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Homebuyers trapped by Banks Swaps Strategy

It could be dozen of thousands of Spanish mortgage borrowers who have been affected by Swaps products commercialized by Spanish Banks between 2007 and 2009. So far, there are more than 4,000 already registered as affected, but only Banks know how many there are. La Caixa, Santander, Bankinter, Caixa Galicia and BBVA are the ones that most widely sold this product.
Spanish Banks have trapped thousand of their clients with Swaps that were commercialised as an insurance product against interest rate rises. In fact, the Swaps are a complex financial instrument (commonly known as Derivatives) that are now forcing clients who signed them, to pay between 2%-5% more of the money borrowed. In some cases, affected borrowers have been paying more than 600 Euros monthly on top of the mortgage, for three years -the agreement time life.
The problem is that clients signed contracts without being given the right information about the risks of the products and the cost of cancelation. So far there have been more than 60 court sentences against Banks because they did not follow good practice and mercantile law.
Banks planned to widely commercialize Swaps as interest rate insurance for mortgage borrowers in 2007, when the crisis was imminent and Banks were preparing themselves against an interest rate drop.
Mortgage borrowers and companies affected by the swaps are organizing and presenting collective demands to the Courts. It is going to be a long battle in Spain 2010-2011.
According to our experience, we highly recommend being very careful with the Spanish Banks and not to sign any document without checking it with an expert, beforehand.
Banks in Spain have a well-earned bad reputation. The main points to consider when dealing with Spanish Banks for mortgages are:
1) Do not sign any extra document linked to the mortgage.
2) Make sure you understand the cancellation cost properly -both total and partial cancellation. It usually varies from 0.5%-1% on top of the remainder of the mortgage.
3) Especially in this time of crisis, avoid any rate floor (“suelo”) clause on the interest to pay. Now, it is unlikely to be offered this clause since the Euribor start rising and there is already a sentence from the High Court that penalized two Banks because of the “floor clause”.
4) It is not a must to arrange the compulsory home insurance with the Bank… you can choose your own broker.
5) Make sure when you open the bank account contract, it is free to use. It does not the matter if they tell you it is free. They may not charge you during the first year for “mantenimiento” but later, they will charge you.
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