Lanzarote’s court annulled a family’s mortgage with BBVA last week after finding the interest and late payment penalties charged “abusive”.
Judge Juan José Cobo of Court No 4 declared that the mortgage which was agreed with BBVA back in March 2006 was to be cancelled and the foreclosure notice scheduled for the 3rd May stopped. The judge considered that the 19% interest rate charged for late payment of the mortgage was abusive and stated that the bank cannot be protected by the court at a time of deep crisis, when financial institutions keep making and maintaining higher penalty interest rates superior to the basic interest at the time governed by the mortgage market.
The judge also noted that the concept of charging default interest as a punishment for breach of an obligation to pay the mortgage installments was meaningless now as vast the majority of people who fail to pay a mortgage do so through no fault of their own, it' is normally due to the fact that they have lost their job without any possibility of finding another or have had their salary substantially reduced.
Continuing, he said that the job loss which caused the default of the loan is not only the fault of the borrower but in reality largely attributable to the lender with their inordinate desire to increase business and profits, which contributed to the crisis and recession that exists in this country and around the world.
Therefore the court considered that at the moment there is no justification for setting a default interest rate higher than the normal interest except the desire to enrich financial institutions since this penalty or punishment is imposed on those who are not to blame for being unable to maintain their mortgage loan.
The Cabildo of Lanzarote have also approved a motion during their plenary meeting on the 5th April to take necessary measures to prevent evictions for economic reasons. The motion supports the proposal approved by the Federación Canaria de Municipios (FECAM) and adds some nuances to make compliance more feasible. The original wording of the proposal was to rescind all contracts with financial institutions to execute evictions without considering if there may be a fair reason of foreclosure by the bank for intentional and unjustifiable non payment.
The council have helped prevent eviction with financial assistance for more than 100 families living in Lanzarote during 2012 and over 30 families so far this year. The Cabildo of Lanzarote will now join with FECAM and Plataforma de Afectados por la Hipoteca (PAH) in their support for residents who are suffering the loss of their homes by judicial evictions.
The proposal envisages adoption of the Cabildo de Lanzarote of the following commitments:
* Show support for the Plataforma de Afectados por la Hipoteca (PAH) and in general for all citizens who are suffering the social drama of losing their home through judicial evictions.
* Support for the legislation presented in the Congreso de los Diputados to demand payment in kind.
* To urge the Gobierno del Estado to amend the current legal framework regulating the mortgage market to limit the social impact of foreclosures caused by default of mortgages.
* Ask all parliamentary groups present in the Cortes Generales to introduce the necessary amendments to the Real Decreto-ley 27/2012, de 15 de noviembre to add urgent measures for the protection of mortgage debtors to expand the scope to cover existing weaknesses.
* Demand for banks and financial institutions to establish a mechanism to promote transparency and provide information to the public in relating to the granting of loans and mortgages, particularly in the area of payment protection insurance to cover contingencies during unemployment or temporary disability of the borrower.
* Urge the Gobierno del Estado, Comunidad Autónoma de Canarias, and Cabildos Insulares to increase rent subsidies to support citizens who may finally lose their homes.
* More than state competition measures, establish the measures to be taken at island level. Assuming that one can act in parallel to the judicial and social level.
* Extinguish those contracts and withdraw funds available to the Cabildo de Lanzarote from those financial institutions who are carrying out foreclosures as of the date of this agreement , prior to informing Bienestar Social and considering evictions that are socially unjust, reporting positive Servicios Jurídicos y Fiscalización Económica.
* To forward this agreement to the Consejo de Ministros, and especially the Ministerio de Economía and the Ministerio de Justicia, to all political groups present in the Congreso de los Diputados and the Senado, Presidencia del Parlamento de Canarias, FECAI, FECAM, and the associations who represent the collective group of Bancos y Cajas de Ahorros, and the PAH and neighbourhood associations of the municipalities.