Posted on 08/19/2013 5:00:45 AM PDT by DeaconBenjamin
Tough mortgage laws in Spain have allowed banks to evict more than 400,000 people since the 2008 economic crisis hit and the housing market subsequently collapsed. Our Observer explains how a grassroots movement in Granada is successfully forcing banks to drop plans to evict people by holding sit-in protests on their premises.
Imagine losing your job, failing to make your mortgage payments and then finding out the house you bought ten years ago is worth €100,000, instead of the €450,000 you paid for it. The bank repossesses your home, but by law you still have to pay back the full mortgage, complete with interest and late fees, even after you have been evicted. Debt-laden, unemployed and evicted: this is the plight of hundreds of thousands of Spaniards who have been hit hard by the toxic combination of an economic crisis, austerity measures and harsh housing laws.
In a bid to reduce Spain’s 10.6-percent budget deficit, Prime Minister Mariano Rajoy’s government has increased taxes and made big cuts in public spending, including health, education, unemployment benefits and pensions. Civil service jobs and pay have been slashed and unemployment in Spain stands at 26 percent.
As banks continue to evict, there are 3.4 million empty homes in Spain – nearly 14 percent of the total housing stock – most of which is owned by banks. A series of suicides by evicted citizens and those on the verge of eviction thrust the crisis into the spotlight and put banks and the government under fire from the media and the EU.
In March this year, the EU Court of Justice ruled that Spanish law gave “incomplete and insufficient” protection for mortgage holders and ruled in favour of giving Spanish courts new powers to delay evictions. Before the ruling, Spanish law meant citizens faced eviction if they fell behind on the mortgage repayments by just a month.
The ruling was a victory for campaigners, but they feel the battle is far from won: the ruling merely delays evictions. Spaniards forced out of their homes are still finding themselves legally obliged to pay back mortgages even after they have handed over the keys.
Eduardo Perez is a member of the Granada-based movement 'Stop Desahucios Granada' [Stop Evictions], which is part of the wider movement ‘Plataforma de Afectados por la Hipoteca’ [Platform for those Affected by Mortgages, or PAH]. He has been unemployed for one year.
We’re trying to give everyone the right to a home. In Spain, mortgage laws are the worst in Europe: the banks kick you out and you keep the debt. Even in Greece, which has bigger economic and social problems than us, they don’t kick you out on the street.
When a family is told they are going to be evicted, we go to the bank to propose an offer. When a bank refuses our offer we ask our members to take part in an ‘action’ at the bank.
We choose a normal working day, so the bank is open, but we still get lots of people coming down because so many people in Granada are unemployed nowadays [Editor’s note: Granada is in the region of Andalusia, where unemployment stands at 36 percent, 10 percent higher than the national average].
We stand outside the bank, blocking the door, and sometimes we even go inside, demanding the bank agree to not evict the family. It’s really bad publicity for the bank, because they can’t work, their clients can’t get inside, and we warn their clients about how bad their bank’s behaviour is.
If it doesn’t work the first time, we try again and in the end the bank always gives in. We’re not asking for the moon: our requests are reasonable.
We’ve stopped about 200 evictions in Granada since we started two years ago. But that figure only counts evictions that were just about to happen: we’ve stopped many more in the early stages through negotiation. We always try to solve the problem first by negotiating an offer with the bank. In the last five months, we’ve stopped about thirty evictions through negotiation.
One type of offer involves the family giving the house to the bank, the debt is erased, and the bank and the family agree on a monthly rent. But the problem here is that the agreement is signed for a number of years, and when the time is up, the family will be faced with the same initial problem.
Another solution is restructuring the mortgage, which is best for everyone because the bank will always be paid the full amount, but just over a longer time period, and the family will eventually own the property.
An emotional moment: the man and woman in the centre have just signed a social housing agreement with Caixabank. The bank accepted to take posession of their house as payment for their mortgage debt. The family will pay the bank a monthly rent of 82€ for the next two years, with the possibility of extending the agreement after this period.
When we first started out in 2011, the negotiation was harder because the banks didn’t feel obliged to negotiate: they thought they were the masters of Spain! There are so many empty houses here, so banks don’t want to repossess a house in exchange for wiping out someone’s debt. But then our movement grew, and the media showed us support, and this forced the banks to retreat a little.
But the majority of people with unaffordable mortgages are still being evicted: we can only help when we hear about an eviction, so there are families facing problems that don’t get to us.
Article 47 of the Spanish Constitution states that "Every Spaniard has the right to enjoy decent and suitable housing". Of course, this right is, as we say in Spanish, ‘wet paper’: pure fiction. Since the constitution was signed in 1978, the people running politics and the economy have always called the Constitution "sacred", but they always forget the articles that talk about social rights.
The obvious reaction to this will be making it all nut impossible to get a mortgage loan.
There will be a new 2-tier class system. Those that “got theirs” before the new ruling and those who will rent for the rest of their lives.
In the meantime unscrupulous owners and criminals will start defaulting even if they don’t financially need to. Why pay a note when you can stay for free?
Idiots.
My understanding is that in America, if the bank evicts you because you have fallen behind on your mortgage, then they are exchanging the mortgage obligation for the collateral (the house). Thus, if you are evicted, then you are no longer obligated to the mortgage agreement.
What kind of mortgage agreements are they signing in Spain?
I know 3 families that lost their homes due to Obamacare cuts when the major breadwinners were laid off within just the last month alone (they were laid off awhile back). Anyone that says Obamacare is not going to be in disaster is either a fed, politician, or making so much money it won’t affect them (I’ve been one of “those” people before; I know their mindset; thank heavens I’m no longer one of them). Normal people are going to get slammed hard. Its going to be brutal. There’s a reason the feds have been stockpiling weapons and ammo, have been buying riot control equipment and vehicles, and training for disaster scenarios.
You are speaking of "non recourse" mortgages. Most states do work this way--if you hand in the keys, you're done with the house and the obligation, although it will affect your future credit rating. However, as a quick search shows, not all states have this legal feature.
Sure, why bother paying that pesky mortgage? After all, the Evil Banks tricked people into buying those homes. Besides housing is a “right”—so there should be free houses for everyone!
Or maybe the mortgage should be adjusted based on what the house is actually worth TODAY? Of course, that scheme can cut both ways.....
What happens to all the homes people are evicted from? Do they just stand empty? I can’t imagine there are too many buyers standing in line.
You didn’t read or understand the article as it applies to Spain did you?
In Spain the banks can kick you out and still hold the debt over your head. That’s why there are millions of empty homes there.
These people are not deadbeats, they are unemployed and owing more than 4 times what a home is worth because of a collapse in the market.
Sure, let the banks kick them out. But let the banks take responsibility for the debt.
The bottomline is Spanish banks have to work out a solution because kicking people out and holding the debt over their head is no solution.
“My understanding is that in America, if the bank evicts you because you have fallen behind on your mortgage, then they are exchanging the mortgage obligation for the collateral (the house). Thus, if you are evicted, then you are no longer obligated to the mortgage agreement.”
It depends on the state. In some states, like CA and AZ, once your mortgage is foreclosed they get the house and that’s it. In other states like VA, you are still liable for the difference between whatever the house sells for and the mortgage. For example, let’s say that a house has a $180,000 mortgage, it’s foreclosed upon, and then sells for $100,000 at the foreclosure auction. The debtor would be liable for the $80,000 difference. As a practical matter though, it’s difficult to squeeze blood from a stone and most banks don’t aggressively pursue it: if they do, step 2 is that the person just goes bankrupt and the $80,000 difference is discharged in bankruptcy anyway.
In Spain it looks like they don’t have the concept of personal bankruptcy, so the bank pursues the difference aggressively.
> My understanding is that in America, if the bank evicts you because you have fallen behind on your mortgage, then they are exchanging the mortgage obligation for the collateral (the house). Thus, if you are evicted, then you are no longer obligated to the mortgage agreement.
Basically they steal all your equity unless you are able to sell it first. Reminds me of a crooked car dealer I worked on a longgg time ago that would sell cars, change the payment date so that it was always behind, then repossess the same vehicles and resell them again many times over making a LOT more profit. He finally got busted enough times that he ended up in jail and lot his car dealership.
>>Sure, let the banks kick them out. But let the banks take responsibility for the debt.<<
Except for some one-time relief the same is here. But maybe I don’t understand what the Spanish version of “hold it over your head” means.
No BK in the EU?
My point is heavy-handed government attempts to directly control the levers of capitalism always result in Unintended Consequences much worse than the original problem.
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