Almost 10pc of Spanish households facing foreclosure say NYT

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  • #55929
    Profile photo of Anonymous
    Anonymous
    Participant

    I spotted this para in a recent article in the NYT:

    An estimated 1.4 million Spaniards are facing potential foreclosure
    proceedings, according to Spain’s consumer protection association, known as
    the Adicae. Recent figures from the courts show that the numbers are rising
    fast. In 2007, there were just 26,000 foreclosures. Last year, there were
    more than 93,000. Early indications suggest that they will be higher again
    in 2010.

    If true this is horrendous. 1.4 million Spaniards – does that mean 1.4 million households, which is almost 10% of all Spanish households, or does it mean 460,000 households, assuming average of 3 people per household? It’s not clear.

    If the former, it could become an explosive situation. Of course this situation mainly applies to primary homes around cities, not really holiday homes on the coast.

    Worth reading the whole article, if you are interested in the human misery behind Spain’s property boom and bust. Spain’s real estate boom, which made some people very rich, has turned out to be a terrible curse. The banks are central villans of the piece.

    Everyone repeat after me: The bondholders (banks, other lenders, and their shareholders) must pay their share of the crisis. Borrowers were foolish, but so where lenders, and they must pay too.

    Anyway, here’s the article:

    In Spain, Homes Are Taken but Debt Stays
    By SUZANNE DALEY
    Published: October 27, 2010

    Lourdes Segade for The New York Times
    MADRID — Manolo Marbán, 59, is still living in his house in Toledo and going
    to work in the small pink-and-aqua pet grooming shop he bought here in 2006,
    when he got swept up in Spain’s giddy real estate boom.

    Manolo Marbán, a pet groomer in Madrid, lost his home and his grooming shop
    to foreclosure and will still owe after eviction.

    The daughter of Mario Gozálvez may spend her life paying off his debts
    because she acted as a guarantor in a deal gone sour.
    But Mr. Marbán does not own either anymore. The bank foreclosed on both
    properties last April, and he is waiting for the courts to issue the
    eviction notices. For most Americans facing foreclosure, that is the end of
    it. But for Mr. Marbán and thousands of others here, it is just the
    beginning of their troubles. When the gavel falls on his case, he will still
    owe the bank more than $140,000. “I will be working for the bank for the
    rest of my life,” Mr. Marbán said recently, tears welling in his eyes. “I
    will never own anything — not even a car.”

    The real estate and banking excesses in Spain were a lot like those in the
    United States. Construction boomed, prices rose at an astonishing pace and
    banks gave out loans just as fast, often to customers like Mr. Marbán, who
    used the equity in his house to finance a mortgage for his shop. But those
    days are over. Spain now has the highest unemployment rate in the euro zone
    — 20 percent — and real estate prices are dropping. For many Spaniards, no
    longer able to pay their mortgages, the fine print in the deals they agreed
    to years ago is catching up with them.

    Not only are Spanish mortgage holders personally liable for the full amount
    of the loan, but throw in penalty interest charges and tens of thousands of
    dollars in court fees, and people can end up, like Mr. Marbán, facing a
    mountain of debt. Bankruptcy is not the answer, either. Mortgage debt is
    specifically excluded here.

    “Effectively, you can never get rid of this debt,” said Ada Colau, a human
    rights lawyer who works for Plataforma, a new advocacy group formed both to
    give legal advice to homeowners and to push for reform of the country’s
    foreclosure laws. “Other countries in the European Union also have personal
    debt mortgages, but you can go to the courts and get relief. Not in Spain.”

    Several opposition parties in Parliament have been pressing for amendments
    to the country’s foreclosure laws, including letting mortgage defaulters
    settle their debts with the bank by turning over the property. But the
    government of José Luis Rodríguez Zapatero has opposed such a major change
    in lending practices. Government officials say Spain’s system of personal
    guarantees saved its banks from the turmoil seen in the United States.

    “It is true that we are living a hangover of a huge real estate binge,” said
    Marcos Vaquer, who was the under secretary of the Housing Ministry until a
    government reshuffle last week. “And it is true that far too many Spaniards
    have excessive debt. But we have not seen the problems of the U.S. because
    the guarantees here are so much better.”

    Immigrants who moved to this country in the boom years and were the first to
    lose their jobs in the downturn, like Jaime Abelardo, have been the most
    severely affected so far. Mr. Abelardo arrived in Barcelona from Ecuador in
    1999 with the promise of a job in a warehouse. A few years later, he could
    afford to bring his family over and buy a tiny apartment. Or so he thought.
    But within two years, he was laid off. He blames himself for not having been
    more cautious. Still, he cannot get over the figures printed on the
    dog-eared papers he has received from the bank.

    They say he now owes nearly 260,000 euros, almost $360,000, which includes
    about 77,000 euros to cover all court costs, including the bank’s, his
    lawyer said. He bought the apartment for less than that — about 220,000
    euros, he thinks, though many aspects of the deal were never clear to him.
    His wife has left him. His unemployment payments are about to run out. He
    would like to go back to Ecuador with his four children, but he does not
    have enough money. “I’m thinking about shooting myself,” he said.

    An estimated 1.4 million Spaniards are facing potential foreclosure
    proceedings, according to Spain’s consumer protection association, known as
    the Adicae. Recent figures from the courts show that the numbers are rising
    fast. In 2007, there were just 26,000 foreclosures. Last year, there were
    more than 93,000. Early indications suggest that they will be higher again
    in 2010.

    A recent Standard & Poor’s report found that 8 percent of Spain’s housing is
    now worth less than the value of the mortgage, and with prices continuing to
    fall, experts believe, that figure could rise to 20 percent.

    Advocates say that Spain’s foreclosure procedures tilt far too much in favor
    of the banks, virtually guaranteeing that mortgage defaulters will end up
    owing large amounts after they lose their homes.

    Banks have the right to auction houses in foreclosure. If no buyers appear,
    as is often the case these days, the bank can take ownership of the house
    for 50 percent of its value, according to the estimate either at the time of
    purchase, or at the current time, depending on what the mortgage specifies.
    The banks then have 15 years to go after the homeowner.

    If the banks initiate proceedings at any point, the clock starts ticking
    again, experts say. In the meantime, the bank can charge interest on that
    debt.

    Montse Andrés Sabaté, a lawyer with Ausbanc, a consumer association that
    specializes in banking services, says the banks usually charge 5 or 6
    percent, but sometimes much more. “We’ve seen 18 or even 19 percent,” Ms.
    Andrés said.

    And then there is the matter of guarantors. Bankers pressed many homeowners
    to find guarantors at the time they took out the mortgages or when they
    began to struggle to make payments. Mario Gozálvez, a truck driver, asked
    his 23-year-old daughter to act as a guarantor when he used the equity in
    his Barcelona apartment to buy a truck three years ago. At the time, she did
    not even have a job, and he thought of it as a silly formality. Now, she
    faces a lifetime of paying off his debts.

    “She may not be able to inherit anything from her mother because the bank
    can seize it,” Mr. Gozálvez said. “No one explains this.”

    Early in the crisis, experts say, the banks were lenient with immigrants who
    had no assets and accepted the property as payment for the loan. But some
    advocates say they are tougher now. Under the law, the banks have the right
    to collect a percentage of a debtor’s income if it is above $835 a month.

    Santos González Sánchez, the chairman of the Spanish Mortgage Association,
    says it is the bank’s duty to try to collect. “This helps to explain why our
    financial entities have not gone bankrupt,” he said.

    Personal liability mortgages are common in Europe. But advocates here say
    that aspects of Spain’s procedures — how quickly banks can foreclose, the
    interest rates they can charge and the repayment schedules they can demand —
    are particularly severe. This month, even Mr. Zapatero’s party joined in
    voting for a parliamentary motion to slow foreclosure proceedings.

    Mr. Marbán knew he was in trouble within months of buying the pet store as
    his business began to taper off. To keep the bank from foreclosing, he gave
    it whatever he could scrape together. At one point, he sold his car at a
    huge discount to meet a payment. Eventually, he sold his wife’s gold
    bracelet.

    But it was no good. He could never catch up on what he owed.

    “It’s funny, when I finally lost the house, I started sleeping,” he said. “I
    cry sometimes, but at least I sleep now.”

  • #101342
    Profile photo of Anonymous
    Anonymous
    Participant

    What caught my eye was this:

    A recent Standard & Poor’s report found that 8 percent of Spain’s housing is
    now worth less than the value of the mortgage, and with prices continuing to
    fall, experts believe, that figure could rise to 20 percent.

    That is a horrendous figure and has all sorts of implications aside from the impact on the individuals involved. What does this do in terms of damaging the economy? Lack of labour mobility, depressed consumer spending, etc, etc.

    If this does come to pass, we surely must see some fairly big banks go to the wall. I can’t see the ECB stepping into the breach and i doubt those few Spanish people still paying tax could shoulder the burden.

  • #101368
    Profile photo of peterhun
    peterhun
    Participant

    @mark wrote:

    I

    Everyone repeat after me: The bondholders (banks, other lenders, and their shareholders) must pay their share of the crisis. Borrowers were foolish, but so where lenders, and they must pay too.

    Ah, but the beauty of the banking industry is that when you penalise bankers, the borrowers suffer as well due to lack of lending pushing house prices down. Banks are in a win-win situation; can’t go bust, make profit when prices rise and the government legislates/lends to ensure they make back their losses in a crash.

    The solution for debtors is obvious; work in the Black economy or emigrate. The reason Spanish banks look solvent is that they can claim that these debts (inflated with large interest payments of course) will be repaid and keep them on their books.

  • #101380
    Profile photo of GarySFBCN
    GarySFBCN
    Participant

    Well, if the banks in Spain are anything like those here in the US, they won’t budge or share the pain, even if it is their best interests to do so.

    Instead of making minor concessions on the interest rates, they pretend that they cannot do anything and end up owning the property. Here in California, people have the right to ‘walk-away’ from their mortgages and homes, leaving the banks (you know, the ones that refused to negotiate the mortgage for home owners) owning property that has lost much of its value and former home owners emotionally broken and starting over.

    And guilty the banks are. They lent money to people who could never repay, falsified paperwork, inflated appraisals, etc.

  • #101381
    Profile photo of Anonymous
    Anonymous
    Participant

    Yes, they are as in America!!!! A friend of mine had a property for nearly ten years with 50% equity, met all his payments never missed one payment.

    He just wanted the Bank to reduce the interest rates before the anniversary due date or make his payments interest only for a 12 to 18 months, until he sorts himself out. The Bank did not agree & he hand to do ” dacion de pago ” I think this what it is called, where the borrower agree with the bank & hand over the keys with no follow up. Yes he had to pay for the cost of taking this action as well.

    An perfectly good customer needless to say that he will never buy in Spain again nor his family, friends after hearing that he lost over £70k , because of the banks inflexibilty.

  • #101382
    Profile photo of katy
    katy
    Spectator

    Don’t know where I read it but this week a man said they had been forced to return to the UK. Finding it impossible to pay the spanish mortgage and rent in the UK. He asked the spanish bank to change the terms of his mortgage and they want to charge him 6000euro to do so.

  • #101383
    Profile photo of Anonymous
    Anonymous
    Participant

    Some of the change of terms may means change of product & this in teurn means taxes & Notary fee. Spanish Government is an accomplice in this perpatuation of misery.

  • #101386
    Profile photo of Anonymous
    Anonymous
    Participant

    can the banks cope with having all these extra homes on their books surely there are only so many they can have until they have a cash flow problem.Also with so many homes already unsold even if they wanted to unload them would they be able to without sending the housing market spiraling out of control.

  • #101387
    Profile photo of Anonymous
    Anonymous
    Participant

    That, dartboy, is the million dollar question.

  • #101401
    Profile photo of logan
    logan
    Participant

    The banks can cope and indeed profit from the current situation. Individual stories of hardship are part of the human condition. What is important from the States point of view is that their institutions remain relatively undamaged so they continue to perform for the future. Spanish banks are protected by the EU and will not be allowed to fail. Some Caja’s may merge but the core banking system is safe and will prosper.
    Individuals who borrowed unwisely or even wisely must summon the courage to deal with their problems because in a capitalist economy failure is soon forgotten. Moving on is the only workable alternative. Giving up can never be a useful option.

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