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Home Loans Get Easier For Spaniards

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http://online.wsj.com/article/SB10001424052748703438604575314711264457870.html?mod=WSJ_PersonalFinance_RealEstate

Spain has one of the world's most-troubled housing markets, yet some buyers are suddenly able to get mortgages with 100% financing, and developers are building new homes on empty lots despite a huge glut.

The reason: Spain's banks took possession of a large inventory of homes, buildings and land two years ago, forgiving the debt in hopes of heading off defaults. The plan was to resell the properties when the market bounced back and evade the worst impact of the looming housing crisis.

But Spain's housing market has only gotten worse, and now the bill is coming due as the banks labor under the weight of an estimated €59.7 billion ($73.8 billion) in real-estate assets on their books. Under pressure to make further markdowns on the assets by their main regulator, the Bank of Spain, many banks are now scrambling to unload the properties as quickly as possible.

In some cases, that means offering deals to consumers that are suspiciously like those that got the global housing market in trouble in the first place. The tactics include not just 100% loans, but also low initial teaser rates for buyers or initial payment deferrals for as long as three years.

At the same time, banks that own big plots of unbuilt land are announcing plans to build new houses to give the illiquid lots more value, despite the country's estimated glut of one million empty homes.

"On the one hand, they are selling the properties that already exist, and on the other, they are building houses," said Fernando Encinar, the director of research at www.idealista.com, a Spanish real-estate website.

The banks making such financing offers, which range from giants like Banco Santander SA to Spain's small regional banks, say they are for primary homes and only available to credit-worthy buyers.

To be sure, such financing accounts for a small portion of the Spanish mortgages; 81% of mortgage loans to households in Spain have a loan-to-value ratio below 80%, according to March data from Bank of Spain. The higher the loan-to-value ratio, the riskier the mortgage is considered to be.

Some analysts, however, suspect the strategy is simply kicking today's housing problems into the future. "They're making a bet," said Alfonso de Gregorio, director of wealth and fund management at Gesconsult, a Spanish fund manager. "Wait for the economic crisis to resolve itself, push forward the problems by three or four years, and try not to let it show too much on the bottom line."

Others worry that the generous financing, which helps maintain the prices, is muddying the long-term picture for a sour Spanish housing market. Unemployment in Spain is currently 20% and is likely to rise with the austerity measures recently announced by the government of Prime Minister Jose Luis Rodriguez Zapatero. A recent Standard & Poor's report said that housing prices, which have fallen 16% from their peak in 2008, could fall another 12%.

"In other countries, the prices have adjusted significantly," said Rafael Repullo, professor of economics at the Center for Monetary and Financial Studies in Madrid. "The sooner they adjust in Spain, the better."

Two years ago, debt-for-asset swaps were seen as a way for banks to get ahead of the housing crisis bearing down on them. The program usually targeted developers who hadn't yet missed payments, but who the bank judged would have problems over the long term. Banco Santander was one of the first to aggressively pursue a debt-for-asset program two years ago. It now holds €4.2 billion worth of these acquired assets, with loan-loss provisions on 33%. Competitors made similar deals.

But last month, offloading such properties became more urgent as the Bank of Spain unveiled proposals that would require banks that haven't already to set more funds aside against potential losses on these assets. This gives the banks a choice: take more hits in the coming months or unload the assets into a difficult market.

Genius.

The Spanish property market is clearly recovering.

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http://market-ticker.denninger.net/archives/2430-Heh,-Look!-Its-Ridiculous-Bank-BS-Again!-Spain.html

There's nothing like bubble-blowing, irresponsible lending and trying to goad people into levering up into things they can't afford, right?

Spain has one of the world's most-troubled housing markets, yet some buyers are suddenly able to get mortgages with 100% financing, and developers are building new homes on empty lots despite a huge glut.

Heh, what could possibly go wrong when you do things like that? Doesn't anyone remember our "subslime" housing mess?

The reason: Spain's banks took possession of a large inventory of homes, buildings and land two years ago, forgiving the debt in hopes of heading off defaults. The plan was to resell the properties when the market bounced back and evade the worst impact of the looming housing crisis.

Translation: They lied.

Just like our banks. They "took possession" while refusing to recognize the mark to the market, just as have our banks, and bet their future on the market recovering so they could sell without recognizing a loss that had already happened.

Except that it didn't work as the market didn't come back.

So now, instead of recognizing their losses, they're doubling down to make even bigger losses!

In some cases, that means offering deals to consumers that are suspiciously like those that got the global housing market in trouble in the first place. The tactics include not just 100% loans, but also low initial teaser rates for buyers or initial payment deferrals for as long as three years.

At the same time, banks that own big plots of unbuilt land are announcing plans to build new houses to give the illiquid lots more value, despite the country's estimated glut of one million empty homes.

Uh huh.

This puts Trichet's claim that he won't "allow" Spain (or Greece) to default in a bit of a different light, eh?

Exactly how does he intend to do that? Try to force an inflationary credit expansion? We tried that - for the last two years. It failed.

The global economy cannot recover until the fraudulent hiding of losses that have already occurred ends and those who are bankrupt are forced to recognize their insolvency, purging the irredeemable debt from the system.

Dennigers take on it.

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http://online.wsj.co...ance_RealEstate

Genius.

The Spanish property market is clearly recovering.

It's kind of worked here. 2 years ago builders were begging people to buy - we'll pay your mortgage for a year, fix your interest rate at feck all for two years etc etc. Now it seems to be back to normal (in terms of prices and deals - not in terms of transactions. That said, there is always a market for new homes. No matter how small they make them.

There is a big estate on the outskirts of Bracknell (1500 units are planned) which, two years ago, was standing with abandoned half built houses. Now they are all sold and new phases are being developed.

It seems to be unstoppable.

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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