Bank Repossessions in Spain, Spanish Banks Taking Eviction Shortcuts

09 Aug 2012

Property in Spain

"A legal outrage." This is how some experts have described the new way chosen by some banks to evict owners who do not pay their mortgage, something which can takes months to achieve under the present system. The new strategy uses extrajudicial auctions at notary offices to recover the properties.

Banks find a "short cut" which allows them to buy foreclosed properties for 1 euro. The origins of this "black hole" lie in the deeds of sale and is being used more frequently for Spanish bank repossessions

It is a procedure which appears in most deeds of sale, but which has barely been used up until now. This procedure does not require the intervention of a judge and, if after two auctions for 100% and 75% of the debt, there are no bidders the banks can take back the property for only one euro, according to The Platform of Those Affected by a Mortgage (PAH).

This method has been used in only a tiny percentage of foreclosure proceedings. However, some banks have dramatically increased their use of this procedure.

"It seems that banks are not satisfied with a mortgage foreclosure procedure that allows properties to be auctioned for 60% of their assessed value while the defaulting owner and their family are ruthlessly evicted. Instead, they are becoming ever-more greedy, and some have decided to take advantage of the extrajudicial auction, which is a procedure which is even more perverse, if that is possible, than the judicial auction: it is quicker (it can be completed in three months); it leaves the affected parties completely defenceless (since it is not a judicial process, but one that is performed through a notary, they are not entitled to legal aid) and; the worst part of all is that the procedure is completed after 3 auctions. This means that if there are no bidders at the first two auctions the bank can buy the property back at a starting price of 1 euro, while the defaulting owner and their family are burdened with trying to repay the whole mortgage debt for the rest of their lives."

As one would expect bank repossessions in Spain created this way is causing quite a storm and the question is will the authorities act to protect it's own people.

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