(…continued from Spain’s housing repossession nightmare and dación en pago — Part 1.)
In November 2010, a judge in Navarre found “that the proceeds from the sale of a home repossessed by the BBVA bank were sufficient to clear the former owner’s mortgage debt” (El País), which made that former owner very happy and probably gave hope to a lot of others in similar positions.
This article from El País (in English) gives a very good rundown of this case in which “the court […] all but accused BBVA of deliberately conniving with estate agents to inflate the value of properties in order to lend larger amounts of money to homebuyers”, saying that it was “morally repellent” for a bank to pursue borrowers for additional claims that were the result of financial malpractice.
This is just one court’s interpretation, but it fairly accurately sums up what was happening, at least on a large scale. Although perhaps not all those involved at the micro level were really conscious of what was going on—they were probably just going with the flow.
BBVA was going to appeal the ruling, although I haven’t been able to track down whether it did or what the outcome was, but, at any rate, it doesn’t sound like other courts have taken the same view in similar cases.
But would it be feasible to systematically write off debts, which is what would effectively happen if other courts were to follow suit? In the US, some states have actually passed non-recourse legislation that protects the borrower from being pursued for any shortfall after an auction or short sale, so maybe it’s an option.
Recent election promises
Proof that these repossessions have become such a problem—or at least a big enough one to be noticeable—is that dación en pago was a feature of the recently run Spanish electoral campaign.
Most parties had a stance on the issue, although, as is often the case, the parties less likely to win were the ones with the most innovative or radical proposals. The PP on the other hand—the party most likely to win and which in fact did win—was as non-committal as it could be about possible measures.
From the other parties, most of the proposals were modified versions of the current dación en pago that entailed imposing conditions such as making the measure applicable only for primary places of residence or where there is economic hardship. Some even called for introducing it retroactively.
Given that dación en pago already exists, I suppose that all these proposed measures also included the removing of the conditions of there being no negative equity or a repossession action underway, although this wasn’t stated, as without doing so, any new measure would be as ineffective as the present one.
Any new legislation will also have to address the attitude of the banks, who, to date, have generally preferred to pursue defaulters without being willing to explore other avenues.
This is not happening everywhere else, at least not always in the US. As shown in this story that was referred to in the comments to my first post on this (thanks David!), where the bank cancelled the outstanding debt after a short sale.
This is not happening at the moment in Spain, so maybe it’s time for more novel solutions or at least tighter regulations.
Among the more original proposals were the ICV-EUiA’s social rent and the proposal from Izquierda Unida-Los Verdes for putting bank-owned properties up for rent.
This type of idea is interesting because it involves making use of one of the effects of the problem: a lot of empty homes. In Madrid alone, 51,101 new properties are vacant.
This has actually been the trend in Spain since the housing boom, although it has got worse with the recent surge in repossessions, as it has in the UK too it seems, where there is also a surplus of empty properties, although the original causes of the situation there may have been different.
The idea in both places is obviously to get this housing back into circulation, just how to do that is the difficult part.
In what appeared to be a useful solution for at least some situations, a bank in Catalonia was suspending mortgage loans and renting people their homes until they could afford to make the payments again, although this doesn’t seem to have become a very widespread practice.
These more radical solutions might be a headache to implement, but given the breadth of the problem and depth of the crisis, a version of them may be the way to go.
So how do you translate “dación en pago”?
One approach—and a good one I think—is to describe it and then use dacion en pago, as is done here. This same page also uses datio pro soluto at one point, but I’m not sure that’s going to be very helpful to anyone, and I wouldn’t use it.
Dation in payment might be another option as it is used in Louisiana (a mixed, common law–civil law system) according to this page, which also says that the concept is often referred to as giving in payment. Although probably the best option, given on this same page, is deed in lieu of payment, which is defined here.
Deed in lieu of payment is nice as it includes the component of negative equity. The other handy thing about it is that if Spain were to introduce a second, slightly different measure solely for when a repossession order has been instigated (which currently excludes the use of dacion en pago), deed in lieu of foreclosure could be a good option to differentiate between the two.
Dación en pago is sometimes translated as accord and satisfaction, which appears to be quite a good common law sounding translation. However, while it’s technically the same, it’s probably too general for some contexts as it does not specifically refer to real properties, as dación en pago generally does.*
Short sale might be another option. But while it is used in this article to implicitly entail the cancelling of the outstanding debt, technically, the term refers only to the selling of the property for less than the amount owed, it does not automatically mean that the bank will not pursue the lender for the shortfall.
So, as is often the case with legal translation, there is a range of options, which is why the legal translator needs specialised knowledge in the field of law to be able to choose the best translation for the document or context in question.
The other thing about legal translation is that the concepts are susceptible to change and redefinition at any time. Depending, for instance, on what the new Spanish government does about this epidemic of repossessions, we might need to rethink the translations of dación en pago very soon, or have to work out how to translate whatever new invention it may come up with.
And a new invention would be nice. Who knows? Maybe we’ll get lucky.
* On revisting dación en pago as part of this research, I should highlight that the term is not exclusively tied to real estate as I suggest above (although in recent times—and probably most of the time—it’s about the only thing it has been referring to). This means that accord and satisfaction is quite a close match, even though it may be a little opaque for non-common law audiences, although that is another story. 🙂
dación en pago: The giving in payment is an act by which a debtor gives a thing to the creditor, who is willing to receive it, in payment of a sum which is due.
Dahl, H.S. (1999) Dahl’s Law Dictionary/Diccionario Jurídico Dahl. 3rd edn. New York: William S. Hein & Co. p 123.
Image courtesy of jarpur