BALEARIC FAMILIES CONFRONT HOUSING DEBT

PALMA
A GROWING number of people in the Balearics are going bankrupt as a result of not being able to keep up their mortgage payments.
A special court has been set up in Palma to hear the cases of plaintiffs - in this case, families in the Islands - who because of banks and building societies having applied particular interest rates to mortgages over the last few months, have been unable to honour their repayment commitments.

It is the first time in the region that a full scale hearing is to be made on indebtedness in the housing sector. Judge Victor Fernandez is to lead an investigation this coming Thursday at the Lawyers' College in Palma under the title: “Housing and Its Entitlements.” The families who are presenting their cases before the Court, are in a position where they are three months behind in their mortgage payments and want to positively address their indebtedness as opposed to letting it slide and having to face the possibility of the banks auctioning off their property to pay the loan. The practice of taking out two or three mortgages on one property was, until now, a common one which allowed families to combine available credit and negotiate lower monthly repayments. As the economic climate has now worsened (Judge Fernández refused to use the term “crisis”), the banks have tightened the knot and it is now hard for applicants to get a lender to accept the same property for a second or third mortgage.

The judge is going to have a difficult time persuading the banks to renegotiate the terms of the mortgages and not lay claim to the possessions of their clients in cases where they have fallen three months behind with their payments. With homes becoming dearer and the judicial process of acquiring them tending to be more and more complicated, those who are not “au fait” with the law have sometimes signed on the dotted line without fully understanding what the realities are if they are unable to keep up payment. The social “fallout” of debtors and how that places them in the civil and commercial market will be another theme discussed at the investigative conference. Judge Fernandez said that the family groups presenting their cases marks a turning point in what, until now has been seen as a property market bonanza.