Banks that have adopted the Code of Good Practice
Banks adopt the Code of Good Practice voluntarily; it is not compulsory. Banks that have done so, and only once they have done so, are obliged to apply the measures envisaged in the Code.
Adoption of the Code of Good Practice must be notified to the General Secretariat of the Treasury and International Financing, which will publish, in the Official State Gazette (BOE) the list of all banks that have adopted the Code.
Given that application of the Code of Good Practice entails an exception to the general rule (since banks have to amend or change the mortgage conditions agreed), the Code may only be imposed on those banks that have previously and voluntarily agreed to adopt it.
When a mortgage is arranged, the bank and the customer agree on the conditions and these may only be changed with the agreement of both parties.
If difficulties arise and you get behind with or can’t meet your mortgage payments, the bank will charge the fees and penalty interest that figure in the mortgage deed.
In these cases, mortgagors will generally apply to their bank for a deferral, an interest rate reduction or an exemption from fees or penalty interest. That is, for a change in the mortgage terms which the bank is not obliged to accept, as any such change will depend on its risk policy.
If you are in mortgage arrears, the bank could go to the courts to claim the amount outstanding. An enforcement procedure would then follow, in which your home would eventually go for sale at auction. The bank would use the amount obtained at auction to pay off your debt and you would lose and would have to leave your home.
If the amount obtained at auction is greater than or equal to the outstanding amount of your mortgage, your debt would be cancelled. However, if the amount obtained is lower, you would have to pay the difference. In this case you would be “personally liable” with all your present and future assets.
Note that the sale of your home at auction does not necessarily extinguish the debt. The bank will continue to claim any amount over and above the price obtained at auction.
In addition, the new terms will be those established in the Code, unless the parties mutually agree on more favourable terms than those initially agreed.
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