2019 is set to be a difficult year for Spanish property owners who are not up to date with their Spanish mortages. The banks there have started to offload their non performing loans to debt collectors who will invariably start to chase up these loans. We have seen an increase in debt recovery activities against people who are not up to date with their mortgages in Spain.
If you have a Spanish mortgage and are not up to date with your mortgage payments for whatever reason then you may have already received letters informing you that your debt to the bank has been sold to another company. If you have not yet received this then be prepared for this to happen. Bankia, CaixaBank and Banco Sabadell / Solvia have all agreed to sell their non performing real estate loans to other companies who will, in turn, have the legal right come after you for the amounts due. Mortgages that are up to date with their payments are unaffected and have not been sold on.
Why is this happening?
During the boom times Spanish Banks lent huge amounts of money to purchasers of properties in Spain, many of whom were foreigners
investing in second homes. When the financial crisis came along many people were not able to pay their monthly outgoings and, unsurprisingly, they concentrated on paying the mortgage of the property that they lived in rather than their holiday home. As such many of the mortgages went unpaid. This caused a huge problem for the Spanish Banks who were, in turn, under pressure from the Bank Of Spain to reduce down the amount of non-performing loans.
What is a non-performing loan?
Put simply a non-performing loan is one in which the borrower is not paying back what they should do (i.e. there is arrears on the account). If you are not up to date with your mortgage payments and are either not paying enough or have stopped paying then you, or more accurately the Bank, has a non-performing loan.
Can the bank sell the debt without my permission?
In all probability your mortgage will have a clause in it which allows the bank to sell their rights to another company without needing your authority to do so. When your debt is sold the new company steps into the shoes of your original bank and you then owe the money to that new company.
What does the sale of the debts mean for you?
When your bank sells the debt they manage to recover some of the money owed to them and get rid of a problem even though they have to take a loss. The company that buys the debt will buy it at a fraction of the total debt due. They do so because they will then try and recover that debt and hopefully recover more than they paid for the debt – thus giving them a profit. The company that purchased the debt is therefore likely to aggressively pursue the amount due. In fact, they are likely to call the whole loan in as your mortagge probably has a clause which allows them to do this in certain circumstances. They can do this by repossessing the property from you and, if there is still a balance due to you, coming after you for any difference.
Can they come after you in the UK?
Yes they can, and they do. Do not assume that a company that is owed money by you will limit it’s operations to Spain. They are perfectly entitled to chase you wherever you and your assets are, which means that if you have property and assets in the UK they can come after you in the UK. Brexit will make no difference to that position even though it may make te process slightly more cumbersome.
What should you do about this if it happens to you?
If you receive news that your Spanish mortgage debt has been sold to another company do not panic - but equally do not ignore the news and bury your head in the sand. There may be options available to you which may prevent the company coming after your assets in the UK. Speak to a specialist lawyer who understands Spanish law to understand what your options are and what, if anything, can be done about the situation. Obviously your options will depend on how much the property is worth, how much you owe on the mortgage, what other assets you have and how much you can afford to pay to the company.
We have extensive of experience in dealing with banks and non performing loans in various countries and are currently helping a number of clients in Spain and Cyprus. If you owe money to a bank in these countries call us now to discuss what options are available to you.