According to the Banks’ Financial Products Agency (Agencia Negociadora de Productos Financieros), during 2010, Spanish banks have already taken over a total of 118,000 properties from debtors. This is a negative historic record, the newspaper El Mundo has published today.
The director of the Agency, Luis Javaloyes, commented that 30% of these repossessions could have been avoided if the banks had refinanced the mortgage. At the time, the problem was that most of the entities, especially the small banks, did not want a negative balance sheet in the short term because of mortgage debts. Therefore, these banks proceed to repossess properties instead of refinancing them.
The problem now is that the banks have quite a large property portfolio and it is becoming a problem to sell them; especially underperforming flats and houses in bad locations and in very poor conditions.
Also, Spanish banks are under pressure since the Banks of Spain (BoS) wants them to increase the provisions up to 30% once they take over properties from debtors. The more provisions they need, the less chance of manoeuvre they have.
Financial companies are standing up
Mr Javaloyes underlines the role that financial brokers have developed in 2010. Thanks to their service, thousands of home owners have been able to keep their properties because of financial services, as an alternative to the direct negotiation with the traditional bank.
1) It is expected that in 2011 repossessions will increase, according to non-official sources from Spanish banks. Now the institutions have to deal with the reality and, in many cases, to re-negotiate the debt.
2) Mortgage debt has become such a problem that, in a few cases, the Spanish banks are accepting the property as a way to repay the mortgage, as it happens in the US. But this is not a solution and not an exit strategy for debtors, the Minister of Development pointed out last week.
3) Mortgage and financial brokers are filling the gap of the market and they will probably develop an important role in 2011.
4) To rent a property with a purchasing option could become more popular.
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