Banks force property owners to pay for the devaluation of their properties
Although Spain’s mortgage market cannot be compared to that of the US where subprime mortgages caused the ruin of many banks, consumer organizations did complain that during the recent property boom banks in Spain were too relaxed in conceding mortgages. In fact they even suggested that some of the practices followed by banks were abusive. Now thousands of people who now find themselves unable to pay their mortgages could be forced not only to hand over the keys to their property but also be forced by banks to pay the difference between the value of their property when they bought it and its current value.
For example according to reports in the press today, one property owner who bought his flat three years ago in a suburb of Madrid borrowed 244,000 euros from the bank.
However last year he became unemployed and the bank repossessed his flat. He said that the bank said that it was intending to sell it at auction for 150,000 euros and that he was responsible for paying the difference in value (just under 100,000 euros).
In Spain the banks say that Spanish law is not the same as that for the US where handing over the keys to a property cancels a mortgage. A spokesperson speaking on behalf of banks said that in Spain a mortgage holder is responsible for paying for the difference in value.
A group of families from Barcelona have formed an association called Afectados por la Hipoteca, which reports these types of practices followed by the banks. Its spokesperson, Ada Colau, demands that the authorities force banks to renounce their part of the debt so that those affected can keep their property at the price of subsidised housing.
The chairman of the Asociación de Usuarios de Bancos, Cajas y Seguros (Adicae), Manuel Pardos, says that two years ago banks and building societies conceded mortgages for more than 80% of the value of the property in order to cover other costs. He said that then valuation was often inflated and now it is often undervalued. In fact, according to Adicae, 65% of financial institutions were conceding mortgages for 80% of the value of the property as little as one year ago.