One of the classic ways to secure a payment is to make it subject to a mortgage. So, in the event of a breach, the creditor has the option of foreclosing on that mortgage to recover part of the credit granted from the mortgaged property.
One of the most frequent actions in these times of crisis is mortgage foreclosure. That is why it is important to have a basic understanding of this procedure and the options available to us if we find ourselves facing a process of this kind. At BBMabogados we are experts in mortgage matters, so do not hesitate to contact us in any eventuality. If your problem stems from a mortgage, it is also worth reviewing the costs that fall to the bank, which in many cases can be reclaimed.
What is a mortgage?
The first thing we should know is that a mortgage is a real right of security; that is, its purpose is to guarantee the performance of an obligation that may arise from a loan or credit.
The way a mortgage works can be summed up as follows:
If the principal debt that has been secured is not satisfied within the agreed period, the mortgagee may promote the forced sale of the encumbered property.
The above will allow the creditor to recover what is owed from the value obtained from the sale.
FEATURES OF THIS MORTGAGE
-It is created by public deed before a notary.
-It does not involve any transfer of possession of the property, which is why it must be registered at the Land Registry for the mortgage to come into being and take effect. In other words, the holder keeps their property; only the deeds change.
-The sale of the mortgaged property is carried out through its knock-down at a notarial or judicial auction, once the demand to the debtor, the claim and the enforcement order have been made.
Mortgage foreclosure procedure in Santander
When speaking of foreclosing on a mortgage, it is important to note that to reach this point an enforcement procedure must be followed before the courts. This may begin when the debtor of the credit or loan fails to pay the instalments and the creditor (who in most cases is a bank or savings bank) decides to enforce its right.
In general terms and in fairly schematic form, the mortgage foreclosure procedure is as follows:
CLAIM
Before the Courts of First Instance of the place where the mortgaged property is located, the creditor may start the procedure by way of a claim.
NOTIFICATION OF THE CLAIM AND DEMAND FOR PAYMENT TO THE DEBTOR
This is the point at which the debtor is notified of the start of the court procedure, while at the same time being required to pay, in the event the creditor had not previously demanded it.
CERTIFICATION FROM THE LAND REGISTRY
The judge will request from the Land Registry a certification of the mortgage’s registration, as well as a list of the other charges encumbering the property.
AUCTION OF THE PROPERTY AND PAYMENT TO THE CREDITOR
The mortgage deed must state the valuation of the property, so that it serves as a reference in the event of an auction. This value may in no case be lower than 75% of the appraisal carried out on the property at the time the mortgage loan was granted.
At this point, two scenarios may arise:
1.-BIDDERS ARE PRESENT:
In which case the knock-down will be approved in favour of the highest bidder. When the best bid is below 70% of the property’s value, the party subject to enforcement may, within 10 days, present a third party who improves on the bid.
Once this period has elapsed without a better bidder coming forward, the creditor may request the award of the property for 70% of its value or for the amount owed, provided that amount exceeds 60% of the appraisal value and of the best bid.
If none of the above scenarios arises, the knock-down will be approved in favour of the highest bidder when the amount offered exceeds 50% of the appraisal value or covers the amount for which enforcement was ordered, including the provision for interest and costs.
2.- NO BIDDERS PRESENT:
If no bidder attends the auction, the creditor may, within twenty days, request the award of the property.
Once the auction has been held, the party to whom the property is awarded at auction becomes the new owner of the property; it should be noted that this change will be recorded at the Land Registry.
In this respect, if the property is occupied, it will be vacated.
Halting the mortgage foreclosure process
Once the mortgage foreclosure process is under way, halting or suspending it may seem an extremely complicated matter. However, there are various circumstances that can bring the process to an end without the foreclosure taking place or, at best, achieve some kind of alternative resolution with the creditor.
For example, it may be possible to reach an agreement with the creditor allowing certain conditions to be adjusted, among which we can mention:
– Extending the term of the mortgage,
– Consolidating all the debts.
– An attempt can be made to agree a deed in lieu (dación en pago) of the home.
What to do when facing a mortgage foreclosure procedure in Santander?
The first thing we should do is turn to the experts, who will guide us through this difficult situation.
With the right guidance, we will be able to work out a strategy that suits our needs.
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