During the last years of the Twentieth Century and first years of the Twenty-first, the economic boom in Spain pushed many Spanish citizens to invest in property. Other nationals, such as British and Germans, joined the cause attracted by the weather and low prices. At that moment the Spanish Banks facilitated these acquisitions, they offered a lot facilities to get a Mortgage, without taking into account the real economic capacity of the clients.

In 2007, with the advent of the global economic crisis, strengthened in Spain by the bursting of the housing bubble, many people were affected by drastic cuts in their incomes and in other cases loss of their jobs. Many of them had signed mortgages and were required to pay high monthly payments that under no circumstances they could afford.

Today, as a result of this situation, it is estimated that some 300.000 open Court proceedings have been issued and approximately 150.000 of these have ended in eviction. So there are numerous affected families where, in spite of having lost their homes, they still have to repay any balance due on the mortgage after the property has been sold or repossessed by the bank. Contrarily to what happens in other countries, such as the USA, the mortgagor’s liability does not end with the handing of the keys and the sale of the property. The mortgage is still required to be repaid and this financial debt will continue after the loss of their house.

This untenable situation has generated public discussion about the applicability of the legal concept known as "dación en pago", which is used by a bank, before filing foreclosure proceedings, allowing the defaulter to offer the property to satisfy the total debt before starting the legal process. Of course, the position of the banks is contrary to this measure.

In that way, with the peer pressure, the Spanish Government approved on March 9, 2012, an Emergency Act to Protect Mortgagors without resources. This act highlights the “dacion en pago”, but provided that a number of very specific requirements are conformed with, such as  all family members being unemployed, mortgage payments that exceed 60% of the family income and the property being a single dwelling.

Also, those who conform to this criteria should follow a roadmap to reach the effective implementation of the “dacion en pago”, taking into account the differences that relate to house prices in the city where they live.

Therefore, it seems that the standard has not satisfied the demands of those affected by this problem, because the act has too many requirements that make the practical applicability of this residual “dacion en pago” barely impossible. Nevertheless, we should see how it develops in practice, as this could be the first step towards solving the mortgage problem in Spain.

SERGIO MARRODAN MONTIEL.- Lawyer

LOGROÑO (SPAIN)