The Portalegre ruling, that a property returned to a bank will wipe clean the mortgage debt, has delighted consumer groups, and has worried banks.
A working group from the Ministries of Finance, Economy, Justice, and the Bank of Portugal, is reviewing the decision of the court in Portalegre.
The government is now to consider a legislative framework to regulate similar situations after the decision of a judge went in the debtor’s favour.
The case in question was for a loan of €117,500 taken out in 2006 by two customers who later failed to keep up interest payments. Espírito Santo Investment Bank seized the property for 70% of the loan and was pursuing the owners for the balance of €46,356. The Court did not accept that this money was still owed and ruled that the house would be sufficient to repay the debt.
Several consumer associations have applauded this result and have called for the government to proceed with a framework to make law this type of situation.
The working group established by the Government will review initiatives already proposed by various parties to parliament. The Left Bloc delivered a proposal that mirrored the judgement in Portalagre. The PSD and the Communists confirmed that they are seeking ways to help families that default on their mortgage payments.
First published May 2012
