It has been a good week in the struggle against abusive practices employed by banks and financial services in Spain with two landmark judgments that benefit the consumer.
Now the Platform for the Defence of the Consumers with Mortgages is taking a recent non binding decision, (that of a Court in Navarro which ruled that by returning the keys the borrower settles the complete mortgage debt), to the Congress with a view to making it law.
The move is supported by the Left Coalition and various small parties but opposed by the PSOE and the PP.
The floor on mortgage interest rates, a “widespread practice” according to the Platform which could affect up to 24,000 mortgages, was also declared “abusive and illegal” this month. This decision by a superior court is binding unlike the ruling that a property may constitute final settlement of the mortgage debt which has been described by critics as “a moral judgment” and an “emotional decision”.
The Platform defend the judge’s decision saying “We all know how during the boom years the financial institutions were eager to inflate the value of our properties to lend us more money. Now they sell the property off at 50% the value, which they estimated in the first place, and pursue the borrower for the other 50%.”
Under the current Spanish law lenders may auction the mortgaged property at an estimated 50% of all loans secured on it and then may pursue the borrower for accumulated interest, costs and the remainder of the debt. The law is similar in the UK but in the United States the “dación”, the exchange of a property as final settlement of the debit, has been law since the domestic mortgage threw the property market into disarray.
As the unemployment figures continue to rise more families in Spain face the prospect of their home being repossessed. Repossessions increased nationally in 2010 by 8% with 71,187 cases. In the last three years this figure has increased to 222,000, with some estimates putting it as high as 350,000. The immediate future of the Euribor is that it is on the rise after years in freefall and now stands at 1.55%. Predictions are of a slow rise throughout the year. So is the future all doom and gloom for mortgage holders? Maybe not!
The Platform for the Defence of the Consumers with Mortgages has powerful allies in the world of the judiciary with Jose Maria Fernandez Seijo, member of the association Judge for Democracy declaring: “It is not fair that citizens pay for the consequences of the property “bubble” when the banks, for the greater part, are those responsible.”
The motion by the Platform will go before Congress on June 16, 2011.
