HAND OVER THE KEYS OF YOUR REAL ESTATE PROPERTY TO YOUR BANK AND GET RID OFF YOUR SPANISH MORTGAGE LOAN ?
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.