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Re: [OM] Nathan's PAD 31/1/2015: the human face of the crisis

Subject: Re: [OM] Nathan's PAD 31/1/2015: the human face of the crisis
From: Moose <olymoose@xxxxxxxxx>
Date: Sun, 01 Feb 2015 12:48:22 -0800
On 2/1/2015 11:32 AM, John Hudson wrote:
This very sad story illustrates one very important issue.

More than one, I think.

Acting as a guarantor for a mortgagee exposes one to a significant risk.

Yes

If the debtor defaults expect the mortgage holder / creditor to call the 
guarantee.

Yes. This is why, when my older son and his wife got pregnant, I gave them the down payment and closing costs. I signed to say any money I had given them was a gift, not a loan, but would certainly not have co-signed the loan.


Why should the bank not have called and enforced the guarantee ?

No reason. they may be obligated to do so as part if their fiduciary 
responsibility to their shareholders.

Why should this be labelled "predatory" ?

I believe the predatory part may be in requiring co-signers for borrowers making a good down payment (which we don't know here) and with income to make the payments. We also don't know if requiring a co-signer is common there, or applied the these borrowers' specific situation. Without knowledge of local law and practices, and the specifics of the case, it's really not right to make any judgments about either side, other than to feel badly about the way it's playing out so far.

In many US cases, I believe the requirement would have been for the borrowers to pay an additional monthly fee for mortgage insurance. But I don't know if such a thing is available in Spain, or if they would have qualified. It certainly would have taken care of this problem, leaving them free and clear, financially. But again, we don't know the specifics. Were these folks, when they applied for the loan, marginal applicants, for whatever reason, who simply wouldn't have qualified without co-signers?

In my son's case, above, although his wife is expert at managing money in her work, they turn out to be terrible managers of their personal finances. Refinancing regularly to pull out cash as the market moved up, they also kept raising their payments. When the bubble burst, even though she makes darn good money, through a long period of renegotiation, BS (probably on both parts), and so, on, they lost the house. The bank resold it quickly, and ate the loss.

Whatever the petitioners



jh



On 2/1/2015 4:26 AM, Nathan Wajsman wrote:
Sonia and Paco are a young couple with two small daughters. Some years ago, when both had jobs, they bought a home, worked, and made their mortgage payments without any problems for 5 years. Then the crisis hit, Spain’s unemployment rate soared to 25%, and both of them lost their jobs. After some months, they were unable to make the mortgage payments and the bank foreclosed on them. But because of the fall in property prices, their debt exceeded the value of the house, and so the bank is trying to collect the remaining debt of 35,000 EUR by garnishing part of Sonia’s parents’ pension—they had co-guaranteed the loan when the mortgage was taken out. The couple and their daughters now live with Sonia’s parents, but with the bank’s demands the entire family is on the verge of falling into extreme poverty. Supported by a local NGO that campaigns against the banks’ predatory practices, they have set up a camp outside the BBVA branch next to the Mercado Central. I went there yesterday to have a look and a chat and to document it. They have now been there for 28 days. Their demand is that the bank stop garnishing Sonia’s parents’ pension.

Two snaps. First, the overall view of the encampment:
<http://www.greatpix.eu/All/Picture-A-Day/4253606_kdsZ6C#!i=3853988458&k=3zcKkQz&lb=1&s=O>

People signing the petition in support of Sonia and Paco and in general demanding that the law be changed so that the debt is extinguished once the house is taken by the bank:
<http://www.greatpix.eu/All/Picture-A-Day/4253606_kdsZ6C#!i=3853988612&k=GJs77dK&lb=1&s=O>

And yes, I signed also. I am no populist but the banks ARE greedy bastards. Just this week, 78 executives of another bank have been charged with fraud—they had been given “black credit cards” by the bank which they could use freely, and of course this little fringe benefit was never declared to the tax authorities.

Cheers,
Nathan

Nathan Wajsman
Alicante, Spain
http://www.frozenlight.eu <http://www.frozenlight.eu/>
http:// <http://www.greatpix.eu/>www.greatpix.eu
PICTURE OF THE WEEK: http://www.fotocycle.dk/paws <http://www.fotocycle.dk/paws>Blog: http://nathansmusings.wordpress.com/ <http://nathansmusings.wordpress.com/>
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