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First keys hand over to a bank in Spain to get rid off mortgage


By Andrés Díez Bronzini, Lawyer

CASE: A Spanish bank, BBVA, granted a mortgage loan to a homeowner in Spain of approximately € 71,000. At the time the bank granted the mortgage loan, BBVA itself valued the real estate property on which it issued the mortgage loan at approximately € 76,000.

Since the borrower did not pay back the mortgage loan, the Spanish bank BBVA applied for the court auction where it acquired the mortgaged real estate property for approximately € 43,000.

Following normal Spanish legal procedures, the bank applied for seizing additional assets of the mortgage lender amounting to approximately 28,000 €uro in order to recover the whole 71,000 €uro it had lent to the mortgage lender.

The bank argued that since the market value of the real estate property  had plummeted the property´s updated value was only € 43,000 (the price it had paid in the court auction for the mortgaged real estate property) whereas the mortgage loan amounted to approximately € 71,000.

In an absolutely isolated and exceptional court ruling in Navarra (Spain) which does not constitute law of precedent, the Provincial Court of Navarra (Audiencia Provincial de Navarra) ruled that BBVA was not entitled to seize additional assets for recovering the mortgage loan. The Court ruled that by acquiring the mortgaged real estate property in the auction, the Spanish bank BBVA had already recovered the total amount of its mortgage loan.

The Court of Navarra reasoned that the value of the mortgaged real estate property which the Spanish bank BBVA acquired in the court auction was € 76,000. That was the value that the bank had assigned to the property when it granted the mortgage loan. No lower value had been proved.

The Court adds that the statement of the Spanish bank saying that the market value of the real estate property has fallen, is morally not acceptable. The Court reasons that the fall of the market price of the real estate property has been caused by the global financial system of which the BBVA is part of.

BBVA is allowed to seize additional assets exclusively regarding interests and costs, but not regarding the mortgage loan.

One thought on “First keys hand over to a bank in Spain to get rid off mortgage

  1. The Spanish Brick Post author

    Andres, thanks for the article. It has been a long row in Spain all the discussions whether to allow borrowers to repay the debt by handing over the property. Rules in Spain are quite restricted in this matter.

    To sign a mortgage with a bank has always meant to be “married” with the bank until you pay the last pence of the debt. In Spain, the mortgage framework in very restricted and the lending terms are fix from the first day to the end of the debt. Not like in the UK, where you can remortgage every two years.

    In this times of crisis, lenders assosiations and politic parties (ie. CiU) have claimed for a new legal frame work in order to allow borrowers to hand over the keys and walk away “in peace”.

    Two months ago, the Minister Blanco said that there is not way in which borrowers will be able to hand over the property inorder to repay the mortgage. This week, the Minister of Economy, Elena Salgado, has said after this first sentence in Navarra that the law needs some modifications. It is a rectification.

    This crisis is cornering banks and cajas at some points. But it is specially difficult for the home owners.

    We are from point of view that banks and Cajas should be flexible with clients in this times of crisis in order to maximise efforts and to keep walking through the tunnel until the crisis is over.

    Many families have invested so far a lot of money and hope when purchasing a home and the pressure of the debt is overwhelming them in such way that the relieve of getting rid off the mortgage is a temptation.

    The banks’ property portfolio will not be considerably enlarge if there are more cases like in Navarra, but finantial entities should be flexible with home owners that have reached the breaking point. It is just a matter of making the system work for both parts and keep the market alive.


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