The legal process in Spain known as ‘dación en pago’ has earned something of a reputation among those home owners in Spain that have suffered economic difficulties over the last few years, and have been unable to continue to meet repayments on a Spanish mortgage.
In effect, the process involves the bank that conferred the mortgage accepting the property in lieu of the balance of the mortgage that remains to be repaid. This has been notoriously tricky of late since, with property values taking a tumble as a result of the great recession, banks have been reluctant to accept an asset that they cannot sell instead of loan repayments.
Normally, for the bank to accept the return of the property, and it is only possible if the bank accepts it, the resale value of the property must be greater than the amount remaining to be paid on the mortgage. In addition there would be legal and other fees to be taken into account, that must be covered by the resale value of the property.