Wednesday, February 22, 2012

No-recourse mortgages coming to Spain?

The headline in El Pais might make you think that, but given the fact that the government is on the side of the banks, basically they are saying that families might be able to give their house back to the bank in exchange for a discharge of the debt only:

First time home owners with all family members are unemployed and no or insufficient income to meet the debt.

So the road to debt freedom is to blow all your savings, have everyone in your family quit their job…

What Spain is really missing is a sensible bankruptcy law. The way things work now, if the bank takes your home, you (and all your cosigners) remain responsible for any unpaid balance ( remaining debt – fire-sale price of home + lots of fees ) for the rest of your life. If you cannot make the monthly payments, the bank can take everything you earn minus some small minimum amount.

No comments: