Spanish lenders have announced a halt to foreclosures in the “most extreme cases”, in response to a spate of suicides by repossession victims and growing public outrage.

Spanish lenders have announced a halt to foreclosures in the “most extreme cases”, in response to a spate of suicides by repossession victims and growing public outrage.

The Spanish Banking Association (AEB) has announced that its members will halt home repossessions for the next two years “in those cases involving circumstances of extreme necessity.”

The language is vague, but it seems Spanish lenders will stop evicting families who, as a consequence of the economic crisis, now cannot afford their mortgages, and would have nowhere else to go if they lost their homes.

Rather than eviction, banks will first try to offer refinancing, mortgage repayment holidays, debt forgiveness, or repossession and lease-back, say press reports.

It is not yet clear how it will be decided who qualifies for this relief, but clearly not everyone. The vast majority will be expected to keep making sacrifices to pay the mortgage.

I doubt any of this will benefit foreign owners of holiday-homes who cannot afford to keep up with mortgage payments. It may, on the other hand, benefit a small number of foreign resident home-owners who have fallen on hard times.

One of the unreported tragedies of the Spanish property bust is the number of foreign families, especially British pensioners, who are trapped in Spain with a property they can’t sell, and unable to pay the bills.

350,000 evictions to date

350,000 Spanish families have already lost their homes since the crisis began 4 years ago. A recent spate of suicides and growing public outrage have forced the issue to the top of the agenda, and the Government and banks to act.

The Government and the main opposition party are in talks to agree a common policy towards the unfolding drama. Despite a stated objective of finding “urgent solutions”, no agreement has yet been reached.

Luis de Guindos, Spain’s Economy minister, has said that “no family acting in good faith” will be left homeless as a consequence of the crisis.

“With 1 million empty homes, the Government and the Ministry of the Economy, in agreement with the main opposition party, have to take measures to ensure that no family acting in good faith is left homeless by the crisis,” he said in response to a question from an MEP.

“The whole country – the Government, Opposition, and all public groups – have to make an effort to ensure that the most vulnerable families, those in difficulty because of the crisis, do not find themselves in an impossible situation as a consequence of losing their homes,” he later told the press.

De Guindos also said that the imminent introduction of Spain’s Bad Bank will help drive down property prices and make housing more accessible.