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Spanish Bank Ready to Sell Struggling Home Loan Portfolio

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Slowly but surely Spain’s bank are moving to jettison the property-related assets weighing down their portfolios. In the latest announcement, Catalunya Banc SA, which was taken over by the government in 2011, is selling €6.95 billion ($9.6 billion) of residential home loans, most of which are described as “heavily delinquent.”

The mortgage deal could be one of the largest in Europe this year, the Wall Street Journal reports. It also could remove a huge negative asset from the books of the Spanish banks, which may soon be facing stress tests.

The portfolio sale has been given the odd nickname of “Project Hercules,” the Journal reports. Forty-three percent of the loans are “non-performing,” which means the loans are more than 90 days overdue, while another 15 percent are up to 90 days overdue, the paper reports.
Most of the mortgages are on residential property in the province of Catalonia, while the remainder are in Valencia, Madrid and other regions. The Journal reports.

Catalunya Banc was the second largest of the government take-overs of Spain banks, which were badly damaged by the collapse of the real estate market. Last week, Blackstone Group, the U.S.-based investment firm, paid €40 million for Catalunya Banc’s real state-servicing unit, the latest move by a Spanish bank to sell their services department.

The bank’s portfolio is one of several mortgage packages on the market. Commerzbank AG is selling a €4.4 billion portfolio of Spanish commercial property loans, which it has given the equally odd name of “Project Octopus”.

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