They’re apparently powerful enough to get their way.
“We probably have the best mortgage system in the world,” explained Francisco González, Executive Chairman of Spain’s second largest bank, BBVA, last week at the annual World Economic Forum in Davos. All seemingly said with a straight face.
Given the devastating effects Spain’s “mortgage system” has had on the country’s economy and society over the last decade and a half, González’s sweeping statement is hard to fathom. It played a central role in stoking one of the most mind-boggling real estate bubbles of modern times, which was followed, in time-honored fashion, by a devastating crash that would have probably destroyed Spain’s financial system if it hadn’t been for the government’s taxpayer-funded bailout. To date, over 600,000 mortgage holders have been evicted from their homes in its aftermath.
In 2013, the European Court of Justice ruled that Spain’s mortgage law was wholly incompatible with a European directive on abusive practices in consumer contracts — that dates back to 1993! As El País reported at the time, one of the “anomalies” of the law in Spain was that if a homeowner failed to meet just one monthly mortgage payment, the bank could (and often did) initiate accelerated proceedings to evict the borrower and take possession of the property:
Even if the borrower alleges the contract he has signed is abusive and a court agrees with him, if the eviction has already been carried out the homeowner has the right to compensation but not the right to recover the property. The bank can also ask for full repayment of the loan even after obtaining possession of the property in question.
Perhaps this is what González had in mind when he spoke so glowingly of Spain’s mortgage system. It truly is a great system — from the banker’s perspective…
Continue reading the article at WOLF STREET