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Évora court rules against mortgage holder who returned his house

judgeswigIn a ruling that will depress many struggling householders, the Court of Appeal in Évora has decided that the handing over of a property to the bank does not abolish the mortgage when the sale of the property is less than the amount owed to the bank, and ordered the seizure of the former householder's wages.

Millennium BCP bank lost the last round when the court in Portimão decided not to seize wages from a debtor's salary having received and later sold the householder’s property, but has won its case on appeal in the Court in Évora.

"Contrary to the arguments in the contested decision, it is not possible to prevent further recovery action by the petitioner (BCP) …. when the enforceable debt was not fully paid off, because the value of the sale of property was insufficient," reads the court judgment.

After the owner gave back the house he had bought in 2006, the proceeded of the subsequent sale of the property to the bank itself, apparently the only buyer interested in the house, were €81,720, less than the €90,000 advanced for the acquisition in 2006 when the bank valued the property at €117,000. Somehow the customer has to find €25,500 which is the difference between the bank’s valuation and the eventual sale price.

According to BCP’s lawyer, Helder Ferreira, "in law there is no doubt that the bank always has to be compensated for the funding it advances," noting that "the bank sells money, not real estate," and that the risk of the devaluation of the asset is down to the owner, not the bank which financed the purchase."

It was also decided in court that the bank only has the function of helping the buyer fund his purchase, the choice of property has already been made by the buyer.

The court's decision contradicts the Portalegre ruling of April 2012 which gave hope to thosands of debtors in trouble with their banks when the local court ruled that the entire loan was cancelled when the property in this instance was handed to the bank. This of course was appealed by the bank in question and also is scheduled to be heard in Évora by the Court of Appeal.

Helder Ferreira argued that the bank is limited to advancing the money to fund the customer’s purchase and that the risk of the purchase must be assumed by the buyer of the property.

In today’s case the former householder has a job and presumably some disposable income that can go towards paying off his loan. In the Portalegre case the two property owners were in dire financial straights and the court ruled that therefore handing back the property was all the bank was going to get.

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Comments  

+1 #7 Laurinda Seabra 2014-01-19 17:28
(Cont) ...

Money is being taken out of circulation so fast that it lives very little circulating. No circulating = no trade = no income for many.

Add to that the fact that many banks have in fact already recovered their loan advancement via securitazion programs and are not in fact the real "owners" of a property no longer (because if you have taken a bond to finance a property you the "buyer" are not in fact the "owner" but just a custodian with some guarantees as long as you keep on paying ;-)). Its just a financing instrument used by them.

The whole system needs to be redesigned and many of the funny financial instruments dropped into file 13.

But thats just my personal opinion ;-))
-1 #6 Laurinda Seabra 2014-01-19 17:27
Rev I think you are generalising. Many of the people that has handed their houses back to the banks did so because they have lost jobs, have greatly reduced income or are unemployed.

I don't believe that its a case of the majority living above their means, but rather a clear indication of our economic reality ... which sucks.
+3 #5 Rev 2014-01-19 11:33
Whilst one feels sorry for the people who are in this dire position, it merely highlights the fact that, the Portuguese people in general, are still of the opinion
that you can spend money that you don't have, on mortgages,cars,credit cards,dwelling in the glorious idea, that someone else will pick up the tab if you cannot pay your debts.
+1 #4 Laurinda Seabra 2014-01-19 07:13
In South Africa there's an interesting case going on against the banking sector and property repossessions. Maybe the law here could be studied?

More info here - Lawsuit Against the Banks http://www.newera.org.za/class-action-lawsuit-against-the-banks/
+2 #3 Richard H 2014-01-18 22:43
One would assume the mortgage was in arrears. Maybe it was an interest only deal and with unpaid interest and other penalties for default (and legal costs?) the debt had grown to €107,220 and presumably continues to grow until repaid in full.
+1 #2 Paul 2014-01-18 17:40
I am still trying to get hold of the original court ruling. The figures made no sense in the Portuguese media reports either so we must be missing a key bit of information.
Ed
+6 #1 Tom.H 2014-01-18 10:31
This does not make sense.
One article in a pt paper implies it was the bank itself that bought this property at auction - at roughly 10% less than the original price.
And are we talking 100% mortgage here ? If the bank paid 90,000 to help the buyer buy and only got back €81,720 6 years later at auction .... where does this 25,500 euros difference to the 117,000 euros come from?
Or did the house need a renovation loan on top of the purchase ?

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