decacion de pagos

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This topic contains 20 replies, has 6 voices, and was last updated by Profile photo of Anonymous Anonymous 7 years, 9 months ago.

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  • #54744
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    I understand the above can be a way out of people predicament. This where the borrower with the blessing of a notary forgoes his property. The mortgage is written off & if there is an equity the borrower loses this to the bank. Can any one please confirm & if they have been through this exercise and why instead of dropping in the keys in the letter box. Why people in financial trouble are not taking this solution.

    a) Are Banks willing and cooperative, if the borrower goes down this route ?.

    b) Where the borrower indicate that he/she wishes to go down this route, & prior to this, will the bank be able to
    (i ) turn the mortgage into interest only say for two years.
    (ii) suspends payments if there is adequate equity.

    c) Who should the mortgage holder approach the Bank manager or is there a specific department in their head office.

    d) I also believe this can only be done if the mortgage holder is not in arrears. Can some please confirm.

  • #90228
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    Shakeel, I posted this link before (from another forum) http://britishexpats.com/forum/showthread.php?p=7204002
    where in post #28 someone has done it, and they were in arrears at the time.
    I think that most people’s problem is lack of equity at the moment plus I don’t think that this course of action is widely known about and is certainly not being actively suggested by lenders to their borrowers.

  • #90230
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    Thanks hillybilly, I do recall reading something on the lines. I don’t know how to call such information/past posting on the forum. A kind of google search for the forum users. Have requested Mark a few times but no response. Cheers & a happy Valentines day.

  • #90243
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    In Spain, and other European countries, one thing is the money you receive, the debt, and other the mortgage, the guarantee.

    If the value of the house is not enough to pay the debt, the Bank can also claim for the rest of properties of the borrower along the world.

    For that simple reason, to avoid that universal liability, it is very important the “dación en pago”, because in that document, the Bank accepts the house and cancel the whole debt officially.

  • #90244
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    Anonymous
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    This is more of a general reply or rant on the topic of trying to sort out mortgage problems and particularly negative equity situations.

    Firstly spanish banks have no sympathy to foreigner borrowers.

    Secondly spanish bank managers are not commercial and in negtive equity situations fail to see that any proposal being made is the best and only option.

    Thirdly it seems the branch manager has no authority to make a decision.

    Finally absolutely no sense of urgency.

    I could go on but …..

  • #90246
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    Thank you for the replies. My friend has equity of around 50%. He had never defaulted on any commitment that he had ever taken in his life.

    If the Banks adjusted their payments according to the Euribor & not waited for the anniversary of the mortgage. He would not be in the position that he finds himself.

    I agree that the Bank manager are not commercially minded. They are selected not for their commercial or banking competence. The are chosen from contacts & dare I say belonging to the Opus Die helped. It is for this reason that they don’t have any authority for decision making.

    With so many unsold properties & a few more added every Monday morning through keys left through their letter boxes. From what ever angle you look at it, commercial, demand & supply, social, etc it does not make sense for people like my friend to be repossessed.

  • #90250
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    But if you had a lower rate than the current one, would you accept the bank to rise it before the mortgage aniversary?

    Probably not, I’m sure. That explains the Banks attitude, it’s logical, and it is a written agreement, isn´t it?

    I have my mortage at 4,85%, since last december until 12/09.

  • #90253
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    Hi Legally,

    “But if you had a lower rate than the current one, would you accept the bank to rise it before the mortgage aniversary?”

    I see what you getting at & this not my point. My friend had the mortgage for seven years & have paid the high & the low as the market fluctuated in normal economic cycle. I however do not see to renew once a year is a equatable way to move forward as within one year peoples circumstances change. The application of rate should not be a lottery, based on the one day i.e. the annivesery or not for the remaining 364 days of the year.

    “Probably not, I’m sure.”

    See above

    “That explains the Banks attitude, it’s logical,”

    Its a Spanish logic. But its not commercial logic. If the bank & its customer can come to an agreement than why it should not be implemented. Let us not forget a mortgage is a 25 year contract/agreement during this period a lot can change with Bank & its customers. From your reasoning it seams that a customer property can be repossessed, when there is no real need for it apart from an agreement. This is typical Spanish dogma.

    ” and it is a written agreement, isn´t it? “
    Again if the two parties agree than why cant a revised agreement be into place. Specially where the customer had honoured his part of the agreement for past seven year & only asking this situation to be looked at under the present unprecedented set of global circumstances.

    “I have my mortage at 4,85%, since last december until 12/09.”
    This seams to be a fixed rate up to a certain period. This a choice you made with your view on events. Your Bank had allocated the cost of such funds etc to come for the rates that you mention. My friends mortgage is variable, so this has little to do with it, as we not comparing like with like.

    My friend has an option to raise the funds from his family, whose savings rates are around 0%. He can raise funds from them & pay them a higher rate that they were receiving. This action on his part will clear his mortgage in Spain. By taking this action, the Spanish Bank will lose a valuable customer in the current climate and future earnings from his mortgage account. Will the bank still be waving their agreement ???

  • #90257
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    “In yet more bad news for the Spanish economy, the central bank reported on Monday that the non-performing loans ratio had risen to 3.29 percent in December, the highest figure since May 1997 and four times the rate of 0.83 percent in December of 2007”.

    Of Course it does not say what is the increase say from November. I am assuming that its December 08 , implied here & not December 07. It does not say, what is the actual month on month increase, if it went up from 3.28% to 3.29%, this could be within tolerance level.

    However, if it went up from say 1.29 % to 3.29%, then this is very significant. I am sure if you point this out to the Central bank they will shrug, their shoulder & say pasa nada.

    Legally, to the above will be added many others by Spring, as expected by one of the Banks manager of a Spanish Bank. What good will be the agreement ?? Some of these people may have been in the same circumstances as my friend and could avoid being a contributor to the % of non performing loans. If the banks show flexibilty & not rigidly stick to the agreement.

  • #90258
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    No, I haven´t a fixed rate, I meant that I will have to pay that rate until next revision. But the point of view of the banks is that if I were paying 2% and euribor were 4%, I wouldn´t accept to get my rate increased and would claim for my contract to be honoured.
    Of course now, I would prefer a lower rate, and I will try to negotiate a bit with my bank, but I recognize the facts.
    Sometimes may be we forget that the banks get the money for the loans from the savings of the people. A Bank is not a normal company.

  • #90259
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    “No, I haven´t a fixed rate, I meant that I will have to pay that rate until next revision.”

    OK.

    “Of course now, I would prefer a lower rate, and I will try to negotiate a bit with my bank, but I recognize the facts. “

    Yes, we have to recognise the facts & the realities. I am concerned here about the realities of the commercial world..

    “Sometimes may be we forget that the banks get the money for the loans from the savings of the people.”

    Yes, one of the sources of bank funds are deposits. The mix of such accounts, maturing in one month, three months etc. The are very few deposits that are for a year & they pay a much lower rates.

    The, reason I am mentioning the one year rate is to compare it with the one year mortgage anniversary. As you had worked for BOE, you will very well understand the matching of such funds lending short/borrowing long etc. The Banks make there money on spread.

    The banks also raise funds in the Money market local or International. no Bank can survive purely on depositors inflation or deflation.

    Incidentally, no Bank has been able to answer my question. Perhaps you can .

    1) If, one has a mortgage Euribor one month say 2% plus 1% spread on the mortgage. Does does it mean that the Bank will charge 3% at the end of the month in arrears or in advance and calculate the 1% spread with the ever changing monthly of the Eurobor rates?
    or

    2) As per example above the Bank would charge at the anniversary date and calculate what the interest should have been at the end of the month & any over or under payments from the customer would either reduce or increase the capital ???

    3) As in your example of interest rate your monthly instalments would based 4.85% & you will service your loans with the capital & interest at this rate until 12/09. However as the Euribor is lower, does this mean that in this instance your are actually over paying & as a result of your over ment by your next anniversary. Your capital will decrease ??

  • #90263
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    @shakeel wrote:

    I understand the above can be a way out of people predicament. This where the borrower with the blessing of a notary forgoes his property. The mortgage is written off & if there is an equity the borrower loses this to the bank. Can any one please confirm & if they have been through this exercise and why instead of dropping in the keys in the letter box. Why people in financial trouble are not taking this solution.

    People are taking this solution everyday. In fact we wrote an article in English explaining the Dación en Pago Procedure last November after we received a flood of queries on the matteron a thread we had replied to in the Eye on Spain website.

    @shakeel wrote:

    a) Are Banks willing and cooperative, if the borrower goes down this route ?.

    It is not up to the borrower to decide. The borrower can propose it to their lender and its up to them to accept it or turn it down. Normally if the property has enough equity the lender will accept it.

    @shakeel wrote:

    b) Where the borrower indicate that he/she wishes to go down this route, & prior to this, will the bank be able to
    (i ) turn the mortgage into interest only say for two years.
    (ii) suspends payments if there is adequate equity.

    Banks are not offering interest-only nowadays. At no time can a borrower stop servicing his mortgage repayments. The Spanish Government enacted a law last year to create a mortgage moratorium for struggling borrowers but zero borrowers have benefitted from it in Spain. So they did an amendment to it in view of its crass failure. Supposedly this moratorium will start as from the 1st of March 2009 for a period spanning three years. However the criteria that one must meet is strict and rules out almost 99% of non-residents. So it’s a legal measure really aimed for residents.

    @shakeel wrote:

    c) Who should the mortgage holder approach the Bank manager or is there a specific department in their head office.

    They just have to approach their lender. For example the branch manager. There is no specific department they just relay the petition. The risk department has to analyse the proposal (check that the numbers stack up).

    @shakeel wrote:

    d) I also believe this can only be done if the mortgage holder is not in arrears. Can some please confirm.

    Not necessarily. The dación en pago acceptance is unrelated strictly to the borrower being in arrears or not. It has to do more with there being enough equity in the property to follow this procedure. However, having said the afore, it is important that the borrower is not in arrears. The reason is that a lender can execute the Mortgage deed on there being arrears and initiate a repossession procedure. Please read our article on Bank Repossessions in Spain for more details. A bank will not accept a dación en pago if they’ve already initiated a repossession which is why it is higly advisable you are not in arrears with them.

    So strictly one can propose the dación en pago being already in arrears although in truth it is not advisable to wait to be in arrears to propose it, one should really do it prior to defaulting. If it’s foreseeable you are going to be unable to meet the monthly repayments and there is enough equity in the property then it is advisable you liaise with your lender and propose it to them.

    The legal steps to complete a Dación en Pago Procedure are:

    1.- The customer must be on time with payments (the repossession legal procedure must not have been initiated), with Community fees and local taxes.
    2.- You contact your lenders’ branch manager and propose it to them.
    3.- The borrower will be required to pay a new valuation (updated appraisal).
    4.-If on average 80% of the new valuation of the property cover (debits +13% of the debits like legal expenses) the lender will accept to take the possession of the apartment, cancelling your debits and will waive taking legal action in Spain and in the British courts.
    5.-The day of the signing the Deed at the Notary, the borrower will surrender the keys, and leave the property clear of furniture and tenants.

  • #90265
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    Definitively not, Shakeel, the financial costs are just that, costs.

    If you have to pay 4,85% and current market rates are 2,5% you are having an extra-cost, but of course your capital will not be reduced for that reason.

    Is the same if you have a bank deposit at one-year term, at 5,00%, if you have a contract, you will go on receiving that rate in despite of the market rate to be lower.

    By the way, congratulations to Lawbird for his accurate explanation about “dación en pago”.

  • #90267
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    Thank you Legally, we appreciate it.

    Kind regards,

    Raymundo Larraín Nesbitt

  • #90268
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    Anonymous
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    Legally:Thank you for your reply. So it seams that it can be possible that at the date of the anniversary say 01/01/09 the rate is 5%, during the year it goes down to say 2%, and at the next anniversary on the 01/01/10 the rate goes back to 5%. In this instance the borrower did not benefited at all. I agree on this principal the reverse could be true & buyer can gain.

    I, was brought up to think that banking was a very prudent profession. Ask Botin. From the above it seams more like lottery, the person pulling the balls from the air machine is Mr Trichet.

  • #90269
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    Anonymous
    Participant

    Thank you lawbird for your response. Keep up the good work on the forum& in the Courts.

  • #90270
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    Anonymous
    Participant

    Thank you for your kind words Shakeel, we appreciate it.

    Kind regards,

  • #90271
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    Anonymous
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    Credit, where credit is due.

  • #90272
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    @Lawbird wrote:

    1.- The customer must be on time with payments (the repossession legal procedure must not have been initiated), with Community fees and local taxes.
    2.- You contact your lenders’ branch manager and propose it to them.
    3.- The borrower will be required to pay a new valuation (updated appraisal).
    4.-If on average 80% of the new valuation of the property cover (debits +13% of the debits like legal expenses) the lender will accept to take the possession of the apartment, cancelling your debits and will waive taking legal action in Spain and in the British courts.
    5.-The day of the signing the Deed at the Notary, the borrower will surrender the keys, and leave the property clear of furniture and tenants.

    And those terms probably make the whole process useless. The buyer would be better off in selling the property on the open market.

    1) A new valuation today will be 20% below the peak prices in 2007

    2) The bank then reduce this by 33%…. Quote “If on average 80% of the new valuation of the property cover (debits +13% of the debits like legal expenses)”

    3) Only then if the value left if greater than the debt will the bank take possesion of the property.

    Apologies if I have misread. But using an example

    2007 purchase price —200k
    Valuation today —160k
    Less 33% for —123k

    So if the mortgage (including the 13% fees described above) is less than 123k the bank will take posession of the property for cancelling the mortgage.

    I would guess that at 123k the owner would have a very good chance of selling privately.

  • #90274
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    You’re right, that’s the mystery of economy.

    However, I believe that the citizens should expect our politicians to establish efficient controls worldwide to avoid the danger of “risk-oriented” bankers.

    That type of people always make just the other to lose, as unfortunately we are seeing nowadays.

  • #90275
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    JP1, This is Spain for you, anything that they develop/involve, which intended for the general public, will always have conditions that will make it in operative.

    When a person is giving up his/her home, for reasons of lack of finance or cash flow. Why should they will be burdened with more cost & paper work.

    This is another of Spanish way of superficially doing something but in reality not much is being done.

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