The seizures of houses to families are back in force in Spain. According to the data published this Friday by the National Institute of Statistics (INE), between January and March of this year 3,207 foreclosures were certified on habitual residence (the house where a family lives), which represents 84.1% more than in the first quarter of last year. In the increase, it must be taken into account that in 2020 the period was marked for 17 days – on March 14, the first state of alarm was declared – by the coronavirus crisis and the stoppage of activity. But apart from the lower activity that could occur on those days in the property registers (the source from which the INE drinks), the increase is also explained by other factors.
The first would be the greatest economic difficulties for many households as a result of the crisis. In periods of economic difficulties, delinquency increases and that, in the case of non-payment of the loan letters, can end up resulting in a foreclosure. To avoid this, the INE recalls in its press release, the Government approved on March 17 of last year a mortgage moratorium that was intended to alleviate the situation of those who have a loan by temporarily making payment conditions more flexible. A line of loans with the endorsement of the Official Credit Institute (ICO) was also set up for borrowers. Judging by the figures released this Monday, the measure has not been enough to prevent a very significant increase in home foreclosures.
It is important to point out, as does the INE itself in its note, that this process does not exactly correspond to an eviction. Foreclosure is the initial procedure by which a lender claims ownership of a property on the grounds that the borrower has defaulted on mortgage payments. Only in cases where there is no agreement between the parties (to catch up on payments or for a dation in payment, for example), the matter will reach the court and it may order the release of those who live in the house. It should also be pointed out that the statistics known this Friday refers only to mortgage defaults, but for many years in Spain the majority of those who are evicted from their homes are tenants living for rent.
The other factor influencing the increase is that for years, as a result of the long litigation that mortgages have experienced (and still live) in Spanish courts, it was not clear when a mortgage foreclosure with guarantees could be initiated in Spain. Some loans included this possibility in the contracts practically from the first default and these early maturity clauses were considered abusive. The Supreme Court resolved the uncertainty in September 2019 with a sentence that referred to the mortgage law that came into force in June of that same year. In short, it established a minimum of 12 months of non-payment or 3% of the principal owed if the loan is in the first half and of 15 non-payments or 7% of the principal owed in the second. It was the starting gun for many entities that had pending cases of that sentence began to go to court.
Sustained increase over time
It is impossible to know how much of the increase corresponds to each of the three factors mentioned. But the latest data from the INE point more to a new reality than to very short-term issues. Last December, when the figures for the third quarter of 2020 were released, foreclosures of habitual residence already grew more than 80%. Then the de-embalming of the processes contained by the paralysis of the activity during the state of alarm of the previous quarter was adduced. Now it is more difficult to attribute the entire increase to this phenomenon, since nine months have passed since the courts and property registries function relatively normally.
Despite the new factors, the detail of the year of purchase of the homes that are subject to embargo continues to show the scars that the bursting of the real estate bubble at the beginning of the century left in Spain. More than four out of every 10 foreclosures (42% exactly) are for homes purchased in 2006, 2007 and 2008. If the target is extended to all homes purchased before 2008, year zero of the Great Recession, they are 68, 1% of total liens.
Back to the figures from the start of this year, the INE also indicates that between January and March there were 682 foreclosures of “other homes” family. This category, mostly second homes, grew by 22.3% compared to the same period in 2020. In total, adding habitual and secondary homes, the repossessions of individuals rose 69.1% in interannual terms.
Meanwhile, it is also a mark of the new mortgage reality of the coronavirus, the foreclosures of houses of legal persons (companies) collapse. The statistics indicate that between January and March there were 1,289 cases within this assumption, associated, for example, with loans to support a business in which a house is pledged as collateral, which represents 60.4% less than in the same quarter of 2020. With the same argument that the aid to avoid the delinquency of families when paying the mortgage seems not to be working; the drop in business foreclosures seems to suggest otherwise.
Apart from housing, the INE also indicates that between January and March, 244 foreclosures were certified on plots of land (-45.2%), 2,484 on other types of urban properties (-41.7%) and 351 on rustic properties ( -37.3%).