There are many reasons why a mortgage loan nullity could be declared by a judge. Some loans are against the Usury Law of 1908. These usurious loans usually have:
- A much higher interest rate than the normal market ones.
- Invariably foresees an abusive delay in interest
- It is also possible that could be nullified because the amount of principal declared is actually more than the amount originally paid over
The Supreme Court ruling 302/2020
In the court decision indicated above, the Supreme Court declared that a mortgage loan contract be declared void in accordance with article 1 of the Usury Law, which states that it will be nullified if;
“The contract in which it is stated that a greater amount has been received than the one actually delivered, whatever its entity and circumstances.”
Thus, in this court decision, and other previous ones, the Supreme Court speaks of a “counterfeit or untrue loan”. It is the one by which, in a fraudulent way, a hidden profit is obtained, by the lender. Declaring that a greater amount has been lent than that actually delivered.
There will not be in a voided mortgage loan, when;
- Interest is charged in advance.
- It includes amounts to be discounted for services done.
- Nor if an amount is withheld to pay debts, or expenses.
This then means that the loan has been properly executed.
Forged or untrue loan
In this case, it was pointed out that an amount had been paid to the client, partly by cheque and partly in cash and included a part that was for brokerage expenses, provisions for expenses, interest, etc.
But in reality, what was being hidden, is that it was being declared as an amount received, greater than that which was actually paid.
The Supreme Court reaches this conclusion, due to consideration of various circumstances;
- The information concerning the amount of advance payment of interest, was not advised to the client, (the borrower)
- It was not explained, what the intermediation service was being charged for
- There was a failure to specify what expenses were to be paid from the amount withheld
- The amount withheld was disproportion to the principal of the loan
Consequences: mortgage loan nullity
In the event that a bigger amount is declared as being received than the actual amount paid then a mortgage loan nullity could be declared. This means;
- Borrowers or clients must return the amount actually received.
- Voiding of the mortgage on the property. The property would be free of charges.
- The lender must repay any amounts received from the borrower
- In the event that a foreclosure procedure has been initiated it must be cancelled.
If you have been the victim of a false loan, (if it was declared that you had been paid more money, than that actually received), you should know that you can legally claim the mortgage loan nullity.
The information provided in this article is not intended to be legal advice, it merely conveys information related to legal issues.
Carlos Baos (Lawyer)
White & Baos
Tel: +34 966 426 185
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