Foreign investor, properties in Poland, walk away from mortgages?

Re Spain: . Regrettably in Spain, on signing a mortgage, you will be held personally and unlimitedly responsible with all your assets both now and in the future if you default. What this means is that even if you walk away from your Spanish property the lender can still pursue you abroad for the shortfall. There are a great number of people who denied this being possible. Many are still in the denial stage.

Do a check on the internet and you will read stories of Brits being chased to the UK, for debts to their mortgage lender in Spain.

Not true anymore, the Spanish courts made a judgment a couple of weeks ago. The debt finishes with repossession, once its taken and sold its the end of the entire mortgage debt.

Edit: Its not so clear cut. I can't find the definitive answer

thespanishbrick.com/2011/legal-advice/i-cant-afford-to-pay-my-mortgage-any-more-what-can-i-do/2177

More precise details here:

morningstar.co.uk/uk/markets/newsfeeditem.aspx?id=148573656370079

The first of the amendments curtails the rights of creditors to attach
the wages of borrowers who default on their mortgage loans. Until now, a
creditor had been allowed (following a court decision) to garnish a
defaulting borrower's wages, but only those wages above 110% of the
national minimum wage (currently equivalent to 705 euro). The amendment
raises the floor to 150% (currently equivalent to 961 euro).

The second amendment raises the minimum percentage of the property value
at which a bank can repossess a mortgaged property if the foreclosure
process ends with no offers. Previously, if there had been no bidders at
the auction, a bank had the right to repossess a property at 50% of its
valuation. The new amendment increases this percentage to 60%, with the
resulting effects:
morningstar.co.uk/uk/markets/newsfeeditem.aspx?id=148573656370079

Its quite scary what they can do...

And you can also find the tale of a pensioner Poland wanted to extradite from the UK for a loan which had been more than paid off years previously when his house was seized and sold off (for slightly more than half the debt).

There is talk of it, but no actual evidence of it actually happening in practice. The stories just don't seem to add up.

As opposed to Poland: Jacek Jaskolski.

I had read something in the surinenglish about a month ago that there would be government meeting, but they expected the outcome to be negative. If it has recently gone through, I am sure that a large number of people on the costa's, feel like they have just got out of prison. Good to hear.


Here is an article from a respected ( semi ) English newspaper in Spain

Spain has rejected a proposal to modify a ruling on mortgage foreclosures, which could have benefit an estimated 300,000 property owners who have lost their homes following the country's economic downturn.

One minority political party has even requested a change in the law to home owners struggling to pay their mortgage to be able to to walk away from their property by handing the keys back to the lender. This suggestion, along with others, was rejected.

Spanish law states that if a repossessed property is sold for a lesser sum than the outstanding mortgage, the bank can claim the difference from the borrower, and banks can pursue a claim for the money from the previous owner.

The number of repossessed homes reached an estimated 300,000 following the crash of the property market, and took a grip as unemployment surged to 20.3% - the highest in the EU. The hangover from the boom years left Spanish banks with 315.8 billion euros in bad debts associated with real estate by late 2010.

The government has formed a committee which has been given 6 months to consider Spain's current mortgage rules and whether the law as it stands allows for abusive practices.

If the proposals to allow homeowners to hand their keys back to the lender is upheld, the added risks involved would undoubtedly result in a higher cost of lending, which would ultimately be passed on to the borrower.


H, do you have a link for this story, it would be interesting to read.

fairtrials.net/documents/Jacek_Jaskolski_complete__2_.pdf

Probably best not to read it at bedtime.

After reading this case, H, some of these people on here want to think twice...

Here is what I found to be the latest:

Poland v Jacek Jaskolski



Sonn Macmillan Walker successfully obtained a discharge for their client who was facing extradition proceedings from Poland. The Court found that it would be oppressive to extradite Mr. Jaskolski given his physical/mental health. 



Mr. Jaskolski was represented by Edward Grange and Ben Cooper of Doughty Street Chambers. Mr. Jaskolski's case was highlighted by Fair Trials International

criminalsolicitor.co.uk/cases.htm?id_article=54

Hi

Please us updated mglaze!

Reading all these posts really hits home as we also bought at the height of the property boom, an off-plan apartment in Wroclaw, using a mortgage in Swiss Francs. This was our first investment and now (with the benefit of hindsight of course!) we really feel that poor advice was given by the UK based company who we purchased it through.

Now the repayments are getting to the "crippling" stage, we wanting to seek professional advice about the options available... but where do we start and who can we really trust??

I can give you the contact of a trustworthy lawyer if you wish? Several others on here can do the same.


Common story. A mortgage in CHF will be like a rope round your neck, I imagine.

Many foreign investors lost money with off-plan apartments. In Poland, like everywhere else, the money is in bricks-and-mortar.

Let me quote from fairtrials.net/cases/article/jacek_jaskloski


The Fair Trials information sheet is available at:

fairtrials.net/documents/Jacek_Jaskolski_complete__2_.pdf

but let me quote from it:

Before leaving Poland, Jacek had an approved overdraft limit of 50,000 zloty (about 10,500 British pounds) with his bank. Jacek withdrew money, taking him over this limit by 11,684 zloty. He maintains that he did this unintentionally. Unfortunately, Jacek then lost his job due to a serious medical condition, making it impossible for him to pay back the entire amount in one go. Instead, Jacek tried to repay his debts in regular instalments. The bank eventually repossessed and auctioned his house, which they sold at auction for 130,000 zloty, more than fulfilling Mr Jaksolski's debt. We understand that Mr Jaksolski never received any of the 68,000 zloty balance after the sale of his house. The Polish court overseeing the sale confirmed in 2004 that all of the debt had been repaid.

...
Jacek has already paid dearly for his debt to the bank, through the loss of his home and the bank has now received more than he ever owed them. Furthermore, his vulnerable health makes the possibility of facing Polish prison not only oppressive, but potentially life-threatening. Even if he is acquitted he is likely to spend months in jail awaiting trial.

I'd suggest to all people who invested in property in Poland and are now having problems that they speak to their bank and to a Polish-qualified lawyer.

Why would you consider the advice bad?

The Polish-qualified part is imperative, I'd say - a UK (okay, okay, I know there's no such thing, but let's use it as a catch-all) lawyer would have great difficulty understanding the Polish system - and more importantly - how to deal with it.

There are some Polish-qualified nationals working in law in the UK, I believe?

its all well and good when the property market was increasing 20-80% per year. Foreign currency mortgages will always carry a risk based on the fact that they are foreign currency mortgages. Did you not realize that?

Its all about extracting money from your bank account and putting it in theirs, isnt that what business is all about?

Just a slight edit on your post.

It's all about extracting invented debt from your bank and putting hard earned real cash in theirs.

Not quite, you sign on the dotted line and you agree that the debt exists.

Only then does it exist, so I stand by my statement.

Is it not more about the greed of people, who are wishing to live beyond their means, I don't quite follow the invented debt, as it is market value, the free market dictates the price, according to buyers and sellers. When there is more people with access to money ( buyers) price goes up, when there is less ( buyers) price goes down. One must also take into consideration GREED or the herd/sheep mentality, of following your friends and family in blindly.

The banks create debt out of thin air and expect hard earned cash back for it.


All that proves is that banks control the market and rammed us into a economic recession.



And one must see those that profit from this greed through thick and thin.

One of the first things the Irish bankers did when they got bailed out, using tax payer's money, was they gave themselves bonuses. No other company could ever get away with such fraudulent behaviour.

It's immoral and probably a little off topic to boot ;)

Are you a banker warszawski? Wroclow boy said something in a thread that you were but from reading your posts, I would say you are not one of the "lads" that created this mess.

In the case of CHF (and other foreign currency) mortgages dont the Polish banks act as brokers just adding a couple of % apr to take their cut. I always imagined there was some huge foreign hedge fund actually backing the mortagages.

No I am not, I worked in the financial sector for about 14 years, but it was more VC, than mainstream banking.


Most people you would call Bankers are decent sorts, they believe they are doing a good job and providing a service, there is a certain section that you could class as the "corporate vultures" - thats another story , remember one thing it was " Lehman Brothers" going down and the housing bubble that caused the crisis. In my opinion, we are going to see some softening of prices in Poland, as a private investor in Polish real estate it is not what I would like to see, but the stage has been set:

I think a more interesting question is what sets the stage for a bubble to emerge - One thing that is needed is liquidity and credit, some way of substantially increasing demand. This is the air that inflates the bubble. Even if all the other conditions for a bubble to emerge are present, if there is no way to inflate the bubble - no way for speculators to rush in and drive up the price - then it won't inflate.

If mortgage brokers had done their job and only made loans to people who could pay them back , we wouldn't have a financial crisis. So right away, in nearly the first step of the chain, we have to ask what went wrong, why they were willing to take so many questionable loans. The problem is what economists call an agency issue. The brokers had no stake in the outcome once the mortgages left their hands. The same with banks, all they had to do was process the mortgages, package them up, then sell them and collect their fee.

Think about the incentives here. Suppose you are a mortgage broker and you begin to suspect that the bubble will pop soon, that all this lucrative business might end. To protect the business, should you get worried and start checking mortgages more carefully to make sure that things don't get further out of hand? No, you should accelerate what you are doing, write even more mortgages - nothing you can do can stop the bubble from popping, you are just one of many, many brokers far down the chain - so why not collect as many fees as possible before the gravy train ends? What if everyone thinks this way, and they all rush to sell as many of these things as they can? Mania.

A solution to this is to give each person in the chain a stake in the future outcome of the mortgage. If mortgage brokers' income had been connected to a financial instrument that pays off according to the future performance of the mortgages they write, would they have behaved differently? Probably. (What about homeowners, why didn't they say no? Don't they have a stake in the future price of the home? Homeowners in non-recourse states - and more generally - were basically granted cheap options on their homes. The downside was protected in their mind, but not in reality and they had no reason to effectively monitor risk. If prices fell, they could just walk away and know that their other assets remained safe and that their credit reputations could be restored with time. As we are seeing now on this very forum, people are starting to wake up and if people like "mglaze" default and walk, we will eventually pay the price with either lower resale values because of surplus or higher interest rates so the bank can recoup their losses.

Which wouldn't bother me one bit given that I am currently looking to buy somewhere and can afford the mortgage on it.


Which bother me, given that I want to be able to keep on affording the mortgage.

Perhaps I should 'do a Milky' and join the Biernat campaign to drive down the price of property in Poland?

Timing is everything H, buy when everyone else is selling, sell when the cattle are buying.


If interest rates go up it affects us all. good or bad.

I think I've already missed the really happy times for buyers, can't really see the price of 80 sq.m new(ish) build in the city centre going that much lower than the current prices, can you? As for the selling bit, I'll be hanging on to my current place until prices have picked up more than a little!

There are always individual cases, but as for the city center it is very difficult, I bought an apartment about 18 months ago that will be finished in Nov, the price per m2 was about the same as your neighbors sold for, although I had to wait for four years for the permission for them to build. The building is on the other side of the road to the Chinese embassy. Great location - long wait. I have heard about one that will be being built on Ulica Dzielna, they are getting permission now. The price should be about 10% less than what your neighbors sold for per m2.

Interesting. Personally I'm having a long hard look at Biała Residence. I love the location and they have a couple of flats of the right size which have a bathroom and a shower room (fairly essential with three women and me in the flat).

Its a good historic area, nice old church, its walking distance to most places. Yareal have finished some nice projects, don't know about Hoza 55 though, seems a lot of money for what you get.

ul Biala is a good location, you have good knowledge of the area and know there are a lot things happening there.

Exactly - have a look at 19dzielnica - there are possibilities.

Most people who I know that live in Wola, like the area. "19 dzielnica" is a good location, my only concern would be the number of units, there are too many developers trying to offload " flats" at apartment prices. I would never buy an apartment if there are more then 30 units in the building, because the "prestige" has been taken out. It will be the " prestige " you will be selling, in the future. As I mentioned before, Yareal have restored some nice addresses, there is also another company out there called Restaura Sp. z o.o, they are Spanish capital, completed Piekna 44 and are in the same section of the business as Yareal. H these guys may be worth a visit, you know the score, contact the developers,blow smoke up their arse about how good their developments are, make sure you are on the friends and family list for the first round. JonnyM, my rule of thumb, if they have got to advertise it, I don't want it.

I'm no lawyer or banking expert, but it seems to me this is a case about an unsecuritized debt (i.e. with no assets to back it, which could be reposessed/foreclosed/etc), as opposed to a securitized debt like a mortgage. I also haven't had time to read the whole case so maybe I'm just misinformed - is there also a mortgage or anything else linked in to this same case? It seems to me that defaulting on an unsecuritized overdraft is a bit different ethically and morally (and presumably legally) than defaulting on a securitized mortgage. But again, maybe that's my US bias.

Here's a quote I read this morning from an article in the latest Economist:


All I'm trying to say is, it seems like there is a huge divide in thinking between the US and Europe, and then even between Britain and Poland within Europe. When I start talking about default here, I'm hearing gasps and rebukes of "what kind of person are you", whereas the thinking in the other hemisphere seems to be more one of acceptance of the new reality, that defaults are a natural way of life, and only by taking our medicine and getting them over with, can we get back to a stable foundation to start rebuilding. Anyway that's how I'm coming to terms with all this.


I don't think it's exactly out of "thin air". Presumably banks have already hedged out (from the sell side) all of their currency exposure on these CHF mortgages, using FX futures/options/swaps etc., and so presumably now they view the CHF mortgages as neutral to currency risk, and so they see them as they see any other mortgage, up and down nominally with interest rates, and at risk of the mortgage customer, and that's it. So while we see vastly fluctuating payments from the buy side, the huge amounts we are paying to the bank each month right now are not seen as massive profits from the bank's point of view - I don't think they've taken a "bet" against us on CHF.

But I guess this is what has been missed in the whole discussion. Everyone keeps asking questions like, "didn't you know how much you were leveraging", "why did you take such a risky 'bet' if you're not willing to face the consequences", etc. I suppose in hindsight I can see now how it's hard to believe anyone could get themselves in such a situation unintentionally, and so yes of course it looks like you just have a bunch of risky gamblers who don't want to fulfill their obligations now.

But let me tell you - honestly - back a few years ago when we were wrapping our heads around this idea, the FX risk did not seem like such a concern, and it did also not seem like the fundamental component of the "bet". We were betting on property growth (i.e. "property always goes up") and on the emerging economy of Poland at the time. Well yes obviously those two things have faltered a bit during the recession, and so fair enough, I would willingly take the pain for making a bad bet on property. But I can tell you we had no intention on being double-leveraged on the FX risk involved with CHF. Now it may seem obvious, but back then, it simply was not.

I know ignorance is a horrible defense to plead, but that's really all there is to it. Back a few years ago, when we were just getting these investments set up, there was so much unfamiliar ground to cover. We made multiple trips to visit Poland, visit building sites, meet with developers, meet with property agents, lawyers, and other experts. Set up Polish bank accounts. Register for Polish taxes and permits. Familiarize ourselves with the (completely foreign) Polish beurocratic processes. Not to mention picking up a foreign language, learn about the country, its different regions, history, culture, and customs. In short, our plate was full, doing all the necessary due diligence in a short time. We simply did not consider that we would also need to become experts in FX hedging. I never received a notice from anyone stating "by the way, you should be aware that you are signing on to an FX instrument with massive risk that potentially multiplies your leverage several times further". I recall at the time even joking to some friends involved in the same scheme, "hmm perhaps we should investigate some FX options or something". But it didn't seem like the major risk or even a point of concern at the time. I remember it seemed like I was the only one who even thought of such a thing. The mortgage brokers, lawyers, property agents, managing agents, etc. - none of them ever mentioned anything about it.

Now after several years of this, I am far more familiar with the whole thing, and I have a much better idea how to not fall in the same trap again. So lesson learned, and I suppose that's the positive side. But to everyone who assumes this is the only thing we needed to research and familiarize ourselves with, and therefore we shouldn't be forgiven for our ignorance - well, just imagine, you decide to go into a foreign country where it seems like some of the best opportunity is and you don't want to miss out, so you do all your research, set up a deal, and follow what seem to be the most common customs. Well, like I said, apparently > 50% of mortgages in Poland are CHF-based, so it does seem quite common. But it is very hard to believe 50% of homeowners in Poland are familiar with FX hedging. If it seems so common, and everyone is doing it, then it's hard to believe that could be the most dangerous component. What I still haven't understood is, how that >50% is still making their payments and not defaulting. I suppose if they are all ignorant about mortgage law, and assume it would be a "crime" to default, well that would probably be a good reason.

Well, what can I say, ignorance is no defense. But I'm sure I'm not the only one, and I'm sure I'm not the most ignorant one either.