Home repossessions Spanish style!

Repossession - Spanish style!

As the ongoing economic downturn continues to drag the worldwide property market lower and lower we are seeing more and more instances of homes being repossessed, banks threatening homeowners and negative equity. There is a thread in the expat forum.com entitled ”

Bank repossessing our home” which offers an insight into an all too familiar scene being experienced around the world.

The Spanish property market

Like any other property market around the world, Spanish property has fallen significantly in value over the last 12 to 18 months. Government budgets are being stretched to the limit, economies are turning downwards, unemployment is increasing and even though interest rates have also been slashed this has offered very little assistance to troubled homeowners.

While Spain is particularly attractive for investors from the UK and other parts of the world, we have an issue on the thread which covers a young family with children who have settled full-time in Spain and are now facing the daunting prospect of having their home repossessed. As suggested above, this is a situation which is becoming far too common around the world, despite assurances from many governments that systems will be changed to help those struggling to pay their mortgages, with nobody forced onto the streets.

Setting the scene in Spain

This particular family approached their mortgage provider last October and explained that they were having financial difficulties at which point the bank offered a three month mortgage payment holiday to allow them time to rebuild their financial status. However, economies around the world have fallen yet further over the last three months and the family in question are still having serious difficulty fulfilling their full mortgage obligations.

However, while many homeowners who are struggling to pay their mortgages often sit quiet and do nothing, even though this particular family have been proactive and advised their bank that they are still having trouble, their appeal appears to have fallen on deaf ears. While we are unaware of the exact mortgage payments required, they have offered to repay around €1000 a month for the foreseeable future to ensure they are at least paying something towards their outstanding debt.

Unfortunately, one issue which they appear to have brought up with their bank is what would happen if they literally posted the keys back to the bank and gave up their property for ever. While this is always an option for many people who are struggling to pay their mortgage, assuming they have somewhere else to go, it was maybe not a wise decision to have brought this up at such an early stage. This will alert the bank of a possible fire sale and added expense trying to obtain any outstanding funds from the mortgage holders.

Even though it was perhaps naive to suggest posting the keys back to the bank, it appears that after the three-month mortgage holiday period is up the bank is determined to stick to its rules and apply for repossession unless all outstanding mortgage payments are covered. Quite rightly, the family in question have raised the subject of governmental help which was promised by many authorities around the world.

What have governments promised?

As in the UK, where Gordon Brown has suggested that banks will not be as quick to repossess homes as they were in the past, the general understanding seems to be that this attitude has been replicated across Europe. At the end of the day, neither banks nor the authorities across the world would like to see a flood of properties being repossessed and literally thousands of people, if not millions as seen in the US, hauled onto the street.

The headlines in the financial press around the world suggest that assistance is at hand, both financial and practical, but experiences in the UK and from the looks of things in Spain would suggest that these plans are not working or not being adhered to by those in the “loop”.

Options open

In this particular instance, where children are involved, the homeowner should have more power in the eyes of the courts if they decide to take the issue further. There is a suggestion that the family in question should bring in Spanish social security services with the likelihood that any possible repossession could and should be at least delayed because of the involvement of children in the case. However, the situation is complicated somewhat by the fact this is a British family living in a foreign land that are maybe not totally aware of their rights and the systems in place in Spain.

The most obvious potential solution is to try and find new employment, with the assumption that income has been reduced because of employment problems, but as the worldwide recession continues, the chances of obtaining employment are diminishing by the day. There is an interesting suggestion regarding potential home work with childminding one particular option openly discussed. However, even childminding in your own home is a lot more difficult than it used to be with added red tape, costs and the fact that many families in Spain will be in the same situation and looking to reduce their costs if anything.

The outlook for home repossessions

Unfortunately, the number of repossessed homes around the world is set to increase sharply over the next 12 months despite various assurances by governments that action would be taken to protect homeowners. We have seen literally trillions upon trillions of dollars of value wiped off the worldwide property market and while mortgage providers would prefer not to take on board any more properties through the repossession process, they too have obligations to their shareholders and their liquidity levels.

In many ways governments around the world are “robbing Peter to pay Paul” in that taxpayers are expected to fund massive rescue packages at a time when the vast majority of taxpayers have seen their own incomes reduced and are struggling to make ends meet. There is no doubt that something needs to be done in the short to medium term but in this particular instance it looks as though the attitude of Spanish banks is not conducive to help in this particular case.

Conclusion

This particular situation, which involves a family with children, is heartbreaking to read but worryingly is becoming more and more common around the world. Big businesses may have overextended their finances in the boom times but it is the honest consumer who is now beeing forced to pay the price as property values collapse and employment prospects trend downwards. The declaration by various governments around the world that assistance will be given to those in trouble appears to ring hollow at this very moment in time with more and more repossessions in the pipeline and very little sign of a slowdown in the rate.

Related posts:

1. Spanish Residency Paperwork And The Consequences
2. How long will the Spanish recession last?
3. Moving back home
4. Expats cut back on luxuries due to global economic downturn but most have no plans to return home, survey shows
5. British expats hit hard by falling Pound with millions considering a return home

Tagged as: home repossession, Spain