As many as 800,000 households in Spain have defaulted on their mortgage loans since the property crisis began in 2008, according to an association established to help people facing repossession.
Recent measures to help borrowers at risk of default have helped thousands of borrowers avoid eviction, but the new numbers outline the extent of the issues, according to the report from AFES. The association arrived at the number by adding the number of mortgages in default reported by the Bank of Spain (more than 300,000) with the number of foreclosure procedures (200,000) and the 300,000 families that have already lost their homes.
New measures allow some borrowers to hand back the property to the bank and pay rent instead of mortgage payments, which allows people to stay in their homes and banks to avoid the hassle of carrying empty homes. But the number of “dación en pago” solutions for borrowers, whereby borrowers hand back the property to the lender and cancel the debt, has been going down, not up, the group says.
Thirty-three per cent of defaults are resolved with a dacion en pago, compared to 38 per cent in 2012, AFES reports.
AFES is lobbying for more negotiations between banks and borrowers distress. It’s better for all parties to negotiate a settlement, rather than for banks to foreclose and end up with another empty home they can’t sell and have to pay to maintain. Empty homes also face the prospect of being gutted by thieves or a lengthy occupation by squatters, the group notes.
“We realised there are no magic solutions to these types of problems, but after intervening in more than 7,000 cases we are also conscious of the fact that the present way they are acting is not the best route,” the group said.
A study by AFES last year found that the repossession crisis was affecting all levels of Spanish society for more than originally calculated.
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