Milagros López, 69, and Verónica Esteban, 41, neither know nor have they ever heard of each other. However, their stories are very similar and the end to years of sleeplessness that the first has found is a hope for the second. Both have been affected by mortgages with anatocism or compound interest, a type of calculation different from the usual one that increases the sums to pay and complicates lowering what is owed. Especially if along the way, as is the case, financial difficulties arise. Now the judges have heard his case and dealt with his claim: in 2019, after 14 years paying a mortgage, in which he had paid more than 95,000 euros, he had only reduced his debt by 4,500 euros. A judgment of the Provincial Court of Oviedo just agreed.
To understand the court ruling, we must go back to April 2005, when López and her husband asked for a loan of 120,800 euros with which they bought the house where they live in a town in Asturias. After the initial refusal of a bank, they went to the financial Union de Credits Inmobiliaros (UCI), which offered them a mortgage called “easy”: the first three years would pay very low fixed amounts; From the fourth year on, the loan became variable and the installments would rise. What no one told them is that in those three years, the monthly payments agreed with the entity did not cover interest. And that the interest that they did not pay, that is what anatocism consists of, would be added to the principal capital of the loan.
The couple did not know then that one of their three children would die shortly at the age of 18. And López had to stop working. Although he affirms that he has not stopped paying “not a single month”, he did agree to a reduction in fees. The consequence is that the vicious cycle of your mortgage worsened: the amounts still did not cover interest and the unpaid interest continued to increase the principal, which increased the interest. “They sent me a letter saying that I had to pay 1,500 euros a month and that’s when I went to a lawyer,” says López on the phone. Then more than 10 years had passed: “We had a very, very, very bad time; I always crying and thinking that we were going to stay in the street ”.
We had a very, very, very bad time; I always crying and thinking that we were going to stay on the street “
Milagros López, one of those affected by mortgages with anatocism
Also the economic difficulties, when her husband became unemployed, were the trigger for Verónica Esteban to begin to look at the details of the mortgage they had requested in 2007 to buy a house in Toledo. Almost 224,000 euros to pay in 40 years. “I stopped paying in April 2014 and we owed about 230,000 euros,” he says. “They gave us a five-year grace period in which we only paid interest and not all that we owed, so they added up.”
The amortization schedule that Esteban received from the financial institution was different from what actually happened. In the simulation, the first 60 installments (five years) did not lower the loan principal, but it did not go up. The extract of the real amortizations reflects that the outstanding capital began to exceed the money that they had already loaned the first year.
After paying all the mortgage payments for 14 years, the debt had only fallen by 4,500 euros
Patricia Suárez, president of Asufin, sees it as “a trap.” “These types of mortgages became very famous in England, but they were a scandal and they stopped being marketed,” he adds. His association indicates that it is not easy to know how many people have mortgages with anatocism in Spain. They believe that there may be “thousands” because they have seen “quite a few” cases of the Real Estate Credit Union (UCI), an expert financial institution in housing finance, as advertised on its website. Asufin has pending a class action lawsuit against them for IRPH (an interest rate higher than the Euribor) in which they are studying whether to introduce this issue.
A spokesperson for the legal department of the Union of Real Estate Credits (UCI) points out that the entity acts “in a transparent manner” and defends that “accrued and unpaid interest capitalization agreements are perfectly valid agreements under the law, on which there are divergent interpretations in some courts.”
Sara Bernardo, a lawyer at the Bernardo Abogados law firm, who has defended López and her husband, admits that anatocism “is not a figure that is not compatible in the law and in the commercial regulations it is included”, but considers that “it is not applicable for mortgage loans ”because“ the problem is that it is not explained to customers ”. In fact, in the judicial process, the lawyer explains, “the financier tried to provide documentation with which to argue that it was explained to them]”. But that simulation, as in the case of Esteban, “had nothing to do with reality.”
The office even considered resorting to the Usury Law, but they saw that the remedy could be worse: “The consequence is that the contract becomes void and the initial situation must be restored,” explains Bernardo. That is, return all the money at once. So they attacked the contract for transparency, the argument with which many abusive clauses in Spain have been declared void.
The Provincial Court has given them the reason in second instance. The ruling considers that “the fact that the defendant calls the type of contract ‘easy mortgage’ is, at best, misleading. Well, the only easy thing is that at the time of hiring the quota that the borrower is going to pay during the first three years is precisely known ”.
The ruling describes the mechanism by which the Asturias couple owed at times more money than they had asked for and highlights that the simulation of installments provided “does not contain any allusion to the possible capitalization of interest.” Based on a previous ruling, it condemns UCI to recalculate the interest with the French system (the usual one in mortgages) and enter the interest paid in excess in the borrowers’ account.
“We hope to start paying the fee that belongs to us and to be able to move forward,” says López relieved, before praising her lawyers. For Esteban and her husband, who have crossed lawsuits with UCI and are pending one for foreclosure, the Oviedo sentence gives them hope to find a different ending to their story: “Now they offer us the dation in payment, but in the end they you are left without the house and you lose the 80,000 euros that you have paid for ”.