Bank repossessions in Spain
After the last article on Costa del Sol bank repossessions I received an enquiry about how bank repossessions work in Spain compared to the UK as he was having trouble with his repayments. So please find below the stages that you expect should you (god forbid) have to deal with in the case of non-payments.
Arrears
The first stage would be arrears, where the borrower is unable to meet payments. The mortgage provider will be in contact asking for an explanation and start charging you a variety of penalties. The lender may also attempt to renegotiate the existing agreement.
IMPORTANT NOTE: If the borrower is are having difficulty meeting repayments, contact you mortgage lender prior to arrears as they may be willing to discuss renegotiating you agreement, off-setting payments, etc… as it is not in the banks interest to repossess your property.
90 days later
90 days after the first arrear, the debt collection department will attempt to recover the defaulted debt.
Up to 30 days after default
The borrower will receive a certified document from the lender informing you of repossession proceedings through the courts.
Further 10 days later
Legal action will be started against the borrower for outstanding repayments and to auction the property to the public to reclaim all monies owed.
Up to 16 months later after legal action
The property is put on auction to be bid upon. If there is no purchaser, the property becomes the possession of the lender for 50% of the properties value.
If lender becomes the new owner, there may be additional monies owed to the lender as in most cases the mortgage will be higher than 50% of the value of the property. Plus the additional penalties for arrears, court costs, etc… there may also be an attempt to reclaim owed monies from any guarantor on the mortgage as well.
The land registry information is then updated to confirm the new owner.
6 months later.
Eviction notice. Court officers along with police and a locksmith will evict the borrower. Although if it is the borrower’s main residence and they have children, it is far next to impossible to have the borrower evicted. The debt would remain though.
Hope this gives you a better idea of how bank repossessions work in Spain. Please note I have kept the date relatively general as they are not clear cut
Regards
Andrew Belles
Hola Andrew
We met on the Spain Forum, like the blog and thanks for the information on re-possession. We have been worried about payments and have asked the bank (Santander/UCI) to reduce our payments back down to interest only so we can ride this year out without too much worry, our interest rates have risen and Santander have not made any mention to the interest rate reduction being passed down, we are due for a review in June.
We have made all our payments but were worried because we have clients who owe us considerable amounts of money and have not paid or are being slow to pay, so the choice of going to interest only while this year pans out is to protect ourselves and our houses, you can never count on people to pay, despite the promises they make!
We took a re-mortgage on the first home we bought in November 2007 so that we could purchase a second home (mortgage on 1st house was paid when we applied for re-mortgage), I think it was bad timing for us as the rental market is even slow, the plan was to have the house we re-mortgaged pay almost for itself, the credit crunch didn’t help there!
We have asked the bank and we are now waiting to hear back their decision by letter, we have been told it will take 1 month for this to arrive and I assume in the meantime the payments will stay high, can I also assume that our second home would also be put up for auction at 50% if re-possession should ever be on the cards, I imagine they can embargo other assets you have?
I will continue reading now
Simone
Hi Simone,
For what its worth when your review does come around in June you are probably going to see a large drop in your repayments.
Regarding your other assets, yes these could potentially be up for grabs, which I sure you don’t want to hear, but you need to be prepared.
Many banks are looking into ways to help mortgage holders as repossessed assets are not in their interest. They would rather have you keep on paying!
As maybe a final option, it might be worth shopping around and seeing whether you can move your mortgage to another bank. Although there are costs doing this, it might be worth it if the other lender can offer you better terms.
Andrew
Hola Andrew
Thanks for your reply and I don’t forsee us having a re-possession order but the payments are so high at the moment I guess we panicked!
As I say I have applied for a small reduction each month and hopefully they will say yes, there is no way in hell I am going to let anyone take what we have worked so bloody hard for over the years
The advice is great and gave me food for thought, as I said before we are not in arrears and have paid everything so far in full but we would like some help from the bank during 2009, to be on the safe side
I will keep on at them for a reduction each month
Simone
I have to say that I feel you are being very optimistic about how slow the banks reposses. I have seen them work far faster than you have indicated and indeed I am now receving details of no less than 500 CAM repsosessions per week!
If you feel you MAY have a problem then start dialogue with your bank/caja IMMEDIATELY and do not do what so many expats do and push their head in the sand.
Hi thisisspain.
Please note in several cases I said ‘up to’. Your property could go to action within a month. Or 5, 8 etc…
I think its also worth noting that the CAM bank (Caja Mediterráneo) were, in my opinion, qute reckless in regards to issuing mortgages.
In many cases giving the equivalent of 100%.
Even their repossessions are not interesting propositions in this market. A good example was a 3 bedroom, 1 bathroom 60m2 apartment for 149.000 euros in marbella.
Absolute spot on re the CAM – hand in hand with Atlas/MASA etc they have caused untold damage in many coastal areas. Some urbanisations are almost 100% expat and these people are on 100% mortgages, An accident waiting to happen.
Hi thisisspain,
And I’m willing to bet as most, if not all, who bought in Altas/Masa were purchasing on the Costa Blanca as pure investment. As soon as the market took a downturn, which started in 2006/7, the owners probably simply returned the keys and told CAM where to stick the property. As they had not invested a penny, no loss to the buyer.
Hi Andrew.
I have been reading the comments left by interested parties and i have a couple a questions for you. I have a mortgage on a Spanish property that is currently charging just under 7% ( Spanish Bank) which is very high based upon the current market rates.
I have found out that the rate is only reviewed Annually and it will not be reviewed until October 2009. I have researched other Banks and my own Bank RBS have a Euro mortgage product at 2.65% which is significantly less than I am paying. I have also found out that I can payoff my Spanish mortgage but have to pay a 1% premium which would be worth while. My question is:- i understand that there are significant charges when you take out a mortgage BUT can I re assign the mortgage or take a second mortgage and pay off 99% of the Spanish mortgage to enable me to reduce the overall monthly costs.
Thanks
Hi Malcolm,
I’m feeling a bit dense here, I’m not actually sure what you are asking me. Seems that your decision comes down to which we will you spend less. The best way to reduce you overall monthly cost would be to switch banks.
Why would you want to take out an additional mortgage to pay of 99% when you could simply switch banks. Either way the costs will be the same.
latest article
http://blog.arribaestates.com/2009/03/24/cajas-and-repossessed-property/
latest article
http://blog.arribaestates.com/2009/04/07/spanish-repossession-and-distressed-property/
I have just come across your website and found it full of very useful information that I know will be very helpful to many of my friends here in the San Roque/Alcaidesa area. Having lived here 22 years and witnessed the exceptional growth it is now almost a relief to have a pause in the construction. I will revisit the site often.
Thank you
Helena
Thank you very much Helena.
read and enjoy
Andrew
Hi Andrew/ThisIsSpain
I have to pick you up on two points you made in your post. Naturally I can only speak for MASA International, but less than 1% of our buyers took out mortgages over 80%. And the vast majority of our buyers were and are those looking to re locate or buy a holiday home for their own use. Around half those buying ‘holiday homes’ are seeking some sort of rental return but it is rarely the main motivation for purchase. We have never really geared our marketing towards the pure investor, preferring to stick to our roots of helping people to re locate or find holiday homes in Spain. I think your blog offers some very good advice and sorry to be so pedantic but I couldn’t let those comments go!
Regards
Paul
Hello Andrew,
We have a property in Otivar, Costa Tropical. We have been trying for 4 years to sell it with no joy (despite however much we reduce the price). Our financial situation has changed and our income has massively reduced. We can no longer make the repayments on the Solbank mortgage. This is a holiday home, we live in UK. If the property is repossessed, can the bank come and sieze our assets in UK (ie family home)?? There was no garauntor asigned to the property for the mortgage.
I would very much appreciate any advise that you may be able to offer.
Kind regards,
John Lucas
Excellent forum by the way!
Hello John,
I am sorry for your predicament. But for what it is worth, i do not believe they can/able to claim any foreign owned assets.
BUT, you need to talk to a fiscal advisor.
I would also really recommend that if you have a high-ish mortgage compared to the value of the property, go bank to the bank a push for a compromise. They don’t won´t your property, they want you to keep on paying them. If you bank managers is not helpful, go straight to the head office.
Best of luck
Andrew
hi andrew
i came to spain to buy a villa with my mum the company we had build are house (costamar) went a year over buil scedhule and my mum died 3 months before villa was finished, i was left with bills and not in good mental state and had to take out a morgage , i have a morgage with solbank campello and made payments for year and half then fell behind i have not paid morgage for 3 and half years they have not offered re morgage or loan or any solution only thing offered was the manager telling me to sell and sending people round to look at property none of witch has even made an offer , i have been told the villa will be put in auction in febuary, i am willing to come to an agreement and pay if the payment could be reduced but they wont even contemplate it is there any thing i can do ,if only to pospone things till i can sell, if not i will lose everything as i have no family and no wher to go . yours sincerly
trevor trinnaman
thanks lots, I have to say your website is amazing!
I feel I should say, I absolutely love your blog. Maybe you could let me know how I could keeping up to date with it.
Hi All,
I am hoping some of you knowledgable people will be able to give me a little advice.
My house has just been assesed for Dacion en Pago and the valuation has come through 23k short, of which the bank have asked me to pay if I want it to go through with this option.
I dont have that money and have no way of obtaining 23k and the bank now say they will proceed with repossession. I am very worried about this. I am aware of the procedure of a repo by the bank, i dont however fully know the implications upon me. I do not have any assets in the UK and the only asset I have here is the house they are taking.
Can anyone tell me that if the repo goes through and i am in dept to the bank for 10′s of 1000′s, what can the bank do to get that money from me?? Especially when i dont have anything to give them?
I appreciate any advice anyone can give.
Thanks
Hi Barrie,
first of all, sorry that you are in this situation, it must be very stressful.
If you follow through and hand back the keys on your Spanish property, and in this case there is negative equity, you will be chased for the remaining amount. Moving abroad will not protect you. Not only can they go after current assets, but also any future assets. Also please note they will go after you for the full costs of the repossession. Notary fees, costs if they cannot sell it, etc…. I am sorry to say it could come out higher than the initial 23k
The only suggestions I can offer are the following:
Approach other banks about switching your mortgage provider.
Contest the valuation. In this case it is in the interest of the bank to have a pessimistic evaluation. Maybe another valuation might come out more in your favour.
Hope this helps Barrie
EDIT: please see reply further below to clarify this post. Andrew
Hi Andrew,
Thank you for your reply, I do appreciate it.
My bank actually reviewed my exisiting mortgage last September and valued the house at €325,000.00. The same bank have valued the same house at €156,000, just short of 8 months later. I am unsure how they can justify such a de-valuation, especially when the house was valued last Sept in an already distressed environment.
Thanks
barrie
i have just read an artical about repossesion in spain and it took my bank 4 and haf years too get my house i could nt get any help even from day one from my bank and in the end it was me who signed the house over but it was a repossesion from the bank can anyone tell me how this happend
Hi trevor,
they actually started proceedings against you and it took 4.5 years?
Can I ask were you in negative equity when you signed the property over?