Sunday, March 17, 2013

The ECJ eviction decision and Spanish banks

Catching a few eyes this week was the European Court of Justice decision in favour of a family that had their home repossessed for non-payment of the mortgage. The Spanish banks have not put up much of a fuss and the government itself has assured that it will introduce legislation to codify the conclusions of the trial judge.

The chart on the left, showing the age of current sufferers of job losses at the time real estate went bust, goes some way towards explaining this quiescence. Home repossessions are not a huge problem for the banking system because employment (although certainly not in the quality sense) has actually increased in the age groups that would have been house buyers at the time.

A few other items of interest:
1). The specific grounds for the consumer protection suit were that the bank could not proceed with a foreclosure order before judgement had been handed down - in another court - on a dispute concerning the original mortgage contract.
2). The ruling further agreed that the mortgage's conditions - specifically the clauses that allowed the bank to foreclose on one missed payment and the interest rate charged on arrears - were not acceptable.
3). The ruling does not generalize beyond this specific case and is probably, seeing as the judge's comments referred to family home and such, not usable (at least in spirit) in cases of second homes building lots, industrial units and so forth.
4). Restricting the foreclosure definition to principal residences, it's hard to find anyone claiming that there have been more than about 40,000 such evictions since 2007. The 220,000 figure quoted by those with an interest in the matter refers to all types of properties. The banks will gladly pay to get this public relations nightmare to disappear.
5). As for the politicians, the only protest movement that might have the legs to challenge the tenured parties is the PAH. Anything to get a bit of wind out of their sails. 
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1 comment:

santcugat said...

I'm not sure I buy the age-group argument, since in many cases the unemployed young people are supported by their parents, who now have a mortgage plus a bunch of unemployed kids to worry about.

I think a bigger danger to the banks is that if people realize they can stay in their homes and not pay their mortgage (and nothing happens), and at worst they have 10% of their salary garnished.