The Spanish central government has recently amended laws relating to mortgages to offer more protection for embattled mortgagees facing financial difficulties, with specific changes to personal income thresholds which rise by 261 euros per month, and adjusting the minimum value attached to the repossessed homes upto 60% of the value of the mortgage.
These changes were announced by Spain’s 1st deputy Prime Minister Alfredo Perez Rubalcaba on July 1st, and herald a softening of the burden imposed on mortgage holders, and a hardening of the government’s position against banks that have largely been seen as part of the problem rather than the solution to Spain’s economic crisis.
Regarding income levels, Perez Rubalcaba announced that when a home is embargoed pending foreclosure, an act that is similar to bankruptcy proceedings in other nations, the personal income of the mortgagee is capped to recover debt owed. With this latest announcement the income retained by the mortgage holder and not passed to debtors rises from 700 euros to 961 euros per month, and additional amounts of 192 euros per month can be retained for each member of the household without an income.
Describing the minimum resale value of a repossessed property, Perez Rubalcaba said the current level of 50% of the value of the remaining mortgage places terrible burdens on borrowers who are liable for remaining debt even after their home has been repossessed and sold. The new minimum level will rise to 60%, and is expected to give much needed peace of mind to families facing repossession.
Certain measures however have not yet been instituted, being considered too radical in the short term, with proposals to clear the mortgage debt after repossession being rejected.
In addition, the minimum-interest clause (Clausula Suelo) has not been repealed or amended. Banks and mortgagors are permitted to charge a minimum amount of interest on variable rate mortgages irrespective of the floating Euribor base rate meaning mortgagees have not benefited from recent drops in the central bank rate.