Bearing in mind that this rate is then fixed for the next 12 months, that is a big hit for banks to take. Ooooh they are clever!

I am in the process of scrutinising my original terms as I am convinced that this is, pardon my French, bull*%$t. Unless anyone who has a mortgage with CAM can confirm that this has always been the case? Just seems a bit convenient as the Euribor is nose diving.

If anyone can confirm that this is CAMs normal policy, please let me know as I am becoming sick and tired of being turned over by this country. I am even considering selling up at a loss, rather than plough any more of my hard earned cash into the place.

Very angry. Thanks in advance,

Ken.

 

This message was last edited by Kenny_B on 1/14/2009.

Our mortgage is with Caja Murcia on an annual review.

We completed in October 2007 & in our case the review takes place on the 1st November with the first new payment taken on 1st December.

The rate used is the euribor as at 1st September & this is detailed in our deeds.

Noreen

A great deal depends on when the mortgage deed was produced and the binding offer