A new report estimates the number of people that will lose their home in Spain as a result of the economic crisis will be over half a million.
The report from the Association of People Affected by Foreclosure and Auctions (AFES) into the impact of defaulted mortgages estimates that between 2008 and 2015 over 510,000 families will have lost their homes and as a result the banks will have to bear losses of around 34,000 million euros.
The report details the loses stating that between 2008 and 2011 over 150,000 people have “already lost their homes” and these people are now struggling with debt and have little “chance of controlling their future.”
For the current year the report suggests that already “135,000 families are undergoing foreclosure procedures” and that there are 133,000 more families that can no longer afford to keep up with mortgage payments. The report also suggests that there are “100,000 who will cease paying [their mortgage repayments] in the next two years as a result of rising unemployment.”
As a result of these “bad” mortgages the financial institutions are in a “critical situation”, the report said, pointing out that the banks have granted loans for property purchases to the value of 18,750 million euros. In the cases of defaulted loans the judicial and administrative proceedings could be “a significant outlay which can be up to 20% of the value of the property”. Due to these costs AFES predict that the “price of real estate held by the banks will now be necessarily readjusted to the real market value.”
The report estimates that by 2015 the banks’ balance sheets will show a loss of 34,000 million euros from mortgages to individuals. These loses beak down as follows: 2008 to 2011 – losses of 8,000 million, 2012 – losses of 18,000 million, reaching 34,000 million in 2015.
The report suggests that some banks have been attempting to adapt to the worsening situations that their customers find themselves in but that “nothing can be done to negotiate the refinancing with families who have ceased to have any income”.
The new government is likely to bring reforms to the property market and to help the banks deal with the huge mortgage problem. Carlos Baños, chairman of AFES, hopes that the government will quickly state its position regarding the costs of financial institutions on provisions and will “open the debate on mortgage enforcement procedures as a resolution to default situations, and instead look for alternative solutions which could be negotiated between banks and their customers.”