Spanish Banks and their approach to transparency
Over the years of arranging mortgages in Spain one develops an understanding of the behaviors of each Bank offering mortgages and the efficiency of their processes.
Some Spanish Banks offer good headline rates and make it difficult to justify not recommending them but good rates are only part of the story.
Finally if it is near on impossible to get an application to completion and or the Bank changes criteria constantly the rates offered by a lender become a mute point and of no consequence to either the broker or the client.
Applying for the best rate can often backfire on an applicant with the lender in Spain taking an unnecessary and unacceptable timescale to come back with feedback about application, and in many cases then not wanting to proceed for reasons that could have been given on immediate receipt of the loan being presented for risk assessment.
Every Spanish Bank has the right to change criteria and to want an application to meet their current guidelines on overall criteria but it should not take weeks to get to this point.
What is happening in the market currently
A good case in hand is UCI. UCI is the joint venture lender owned by Banco Santander and BNP Paribas. The sole function of UCI is to lend money in Spain they do not have a banking network or offer other products.
UCI hard hit by fraudulent applications during the boom, and hard hit by subsequent arrears, never the less has survived and in the past months have actively been looking to attract new applications. In an effort to gain new clients they re-launched non resident lending at 70% loan to value and a range of very competitive loans both variable and fixed and unlike their competitors do not add life cover as a requirement.
The competitiveness of the rates and lack of life cover has meant that they have become on many occasions, for loans below 300k, the best choice for clients and have been recommended extensively.
So what are the issues.
Each week UCI change the parameters without warning and often without logic. It is impossible to second guess what the next change for an application in Spain may be. On top of changing regularly parts of their criteria they fail to pick this up on new applications early on the process or on existing applications that have been in the system for some weeks.
After taking a number of applications based on their portfolio of products, which have to be classed in the best buy tables, and perhaps scaring themselves with the volume they received, the following changes have been made.
From having no criteria over number of buy to lets owned in the country of the applicant’s residence they changed this to no more than 2. This change was made without warning and a number of applications were allowed to progress despite the fact that it was clear the applicant had more than two buy to lets.
Withdrawing from lending in certian blackspots
UCI withdrew last week from a number of areas within Spain citing that they no longer wished to lend in these areas due to an overally high exposure to properties there already and a significant amount of arrears and re-possessions.
The first area to be classed as a no go was Alicante. The new criteria was only found out for us when an application that had progressed all the way to underwriter sign off was approved, but only if the client bought outside Alicante. As the lender had the Nota Simple, a Spanish property was already found and clear in the application when submitted some weeks before, why they thought approving but not for the area of the property is beyond comprehension.
On top of it being clear where the client was buying due to previous issues with introducers back in the “good old days” a part of the process for UCI is a call to the client direct to ascertain they are who the third party says they are and to check the validity of the documents given. This call was made for our application in Alicante so the client had been in direct contact with UCI and had confirmed where they were buying before the loan was approved but denied in the area they were buying.
After stating that Alicante and Murcia were out of bounds for UCI, but not mentioning any other region it then transpired they had added to the list. Nerja, Almeria, Castellon, and Mojacar. When these changes were made who knows but it has drawn to a halt a number of applications.
Next on the list of changes, made without warning, was that now applicants must attend Notary themselves in person to sign. Most lenders will allow a Spanish Lawyer with the right Power of Attorney to sign on the borrower’s behalf and for most nonresident buyers in Spain this option is chosen so as to avoid an unnecessary trip to Spain.
And finally in a week that has seen unprecedented changes the early redemption penalty on the lenders previously very good fixed rate portfolio has been increased from 1.5% to 3%.
So are UCI alone
Sadly this type of constant changes and lack of service when a loan is denied is not totally confined to the likes of UCI. One major Private bank recently after three months rejected a direct client because he was buying a Rustica not Urban. At application the client had given the Nota Simple which clearly stated Rustica. The Bank also said that no Bank in Spain would lend because he was working in a non taxpaying jurisdiction. Apart from this being wrong. the fact he had no tax document was known from the start so why did it take 3 months to say no.
Other lenders including one major Bank have increased rates in January, decreased them again in February, and changed the status on three occasions since the start of 2015 on their premier product and it is now normal to see changes happen on a weekly basis making it a minefield for both mortgage advisers, branch staff and direct applicants.
Lack of robust regulation in Spain can cause a number of issues but in general it is Bank behaviours not intermediaries that are at fault.
As experienced advisers on Spanish Mortgages we have to balance all factors for client’s this will include rate, efficiency, stability, transparency and service levels, we cannot work form headline rate alone. Risking client’s deposit monies by using an ineffectual Bank or one with flakey terms and conditions is as bad as not giving advice at all.