Spain Postpones Deal on Foreclosures as Talks Drag On
Spain’s government failed to clinch a deal with the opposition to prevent families being evicted for defaulting on their mortgages and said talks would continue today to draft a decree by the end of the week.
After six hours of negotiations in Madrid late yesterday, government and Socialist party officials agreed to reconvene today to thrash out a decree the Cabinet will approve on Nov. 15, said a government spokesman who asked not to be named in line with policy. He gave no details of the proposals.
Prime Minister Mariano Rajoy, who faces a general strike this week amid mounting street protests, pledged measures to stem evictions on Nov. 9 after a woman committed suicide as officials tried to seize her home. Rajoy is trying to respond to outrage over evictions amid a taxpayer-funded bank bailout without inflicting further losses on a financial system crippled by the collapse of a debt-fueled housing boom.
“No family in good faith should end up homeless as a result of the crisis,” Economy Minister Luis de Guindos told the European Parliament in Brussels yesterday, without giving details of possible changes.
As the bipartisan committee prepared to meet yesterday, Spain’s banking association announced a two-year freeze on repossessions in cases of extreme need for “humanitarian reasons.” The measures being discussed by the committee would include grace periods, Maria Dolores de Cospedal, deputy leader of the ruling People’s Party, told reporters yesterday.
Some 400,000 homes have been foreclosed in Spain since the collapse of the decade-long property boom five years ago. The number is set to increase without government action after unemployment reached a record 26 percent in September. Banks lent more than 600 billion euros ($762 billion) of mortgages. Those loans have a default rate of 3.1 percent, compared with 10.5 percent for lending as a whole, according to data from the Bank of Spain, which predicts further increases in bad loans.
“There will be pressure to try to limit the number of mortgage evictions and iron out some of the inconsistencies in the legislation,” Daragh Quinn, a banking analyst at Nomura International Plc in Madrid, said in a phone interview. “It could cause increased losses on mortgages for banks and reported rates of NPLs if it affects their ability to recover assets.” NPLs are non-performing loans.
Spanish banks, some of which are set to benefit from a European rescue package of as much as 100 billion euros and the creation of a so-called bad bank backed by taxpayers, have become the focus of public outrage over foreclosures. In a Metroscopia poll published on Nov. 11, 91 percent of respondents said lenders exploit clients’ lack of legal knowledge to insert abusive clauses into mortgage contracts, while 31 percent said some banks have acted in good faith.
Amaia Egana became the second person in the past month to commit suicide in Spain over an eviction when she threw herself from her apartment in Baracaldo as officials arrived to change the locks on Nov. 9.
“If we bail out the banks, how can we not bail out families?” Socialist Party No. 2 Elena Valenciano said in a Nov. 7 interview on Telecinco. She is negotiating the eviction measures with Deputy Prime Minister Soraya Saenz de Santamaria.
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