The problem has overflowed. Not even the most pessimistic bank managers could have imagined that the real estate madness, unemployment, bad appraisals, the mortgage law and the lack of rigor in granting loans ...
The problem has overflowed. Not even the most pessimistic bank managers could have imagined
that the real estate madness, unemployment, bad appraisals, the mortgage law and the lack of rigor
granting mortgage loans would lead to such terrible human dramas in
evictions like the ones we are seeing these days. The entities are preparing solutions to
tackle an issue that has hit them hard in their reputation. Some now admit that
a good part of those evicted now should have been tenants of an apartment, but never
owners. I think it's a bit late to admit mistakes.
That madness has figures, since the beginning of the crisis in 2008, 350,000 cases of
evictions have been opened, although only 172,000 have been executed, according to banking sources. Of
these, some are primary residences, while the rest are homes on the beach, in
the mountains, garages, commercial premises and industrial warehouses. There are 178,000 more cases that
are in judicial proceedings.
Although financial institutions are not in favor of detailing how many awarded apartments
they accumulate in their portfolios, some data is already known. The Bad Bank, called a company
Asset Management, from Banking Restructuring (Sareb), has made public
that it will receive 89,000 homes and 13 million square meters of land from the old
nationalized savings banks: Bankia, CatalunyaCaixa, Novagalicia and Banco de Valencia.
But the figures for Bankia and its parent company BFA are worse, they accumulate 100 million square meters
meters (equivalent to the entire municipality of Las Palmas de Gran Canaria) of land
unproductive, 45,000 unsold homes and 15,000 premises, garages. A heritage
real estate that is a gigantic tribute to the incompetence and lack of prudence of the
previous managers of Caja Madrid and Bancaja.
The executives who are now in charge of Bankia do not deny it. They admit that if it had not been
granted loans without control, this situation could not have been reached. There have been clear errors
clear, the best demonstration of this is that the delinquency in mortgage credit of the
immigrant community exceeds 5% compared to 3% for the sector as a whole.
However, what they do not easily admit is that many of their clients were workers
with temporary contracts to whom apartments were sold with loans that meant debts
enormous in relation to their income. And this does not comply with the manual of good practices
banking, although no one, neither the Bank of Spain nor the auditors ever denounced it.
In my humble opinion, I believe that the entities have the worst part of this
problem, as they confused their social vocation with fully entering the
mortgage segment of immigrants, as well as the most popular social classes, who took
this already risky path, without having the risk control systems
adequate, with which, the bomb has exploded.
From my point of view, the real estate boom needed intensive labor, especially in
Canary Islands, which had a pull effect on immigrants, who came to Spain to build
apartments and were granted loans to buy them. With the fall of construction, everything has
sunk, they have lost their jobs and are on their way to losing their homes.
Not only were banks and savings banks looking for clients, but also other intermediaries, such as
Real Estate Agents (API) and financial companies. Both were more
aggressive than the entities themselves and collected scandalous delinquency. It should be remembered
that interest rates were at their lowest levels in history after the arrival of the euro
and also, liquidity seemed like an inexhaustible manna. The mixture of these two factors allowed
grant cheap loans and for huge amounts of euros. A good part of these euros,
by the way, from German and French banks.
An offer from those times was the "welcome mortgage". It was a financial product
specially designed for immigrants and was offered in 2005 by the financial intermediary
CreditServices. With only three months of work in Spain, the immigrant could access
a loan that covered 120% of the value of a home. All expenses and commissions of
management were covered and he became the owner of an apartment without putting in a euro. The credit
was granted by entities from the United States. The welcome mortgage got about 50,000
customers per year.
According to statements by the president of CreditServices in 2010, there are seven million
mortgages that if banks do not make an effort to refinance, they will fall. Those are the
bomb mortgages, which will end in evictions or defaults.
They are the same loans that in October 2007, the number two of Santander, Alfredo
Sáenz, baptized as subprime mortgages. "Of course there are subprime mortgages in Spain. It is
a matter of pure common sense," said Sáenz.
All the entities carried out massive campaigns, although not with the same intensity. For
that is why not all the entities have fallen, but something more than half of the sector and no bank
has received public aid. The savings banks took advantage of the real estate bubble to grow
relying on real estate developments. Between 1993 and 2008 they went from 14,000 to 25,000
offices while banks reduced branches from 18,000 to 15,000. Block of
buildings that they financed, branch that was placed in the lower floors; the representative of the entity
connected with a real estate agent or a financial company and the entity closed
the office, and that was an apparent great business.
Therefore, a loan that covers more than 80% of the value of the asset is considered risky
mortgaged, a high effort rate (that the buyer has to dedicate more than 35% of their
income to pay the installments) and the forced appraisals that raised prices. Evictions are
the most savage mutation of these chain errors and the entities promise severe measures
to avoid more evictions. It won't be easy at all.
By Roberto Herbón