27 Jan Justice gives a blow to the banks in the Mortgage foreclosures in Spain
The Provincial High Court of Navarre establishes that the banking entity, in this case BBVA, in favour of whom a mortgaged house is adjudged in auction cannot go on demanding the part of the loan not covered by this route from its client .
The Provincial High Court of Navarre has put boundary to certain “abuses” that, in the court’s opinion, are taking place in the matter of mortgage foreclosures in a Writ that, in case this doctrine is extended, could stagger the foundations of the Spanish hypothecating system.
The resolution determines that the banking organization in favour of whom a mortgaged house is adjudged after its auction had no bids at all, cannot continue with the execution of other assets of its client in order to cover the part of the loan non recovered by this route. That is to say: the awarding of the property puts point and end to the claim process, while the Spanish system is based on the total compensation of the debt.
The Court reaches this conclusion considering that with the material awarding of the property in favor of the bank “the principal [of the loan] and something more has been covered”. In addition, the court reproves that the bank organization tries to continue with the execution alleging that the building, due to the economic crisis, has no longer the same value that it had when it was appraised to grant the loan.
According to Alvaro Lopez de Argumedo, lawyer of Uría Menéndez “This decision puts in check the Spanish banking system and guarantees the American one, infringing clearly the Spanish legal ordering”.
Francisco Uría, responsible partner for the financial sector of KPMG also censures the judicial Writ. In his opinion, it cannot be shared that “a perpetual value is attributed to the building’s appraisal made at the time of the concession of the mortgage credit, when it is obvious that the circumstances of the market, and therefore, the price of the building, have changed completely”. However, Uría stresses that, “although the Writ is showy”, one does not have “to grant to it greater importance”, since “it does not constitute jurisprudence and it is bound very indissolubly to the incidences of a specific case in which the bank organization has not been able to contribute a more updated appraisal with which, without a doubt, the case should had thrown a different result”.
The judicial Writ reminds that the economic crisis “has its origin in the bad management of the financial system of which the banking organizations are protagonists”. It stresses that this has been so much showed “by the president of the Spanish Government, as well as by the one of the U.S.A.”. It insists, as well, about the loss of value of the building at issue “being attributable to the crisis, fruit of bad praxis of the financial system”. For that reason, in the court’s opinion, “it is especially painful” that one of its protagonists justifies its pretension in circumstances “that have raised blisters” in the society.
( Expansión Newspaper)
Published on: Jan 27, 2011