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Valencia Property

The Spanish Government, Banks and Repossessions.

Up to now if you couldn’t pay your mortgage in Spain you had three months and then the bank would start proceedings to embargo (Repossess) your property. The process would usually take around a year and at the end of the year when nobody bought it at auction because of the debt on the property, original mortgage debt plus around 35% costs on top, the bank would adjudicate it to themselves at 50% of mortgage value, sell it onto an investor, usually another financial institution, and then start the process of recouping the money from you for the rest of time, they could embargo a percentage of your wages above 648 Euros per month.

That has now changed, more of that later, but first the background.

#15M Protest Banner in Valencia

#15M Protest Banner in Valencia

People in Spain are sick of two things, banks and corruption, especially in the political class. The banks are seen to be predators preying on the weakest in society after being reckless, and even brazen in their recklessness for many years, and they are not perceived to be suffering like the rest of the population.

Politicians in Spain are just corrupt and self serving, end of story. No arguments, they just are.

Anyway, the demonstrations of the #SpanishRevolution since the 15th of May have started to have some effect on the government and funnily enough the opposition which has supported the measures below.

The government has now raised to 50% above the previous limit the starting point for banks to embargo some of your future wages if you default, you can now earn 960 Euros per month without the banks being able to get their hands on it, it’s not much but it’s a start. Also the banks cannot now adjudicate the property to themselves at 50% of the mortgage value leaving you to pay the extra, the government has moved the value to 60% meaning anyone embargoed will have less to pay.

However the #15M movement wants the country to go even further and their protests are set to continue. They are well organized and have already stopped evictions taking place in many parts of Spain by forming human cordons around places due to be taken from their owners.

They are also pushing for “Dación en Pago” to be allowed to pay back a debt. What “Dación en Pago” means is returning the keys to the house to the bank as full payment of debt like in the United States and leave the ex owner debt free by doing so. This would assume that banks have been prudent in their lending in the past and if they haven’t then they pay for it. Funnily enough many of the best known judges in the country are fully behind the proposal but despite judicial support it looks like the political classes will not bring it into law as their paymasters in the banks are using their powerful lobbying group to suggest that they will stop lending completely if they are forced into accepting “Dación en Pago”

Here is the opinion part. So what? The banks in Spain are not lending anyway except on their own properties so they can make their books look better. Getting a mortgage, a business loan, a personal loan or even a credit card is extremely difficult for anyone currently, even people with large incomes wanting small loans or well functioning businesses. Let the banks make their threats but bring in “Dación en Pago” and let them suffer. After all every single repossession in Spain so far in the last five years could have been avoided by the government having invested just 500 million Euros (How does that compare with the bailouts of banks around the World then). The banks are vultures preying on those with problems due to the excessive interest payments and abusive contract terms they imposed even during the boom years. Let them suffer.

(And yes I know this will undermine confidence in the banks and lead to Moody’s and Standard and Poors’ lowering Spain’s debt rating. Guess what I couldn’t give a monkeys. Those ratings agencies are totally discredited, after all it was they who gave AAA ratings to junk mortgages and Greek and Irish debt.

Why does anyone listen to them?

What do you think?

Repossessions in Spain

Repossessions in Spain

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