Tag: borrowers

Bank Lending To Individuals Peaked In April

8 June 2016 – Expansión

The banks are stepping on the accelerator to sign new loan contracts. In April, the rate of new mortgages and consumer loans granted by Spanish financial institutions reached levels not seen since before the rescue (of the sector) in 2012. Nevertheless, new operations to large companies declined during the month, which meant that the total volume of new loans granted in April decreased by 7.9% to €34,600 million, according to data from the Bank of Spain.

In this way, Spain’s banks are clearly focusing on three areas to secure new business and whereby improve their returns:

1. Mortgages: the volume of new mortgages to buy homes amounted to €5,173 million in April, twice as much as last year and the highest monthly figure since December 2012. Even so, that figure does include renegotiations. If we exclude those, the amount of new money granted for mortgages during April amounted to €2,920 million, i.e. 45% more than during the same month last year and the second highest monthly figure in the last year. The banks hope to offset the low profitability of the mortgages granted during the years of the real estate boom with these new mortgages.

2. Consumer credit: Another segment that the financial entities are pushing hard is that of consumer credit, in light of the high interest rates being offered (c. 7.52%), according to the latest figures from the Bank of Spain. In this way, the financial sector granted €2,330 million of new financing to consumers in April, almost 50% more than a year earlier and the largest volume since May 2010.

3. SMEs: The financial sector is also focusing on its business with SMEs, where the banks are waging a battle to secure new clients. Nevertheless, the loan volumes there did not reach record levels in April – €11,710 million was granted, which was 14% more than a year earlier, but lower than the figure in December – like in the cases of mortgages and consumer credit, but the price at which new loans are being granted did, averaging 7.52%, the lowest level seen in recent months.

However, the banks have encountered a more complex panorama in the market for medium-sized and large business. Regarding the former, the volume of new loans grew by just 4% in April, whilst in the case of the later, the volume of loans granted declined by 40%. According to Fernando Alonso, Director of Companies and Corporations at BBVA, speaking in a recent interview, the “political uncertainty may well be delaying investment decisions at the corporate level”.

For the first time, the Bank of Spain provided data about renegotiations in its figures for April; it also gave details about loans to companies by amount; deferred credit card payments – also at record highs -; and overdrafts to households and companies.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

INE: Primary Residence Foreclosures Fell By 31.8% In Q1

3 June 2016 – El País

The number of foreclosures over primary residences is continuing its decline. The number of cases involving homes (secured by mortgages) being sold due to a failure to keep up with the mortgage repayments, decreased to 6,118 during the first three months of the year, which represents a 31.2% reduction compared with the same period in 2015, according to Spain’s National Institute of Statistics (INE). Taking the total number of family homes in Spain during the first quarter (18,408,300) as a benchmark, foreclosure proceedings were initiated on 0.03% of those properties during the quarter.

Whilst the crisis recedes, so too does one of its darkest sides. Two years ago, in 2014, 34,680 primary residences were handed over to the banks to settle unpaid debts. In 2015, that figure decreased for the first time by 13%. The decrease in interest rates to historical lows – they closed May in negative territory for the four month in a row and the monthly rate dropped to -0.013% – and agreements between borrowers and financial entities have helped to alleviate the drama.

Homes mortgaged in 2007 are the worst off

Borrowers who mortgaged their homes in 2007 and did so over second-hand homes have been hit the hardest. 20.4% of the foreclosures in Q1 corresponded to loans granted in that year. 15.6% related to mortgages signed in 2006 and 11.8% to loans taken out in 2008. The period comprising 2005-2008 accounted for 58.5% of all mortgage foreclosures and the highest values were reached in 2013 and 2007. During Q1, foreclosure proceedings were initiated against 0.20% and 0.19% of the mortgages granted over homes in each of those years, respectively, according to INE. 86.4% of the cases initiated during the three months to March related to second-hand homes, whilst 13.6% corresponded to new builds.

Homes owned by legal entities accounted for 17.7% of the total mortgage foreclosures. Beyond the housing market, the number of mortgage foreclosures registered over properties in general during the first quarter amounted to 19,354, which represents a 37.9% decrease with respect to the same period in 2015.

Andalucía, the most asphyxiated

The autonomous regions with the highest number of mortgage foreclosures over homes were Andalucía (3,144), Cataluña (2,113) and Valencia (2,094). And the fewest foreclosures were filed in Cantabria (43), La Rioja (54) and Navarra (61). Borrowers who took mortgages out between 2003 and 2015 in Murcia (0.25%), Andalucía (0.20%) and Valencia (0.18%) were the worst off. Meanwhile, those in the País Vasco (0.03%) and Cantabria (0.06%) suffered the least.

Original story: El Páis (by Sandra López Letón)

Translation: Carmel Drake

Evo Buys GE’s Spanish Mortgage Business For c. €300M

14 April 2016 – Expansión

As a result of this operation, involving Evo’s acquisition of almost €400 million in mortgages from GE Capital, Apollo’s subsidiary expects to increase its balance sheet by 10% and its loans to customers by 25%.

(…). The Spanish subsidiary of the US fund Apollo is acquiring General Electric’s mortgage business in Spain: almost €400 million in loans to individual borrowers, according to financial sources consulted by Expansión. According to the same sources, Evo will pay almost €300 million for the portfolio.

This operation brings the bank led by Enrique Tellado closer to its objective of achieving critical mass to emerge from the red in 2016.

Since Apollo acquired Evo, the former subsidiary of NCG Banco, the entity has registered three consecutive years of losses: €3.6 million in 2013, €78 million in 2014; and €13 million last year, according to the latest figures published, as at September, according to the Spanish Banking Association (AEB).

GE Capital Bank, the financial arm of GE, launched this divestment last year, as part of Project Zágato, advised by PwC. The portfolio, worth €400 million, contains 5,000 mortgage contracts and mainly contains loans that the US entity granted through APIs (real estate agents).

With this sale, GE Capital Bank is virtually shutting down its business in Spain, following the transfer of its leasing portfolio to Incus Capital, at the end of last year; and the repayment of the majority of its consumer loans.

This departure is the response to a change of strategy for the multinational company at the global level. At the beginning of 2015, GE decided to divest the majority of its financial business to focus on its industrial turbine, aircraft engine and medical equipment businesses, amongst others. It did so because of the risk posed by this financial exposure following the outbreak of the subprime mortgage crisis in 2008. At the time, the group had financial assets worth $500,000 million (€438,400 million).

Since then, GE Capital has been selling off parts of this business through different agreements in different countries, such as those signed with Evo and Incus in Spain.

This subsidiary reached its peak in Spain with partnerships that it signed with CAM and BBK before the crisis.

In 2008, it recorded losses and has remained loss-making ever since.

Quantitative leap

Project Zágato allows Evo Banco to make a significant quantitative leap. The portfolio acquired represents around 10% of its current balance sheet, which according to data from AEB as at November amounted to €4,000 million. The growth in terms of loans to customers is greater, almost 25%, given that it held €1,771 million last November.

Apollo’s standard strategy since it arrived in Spain has been to make purchases of entities, such as Evo Banco, which it acquired in 2013. Evo’s loan portfolio comprises purchases such as Finanmadrid, from Bankia; Bank of America’s credit card business; and portfolios of consumer credit and mortgages from Citi.

In the last few months, Evo Banco and Apollo have looked into other acquisitions in Spain, such as the BarclayCard sale, where it was pipped to the post by Bancopopular-e, the subsidiary of Värde Partners and Banco Popular, which is now in exclusive negotiations.

Original story: Expansión (by J. Zuloaga)

Translation: Carmel Drake

Experts Predict Mergers Between RE Servicers

30 March 2016 – El Mundo

The real estate servicers that emerged from the financial institutions are driving housing developments, taking advantage of the recovery in the sector in areas with demand, and also the growth in rents. Experts predict that we will see mergers between these entities over the next few years in order to reduce costs.

Servihabitat, owned 51% by the TPG and 49% by CaixaBank, currently manages €51,000 million of assets for financial institutions, Sareb, investment funds, holding companies and large landowners, and whereby leads the ranking of servicers in the Spanish sector. Of the total, €21,000 million relate to financial assets and €30,000 million relate to real estate assets. The company also has 59 developments under assessment and under construction, containing more than 2,500 homes, as well as 38,000 contracts for rental assets.

The Executive Director of Servihabitat’s real estate business, Juan Carlos Álvarez, has explained that the firm has completed 18 developments containing 707 homes over the last three years. Moreover, it finishes an average of 15,000 homes per year from developers who have left projects unfinished, given that most of the financial assets that it manages relate to developers who have filed for bankruptcy; it deals with just a handful of mortgages to individuals.

Whilst at the beginning of the crisis, it was common practice to pursue court proceedings and “daciones en pago” to manage financial real estate assets, now the strategy involves making the real estate assets supplied as collateral more attractive to sell them at the best price possible, says the Director of Financial Assets, Agustín Melchor.

Solvia, the real estate arm of Banco Sabadell, has also gained a lot of weight in the multi-client servicers field, although its two main clients are the bank led by Josep Oliu and Sareb. It manages more than €28,000 million of assets, of which more than €5,300 million are financial assets, and it also manages land under development worth €4,200 million, and more than 10,000 rental properties (worth more than €2,500 million).

In the development sphere, it has constructed more than 3,400 homes since 2011 and currently has 34,426 properties up for sale, including homes (13,634), parking spaces, storerooms, retail outlets, offices, warehouses, plots of land and others, such as moorings and buildings under construction. It has 23 new property developments underway – 21 that it is constructing on behalf of clients and two that it is marketing itself – which contain more than 1,100 homes, primarily in the areas of Barcelona and Madrid, Levante and Andalucía.

Rental properties as a business

Although Servihabitat and Solvia do not own any assets themselves (they manage them on behalf of their clients), Anticipa Real Estate (owned by the fund Blackstone and created with 40,000 mortgages from CatalunyaCaixa) specialises in buying up mortgages and properties to focus on the business of rental homes. Thus, its strategy involves long-term management, rather than the liquidation of assets, and in 2015, it acquired developer loan portfolios from CaixaBank and Sareb for around €1,000 million and 5,000 homes in total; it also agreed to buy 4,500 homes from Banco Sabadell – 3,000 of which are currently rented out.

Of the portfolio of mortgages under management, 25% pay normally, whilst the remaining 75% pay with varying degrees of default. Anticipa plans to apply “dación en pago” arrangements to the majority of its problem loans. To date, it has signed 3,000 agreements in total. Following the “dación en pago”, most borrowers leave the home, but 5% remain, with a reduced rental price under a three year contract, explained the CEO of Anticipa, Eduard Mendiluce.

The future of the sector

Experts predict that there will be mergers between the servicers over the next few years, as the banks de-couple themselves from these companies and new investors look for economies of scale to reduce their costs, according to the Esade Alumni Real Estate Club. One of the first examples has been the Norwegian company Lindorff, specialist in non-performing loans and recoveries, which has acquired Aktua, the real estate services company of the former Banesto: “We expect to see more operations”, say sources at the Club.

Moreover, the distancing of the banks is going to force these companies to look for new clients and choose between offering end-to-end real estate services to third parties and becoming real estate companies. Sources at the Club expect that the major banks will sell their servicers and that over the long-term, there will end up being four operators in Spain after the concentration process: Servihabitat and Solvia, as integrated service companies and Neinor Homes (the fond owned by Lone Star) and Anticipa as real estate companies, the first focusing on development and the second on rental properties.

Original story: El Mundo

Translation: Carmel Drake

Real Estate Debt Decreases To €41,000M

21 December 2015 – El Economista

The clean up of the financial institutions and the reactivation of the economy are leading to marked decreases in the banks’ real estate arrears. At the end of September, loans granted to property developers had decreased to €41,621 million, a figure that has not been seen since the middle of 2010, when the process to restructure the sector began with the merger of the majority of the saving banks.

In just nine months, the volume of insolvencies relating to property has reduced by almost €13,000 million and the default rate has fallen to 30.6%.

Some of the decrease is due to the sale of unpaid loans that several entities have been carrying out to reduce their non-performing assets. These portfolios have been acquired by investment funds with significant discounts on their nominal values, with the hope of recovering the money and, thus, generating sizeable profits. Another factor that has reduced the amount of property developer debt is the exchange of debt for homes and land by the banks to lighten customer charges and to collect a portion of the loans granted.

Since the outbreak of the crisis, real estate financing has been weighing down on the Spanish financial sector. The number of insolvencies peaked in 2013, at €70,000 million, excluding the volume of loans transferred to Sareb by the entities that received state aid.

According to the data published on Friday, another one of the sectors hardest hit by the crisis, construction, has also been experiencing a significant decrease in its defaulting customers. After decreasing by €3,000 million this year, they now amount to €13,300 million, also returning to 2010 levels, and with a default rate of less than 30%.

The decrease in the default rate is happening in all of the production sectors, as well as in the mortgage sector. As a result, the total volume of unpaid loans being financed by the banks, savings banks and credit cooperatives decreased to €136,000 million in October, a volume similar to that recorded at the end of 2011. In nine months, this amount has decreased by €31,000 million. The default rate of the system as a whole has reduced to 10.6%, its lowest level since 2013, just after the European bailout.

The volume of loans granted by the banks, savings banks and credit cooperatives decreased by 3.5% between October 2014 and the same month this year, according to data published by the Bank of Spain.

The volume of financing granted to companies and families increased to just over €1.2 billion.

Original story: El Economista (by Fernando Tadeo)

Translation: Carmel Drake

Blackstone To Offer Debt Forgiveness On Spanish Mortgages

1 July 2015 – Bloomberg

Blackstone Group LP is seeking to restructure some of the €6.4 billion Spanish home loans it bought at a discount to help borrowers meet repayments, according to three people with knowledge of the matter.

The world’s largest private equity firm is offering to cut outstanding debt or allow homeowners to hand back the keys and walk away from loans, said two of the people, who asked not to be identified because the matter is private. Blackstone holds the mortgages of 40,000 homeowners in Spain after buying the debt for €3.6 billion from struggling savings bank CatalunyaCaixa.

Blackstone can avoid the time and expense of repossessing homes by helping borrowers find ways to continue paying their mortgages, something that is more difficult for Spanish banks because of provisioning requirements and central bank regulations. Avoiding evictions may also mute political claims that private investors are coming to Spain to take people’s homes away.

“If you are struggling to pay your mortgage, you are undoubtedly better off having Blackstone as your creditor than a traditional Spanish bank,” said Juan Villen, Head of Mortgage Services at property website Idealista.com. “Blackstone can be much more flexible.”

Andrew Dowler, a London-based spokesman for Blackstone, declined to comment when called by Bloomberg News.

Loan Portfolio

The subject of Spaniards losing their homes is a hot-button political issue, with power in the Madrid and Barcelona town halls swinging to parties that pledged to ban evictions during municipal elections in May. The Platform Against Evictions activist group organized demonstrations outside Blackstone’s offices in New York, London, Madrid and Barcelona in March, and posted a video on its website accusing the firm of intending to evict “en masse.”

Anticipa, Blackstone’s mortgage servicing unit, took over the management of the loan portfolio two months ago, with about 75 percent of the debt classified as under-performing or non-performing, according to the people. It will take about seven years to restructure the debt, they said.

Spanish home prices have fallen by more than 42% since the peak in 2007, according to Tinsa, Spain’s largest homes appraiser. That has left about a fifth of borrowers in negative equity, according to Villen. Lenders in the country foreclosed on more than 70,000 properties in 2014, with Andalusia, Catalunya and Valencia hit the hardest, according to the National Statistics Institute, which began compiling data at that start of that year.

Post Keys

Blackstone’s plan to allow homeowners to post the keys and walk away from their debts, a legal process known as “dation in payment”, is seen as a significant step by analysts.

“Unlike in the U.S. and other European countries, Spanish law stipulates a bank can foreclose on a home and still pursue the borrower for the rest of his life if the value of the loan is higher than the price that the bank forecloses at,” Villen said. “The offer of “dation in payment” is a refreshing way of approaching borrowers that are in negative equity.”

The private equity company will only foreclose on “strategic defaulters” who can pay but refuse to, while homeowners at risk of social exclusion, which represent about 3% of Blackstone’s portfolio, will be allowed to remain in their property paying subsidized rents, the people said.

Original story: Bloomberg (by Sharon R. Smyth)

Edited by: Carmel Drake

Supreme Court: Gains May Be Unfair If Banks Make Profits On Sale Of Foreclosed Properties

23 February 2015 – Expansión

The Supreme Court has established a doctrine and clarified the jurisprudence on the understanding that a bank may be unfairly rewarded in the event that it obtains a significant profit on the sale of a foreclosed home.

The High Court reached this conclusion after studying the case of a bank that launched foreclosure proceedings after the borrowers failed to meet their repayment obligations. The entity foreclosed the home for half of the value specified in the deed (escritura).

In this case, given that not all of the loan was paid off (following the foreclosure of the property), the bank filed a lawsuit against the borrowers and their two guarantors, for the difference between the debt and the value of the foreclosed property, plus interest and execution costs.

However, the borrowers had understood that, as a result of the action (the foreclosure), the debt would be considered to have been repaid, since the value of the property had been set by the bank itself on the basis that it would cover all of the debt relating to the mortgage. They argued, therefore, that the entity had obtained unfair gains.

Establishing doctrine

Although the (local) court rejected the claim and denied the existence of unfair gains, the Provincial Court of Córdoba upheld the appeal of the defendants and concluded that the foreclosure of the property at auction for a 50% discount was equivalent to a deed in lieu. Nevertheless, the Supreme Court did not share that ruling.

According to established case law, the Supreme Court Chamber, which has studied this case, stresses that “in principle, the exercise of the legal right to demand the unpaid part of the loan from the borrowers (following the foreclosure of the mortgaged property for 50% of its appraisal value) could not be regarded as a case of unfair gain”.

Nevertheless, the Supreme Court qualified its statement and noted that in the cases in which the foreclosure (of the property by the bank) is followed by a subsequent disposal (of the property) at a much higher price that the foreclosure price and for a very significant gain, then “it should match it with any outstanding loan and any claim made by the creditor to (share in) the profit”.

The Supreme Court Chamber insists that this clarification is supported by recent legislation introduced to strengthen the (legal) protection for mortgage borrowers.

Original story: Expansión

Translation: Carmel Drake