Abogados y Economistas


The real estate investors and the first executive copies

- Maria López-Amo Musoles

The General Directorate of the Registry and the Notary (DGRN) has issued a resolution on June 18, 2018, which has been an important novelty in the Spanish mortgage market, by allowing investment funds that have acquired portfolios of non-performing loans, may request the Notary to issue "another copy for the purpose or enforceability of an authentic public deed of loan, credit or any other operation secured by a mortgage on a registered property" when the applicant has not obtained one previously.

In our legal system, those who seek to collect their credit in the fastest and most privileged way, especially in cases of mortgage loans, must prove it by providing the corresponding Mortgage Deed, provided that this is the first copy and has executive character, which  has been formally drawn up or  registered as an authentic instrument, as provided in article 571.2.4 of the Civil Procedure Law.

For this reason, until now, these investors - commonly referred to as "servicers" - who, after acquiring failed portfolios, became the new holders of the loans, were hampered by their recovery strategy, to the point that it could be delayed for years, since in many cases these first copies with executive force were lost in the offices of the banking entities, the initial holders of the credit. In consequence, they lost the possibility of resorting to summary proceedings such as foreclosure, being forced to file declaratory procedures for their subsequent execution, thus generating more costs and delaying the recovery of the loan. Major complexity presented the cases in which the Executive Copy had already been issued in favor of the bank, which transmitted its credit to the "servicers", who were subrogated in their position as creditors of the operation.

This has inevitably had an impact on the Spanish banking market: the higher costs in the recovery of credit entailed the greater restriction of banking entities when granting loans, and at the same time, discouraged investors from acting in our market.

Because of the problems that this generated, ten of the largest investors "servicers" made a consultation before the DGRN, whose resolution is binding, so that it clarifies if the Notaries are authorized to issue copies of an executive nature or force through these investors that have been adjudicated no-performing loans, even in the cases in which the copy with an executive force had already been issued in favor of the entity in whose position they had been subrogated.

The conclusion reached by the DGRN to endorse the power of Notaries to issue such copies, is that, having disposed of the transferor (the bank) of the ownership of the credit, and therefore of its legitimacy to exercise the privileged executive action, nothing prevents the notarial law (referring to articles 224 and 233 of the Notary Regulation) that the new holder of the credit (the "servicer" or investor), once accredited the ownership, can issue a copy with such character.

That is to say, according to the resolution of the DGRN, even if copies have been issued with an executive character of the same loan previously, those investors who had not requested it, will be able to claim it before the corresponding Notary, thus seeing their right of collection ensured, being able to go to the executive way (foreclosure), without having to resort to prior declaratory procedures, reducing costs and minoring execution times, attracting investors, which favors the credit market and strengthens the mortgage as the best guarantee for housing acquisition