Moody’s Warns That Banks Are Delaying Their Property Sales

9 June 2015 – Expansión

Moody’s warns that Spanish banks are delaying the sale of foreclosed properties to avoid losses, as they wait for market conditions and house prices to improve.

In a report about residential mortgage-backed securities (RMBS), Moody’s observes that, despite the recent decrease in mortgage foreclosures, data from the Bank of Spain shows that the volume of foreclosed real estate assets in the banks’ portfolios amounted to €83,400 million in 2014. As such, it warns that a delay in the sale of these properties may expose securitisation funds to greater losses.

In turn, it adds that the figures regarding the number of foreclosures that go to court actually under-estimate the real number of homes the banks have foreclosed in the last two years. And it points out that, in its opinion, a single property may be involved in more than one mortgage foreclosure process. Furthermore, it notes that, in general, Spanish mortgage lenders have become more willing to accept “daciones en pago” (assignment of deeds in lieu of payment).

Improvements

The number of mortgage foreclosures has decreased by almost 14% from the peak they reached during the crisis, recorded in 2010. Moody’s also highlights the decrease in the default rate in Spain, which is being driven by the decrease in interest rates and the improvement in the economic environment.

Original story: Expansión

Translation: Carmel Drake

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