Who signed for our mortgage?

My family and I were 'assigned' a mortgage from a developer when we bought off plan near Estepona.

Our original mortgage offer was for 129,000 euros which we increased to 138,000 euros to buy a furniture package for our apartment which we were told we had to buy as part of the deal. We have since noticed that our mortgage is actually for 180,000 euros. We DID NOT sign for this increased mortgage but think perhaps our solicitor who had power of attorney did. We have no paperwork pertaining to this bigger mortgage.

We are struggling to keep afloat with our payments and are chasing down evidence of us agreeing to this mortgage. Can a power of attorney solicitor agree a figure if it has not been approved by the owners and the owners be liable for this loan?

The owner of the mortgage company from where our original offer came is being investigated in the UK by the Financial Services Authority for the fraudulent sale of mortgages. If we have been mis sold a mortgage does this also give us any grounds to dispute the greater loan amount with which we seem saddled?

Dear Sir/Madam,

In short, yes, you will be held liable as he used a POA granted by yourselves.

Another matter being if you have recourse against your lawyer for not following your specific mandate/instructions. You must gather evidence.

Why do you mention 180,000€? Where do you get this figure from? Perhaps you are confusing it with the full mortgage responsibility.

Yours faithfully,

Hi
I'm sorry I don't quite understand...

The mortgage offer paperwork shows we were offered a mortgage of €138,000 and this is the figure we understood to be paying off over 15 years, this is the figure we understood out POA to be signing off. As we look at our mortgage statement it is clear that a mortgage was arranged for €180,000 WITHOUT our knowledge or approval and it is this figure we are paying off over 20 years. Both figure and year terms are different to those we have agreed to. Surely we cannot be held responsible for a solicitor who has not made us aware of a higher mortgage being arranged without our sign off going ahead without letting us knowing of the increase from €138,000 to €180,000.

We believe the developer/mortgage advisor (now being inspected for fraudulent mis-selling of mortgages) had the apartment revalued in order to remove the equity before we completed, which resulted in us BEING ALLOCATED (not offered and agreed to) a larger mortgage.

What do you mean by full mortgage responsibility?

Dear Sir/Madam,

Quote:

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Originally Posted by Unregistered

Surely we cannot be held responsible for a solicitor who has not made us aware of a higher mortgage being arranged without our sign off going ahead without letting us knowing of the increase from €138,000 to €180,000.

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Regrettably, as per my reply above, you will be held personally liable before your lender.

Another matter being, again as per my reply above, any recourse you may have against your solicitor for not having followed your mandate. Which will require you gathering evidence, as you yourself write.

Quote:

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Originally Posted by Unregistered

What do you mean by full mortgage responsibility?

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Besides the principal you must tag on the additional fees and expenses (legal interest added on top, delay interests, court related expenses etc.). This is what's known as the full mortgage responsibility. It's a legal concept.

The principal is what you actually borrowed from the bank. I was asking you if you were confusing perhaps the principal (138,000€) with your full mortgage responsibility.

Oh dear this is very disappointing and worrying to hear. So our POA could have signed for ANY mortgage amount and we would be liable?

I have asked the bank to supply paperwork pertaining to this mortgage as we have never received any copies and we wondered against what authority they were operating this mortgage. If they are unable to uncover any paper work what would the outcome be? They hold our deeds presumably, so could they hold them to ransom for whatever they deem the mortgage value to be?

I will try and check whether the total 180,000 incorporated the taxes, fees etc

Quote:

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Originally Posted by Unregistered

Oh dear this is very disappointing and worrying to hear. So our POA could have signed for ANY mortgage amount and we would be liable?

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Yes, that's exactly the purpose of a POA, unless you restrict it.

But in practice a lender will only loan a given amount.

Bottom line, they will be held personally liable, yes.

Lenders always hold the original Mortgage deed, they will only handout a copy. You can always request a copy from the Notary where it was signed.

I trust you do have their Binding Offer specifying the loan's terms...

We have no paperwork at all! Binding offer, completion papers ...nothing etc Our contract when we bought the property has no dates on it either. The whole process looking back now is very suspect.

All we have is an early mortgage offer (which we agreed to two years before our completion actually went ahead) from the original mortgage lender. We're hoping the solicitor or bank will uncover some papers we can actually check and form a paper trail as to what has happened.

Thank you for your thoughts, I will see what I can find out and maybe come back to you if I have further questions.

You're welcome. Do come back.

Regards,

Hi
We have been trying to trace our paperwork for our mortgage via the bank and our solicitor. We have had no response from our bank (with whom we are trying to negotiate an interest only mortgage to reduce our payments) and our solicitor has since gone bust, and we think has even since died, leaving no trail for who now holds our case notes/file.

So we find ourselves in this position:
1) No completion paperwork, binding offer in our possession, therefore unable to sell the property
2) Negotiations with the bank to reduce our payments by way of an interest only mortgage appear to have halted despite our repeated emails and phone calls asking for urgent response
3) No tenant in our property as of yesterday so no money coming in at all (tenant was in arrears and left owing us money).

Therefore we are unable to pay the bank any mortgage payments and have told them this was the likely outcome if we were unable to complete our move to interest only by September.

What is the best action to take in your opinion in order to extract ourselves legally from this grim financial loop?

Can we be pursued for any outstanding monies owed on the property in Spain, in the UK?

Quote:

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Originally Posted by Unregistered

Hi
We have been trying to trace our paperwork for our mortgage via the bank and our solicitor. We have had no response from our bank (with whom we are trying to negotiate an interest only mortgage to reduce our payments) and our solicitor has since gone bust, and we think has even since died, leaving no trail for who now holds our case notes/file.

So we find ourselves in this position:
1) No completion paperwork, binding offer in our possession, therefore unable to sell the property

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You can sell your property whenever you please. You can always request an authorised copy before the Notary in which the property was purchased. what matters is that the proeprty is lodged under your name at the Land Registry.

You don't need an original Title deed to sell on a property in Spain. It is highly advisable of course albeit its lack can be overcome easily.

Quote:

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Originally Posted by Unregistered

2) Negotiations with the bank to reduce our payments by way of an interest only mortgage appear to have halted despite our repeated emails and phone calls asking for urgent response

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Only some banks are now open to paying interest-only and that will be only for 2 years maximum nowadays post credit-crunch. You cannot force a bank to accept interest-only payments if you did not agree it with them on signing the Mortgage deed.

In any case do shop around for other lenders terms.

Quote:

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Originally Posted by Unregistered

3) No tenant in our property as of yesterday so no money coming in at all (tenant was in arrears and left owing us money).

Therefore we are unable to pay the bank any mortgage payments and have told them this was the likely outcome if we were unable to complete our move to interest only by September.

What is the best action to take in your opinion in order to extract ourselves legally from this grim financial loop?

Can we be pursued for any outstanding monies owed on the property in Spain, in the UK?

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Yes of course you can be pursued in the UK for the outstanding debt on defaulting a Spanish mortgage loan. There's this myth created on forums and blogs that you will not be pursued abroad when it's already hapenning everyday. You have quite a few queries on this very website with borrowers who are being pursued in the R.O.I. and in the U.K.

I can only recommend you to follow a procedure that is known as "dación en pago". This is baisically handing over the keys to your lender in a formal manner before a Notary public signing a deed. You relinquish the ownership and in excahange your lender will discharge in full all mortgage liability and will not pursue you abroad for any shortfall. Please read my article on Bank Repossessions in Spain:

Bank Repossessions in Spain: A Legal Perspective - 25th of June 2008

Please read as well my article on dación en pago which explains the procedure in great detail:

The Dación en Pago Explained - 28th of March 2009

A dación en pago should only be followed always as a last resort. Sometimes it works magic just mentioning the name to your lender; some of them balk away before the grim prospect of having to place yet another a provision for default before the Bank of Spain and may lead the way to open up new options, such as them allowing you to pay interest-only whilst you weather off the financial storm in the nest years or find a buyer. So at times you can use this strategy to "ease up" protracted negotiations.

The drawback the dación en pago has is that the lender, should you have significant equity locked away in the property, will not pay you a penny and you will lose all this equity.

As I explain in my article above, retaining a lawyer is optional for a dación en pago. However be warned that if you do not hire a lawyer the following may happen to you:

Can we be chased by the bank after arranging a Dacion en Pago?
Unregistered

Handing over keys - Mortgage arrears
Unregistered

Yours faithfully,
Raymundo LarraÃ*n Nesbitt

Hi

Since I last spoke our apartment, for a fee of 1000 euros, has been entered into a live auction. Which in fact resembled more of a sealed bid method of selling. We supposedly sold at this live 'auction' via an absent bidder through a commission bid just over our advertised selling price. This was two weeks ago and we have received no reservation fee from our supposed buyer, so in effect have lost two weeks of marketing our property believing a commission bid was in some way shape or form legally binding.

Were we right to believe that an auction house instructed by us, with the transfer of 1000 euros, can be allowed to trade in such a way whereby a successful bid on a property does not result in anything legally binding let alone an eventual completion of sale?

Thanks
SuR

Dear Sir/Madam,

I take it you are referring to a private auction, not a public one?

Because in Public Auction any potential bidder must previously lodge before the law court's bank account 30% of the assessed appraisal auction value to be enabled to bid as prerequisite.

Regarding private auctions its whatever you've agreed with them and however they work.

Yours faithfully,

Hi

Direct Auctions is the company and they make this claim on their website...Direct Auctions was the first Property Auction house open to the public on the Costa del Sol.

Is the fact that it is open to the public make it a public auction?

Thanks
SuR

Dear Sir/Madam,

To the best of my knowledge it's a privately held company, it's not "public".

Yours faithfully,

Hi

Would yo know of a public organisation that would suit better? Should we look for an auction house with plc at the end of their name (or spanish equivalent if you could tell me what that would be)?

Would this safeguard us in future...i e sell our property on the drop of the hammer?

Many thanks
SuR

Dear Sir/Madam,

The truth is that in auctions, private and public alike, no one is bidding unless the asset is exceptional (i.e. Lord Sugar).

The reasons are:

1. Shortage of liquidity
2. Outstanding mortgages against the property are higher than the intrinsic value of the asset itself (negative equity).

Professional bidders are only interested in properties prior to 2003 (when properties began to be ridiculously overvalued thus attracting huge mortgages against them) or else properties that are in prime locations (i.e. beach front) or else have plenty of equity in them.

Nowadays, no one can guarantee you that your property will be sold, not even in an auction, whether public or private.

Here's a link to the Sur newspaper from March 2009 where they write that banks have to withhold 80% of properties going into auction as there are no bidders interested:

http://www.diariosur.es/20090328/mal...-20090328.html

And yet another link to the same newspaper with yet another article in which they claim that in all public auctions held in Marbella city, where we are loacted, no one has bidded:

http://www.diariosur.es/20081129/mar...-20081129.html

I suspect the situation repeats itself nationwide as the problems which afflict the sector are also of a national and international scope (credit crisis), so there is no escape.

Yours faithfully,
Raymundo LarraÃ*n Nesbitt

Given these circumstances how would you advise we proceed?
Thanks
SuR

Proceed? You mean to sell your property asap?

All the conveyance procedures in which we have been involved this year were cash buyers.

All deals dependant on securing finance have fallen through, all. To the despair of some sellers, even thrice. I know people who have been trying to sell for the last 4 years.

So my recommendation as always is to be practical, not beat around the bush, bite the bullet, cut losses and sell extremely competitively below the market value (BMV) if you really need to sell now for whatever reason i.e. you cannot afford your monthly mortgage repayments. There are plenty of websites available, just google them, specialised on distressed assets and fire sales. Ask any estate agent, they will help you.

If you can afford to sit back and hold onto the property for the next years weathering off the storm you should do so. If you sell now you must assume you will do so losing money. The Governments say we are back to normal and the green shoot hype etc. But in Main Street we see it as tough as ever.

If you still cannot sell the property and you are about to default on your mortgage (if you do have one) then I advise you follow a dación en pago de deuda (handing back the keys):

The Dación en Pago Explained - 28th March 2009

Clearly this is a Buyer's market, a very tough one. One man's meat is another man's poison et al.

In any case, as a disclaimer, take what I write with a pinch or two of salt as almost all the e-mails I receive for the last two years have been mortgage related problems and people unable to sell up or wanting to pull out. What I mean to say is that the vast majority of queries I receive are all biased towards financial problems (which is why people seek our advice in the first place). So maybe I'm being a little too over pessimistic.

But that's just our experience anyway. Others will have a different one.

Yours faithfully,

Hi again

We have mentioned to the bank via our solicitor that we will be applying for a Dacion en Pago, as we are now facing severe financial problems servicing our mortgage.

The bank, via the solicitors, have come straight back and said they will not accept dacion. Can the bank flatly refuse without having valued the property? We have not defaulted on our mortgage and all bills are up to date. We have had two valuations in the last year that put the value of the property within the % criteria a property must meet in order to be eligible for a Dacion.

Thanks
SuR

Dear SuR,

That's odd. Banks normally accept a dación providing you have 20% equity or more locked in the property.

On what date (month & year) did you buy this property?

For what price?

What was the mortagge loan on it?

What are the current apparaisal values you mention in your post above?

Who commanded these aprraisaal values and what companies did you use?

Regards,
Raymundo LarraÃ*n Nesbitt

Hi Raymundo

Answers below:

On what date (month & year) did you buy this property?
We bought off plan in 2001 but it didn't complete until November 2005

For what price?
The final figure with furniture package and taxes/fees was £267k euros

What was the mortgage loan on it?
We borrowed 160k euros

What are the current apparaisal values you mention in your post above?
We have had valuations at 230k and 255k euros from Direct Auctions and our Rental agent (his name is Domingo, sorry don't have his company name to hand)

Who commanded these aprraisal values and what companies did you use?
See above

Many thanks
SuR

Dear SuR,

Appraisals done by the said companies are not good enough. I was referring to companies such as Tinsa, Eurotasaciones etc the ones that banks use specific for a dación en pago.

The price I was asking was without furniture, just the dwelling. How much was it bought for and declared in your Title Deed? Please do not tag on extra expenses.

Yours faithfully,

Hi Raymundo

Thank you for your advice thus far on our situation. We have, since last talking with you, managed to secure an interest only mortgage with the bank for two years. We also have the property entered into a property auction to be held in March and it is listed for sale and rental with two estate agents. We are however preparing for the worst by looking into the specifics of the dacion en pago procedure. We believe a valuation needs to take place on our property to establish whether it is in negative equity. Does the bank have to do this or will an independent valuation suffice. We are understandably dubious as to whether the bank would value it highly enough to accept the dacion procedure given the effect it would have on their future credit rating.

If we need to arrange a valuation, bank or otherwise, how much should we expect to pay for this? I have heard figures of up to 3000 euros are not unusual, this being the case it begs the question...how are people in financial trouble expected to find the money to fund the valuation to get them out of financial trouble??

Many thanks
SRo

Dear SRo,

I'm glad your lender gave you a 2 year interest-only ("carencia"). Spanish lenders currently are not willing to give more than that as a teaser really. Foreign banks, such as HBOS, used to give 15 years interest-only. But following the financial problems they've had that was struck off early last year.

Regarding a Dación en Pago an updated appraisal must be commanded prior to carrying it out. The reason is because appraisals commanded specifically for a dación en pago tend to be extremely conservative; many would say even below the current market value. It is not the same outcome to appraise to sell a property or request a mortgage loan than to hand over the keys. The latter will always be lower as it must be conservative (from the lender's point of view as it's a risk-taking decision for them).

Please read my article on the procedure to be followed, the first one written in English:

The Dación en Pago Explained - 28th March 2009

You can appoint your own valuer, but your lender is not forced to accept their valuation. So it will not be binding.

The way it works out in practice is that your Spanish lender will command their own appraisal from a trusted surveyor. They normally cost 350-400€ which are paid by yourself in advance. Obvioulsy the survey will all be in Spanish and it's for your lender.

Anyone quoting you 3,000€ is clearly either taking advantage of you or deluded.

Let me know if we can assit you handing in the keys of your property as we are fairly experienced on this. We charge a flat fee of 1,200€ for this service.

Yours sincerely,
Raymundo LarraÃ*n Nesbitt

Hi Raymundo

We have at last received an offer on our property and wondered if marbella-lawyers handled conveyancing? If so perhaps you could forward me a quote to complete the sale of our property?

Many thaanks
SRo

Hi SRo,

I'm glad you received an offer. It would seem the real estate market is starting to move again.

Besides litigation we also deal with conveyancing, yes.

Please send me an e-mail and we'll take it on from there.

Regards,
Raymundo LarraÃ*n Nesbitt