The closest thing outside of the US to the housing bubble and collapse dynamic we’ve seen here since 2007 is in Spain. The bubble and the crash destroyed the Spanish economy and its financial system to a much greater degree in the US, mainly because the country does not control its own currency. So the evictions never stopped, to the great suffering of the citizenry. The situation led to a formative event last week: a middle-aged Basque woman named Amaya Egaña jumped off her balcony in Bilbao rather than face eviction, following a similar eviction-caused suicide in Grenada three weeks earlier. This led the foreclosing bank to halt all other repossessions, and which even roused the Prime Minister to demand changes.
Following protests over Mrs Egaña’s death, the savings bank Kutxabank stopped all evictions yesterday. Mariano Rajoy, the Prime Minister, said that the Government would ask banks to halt evictions temporarily and pledged to find a solution in talks with the opposition Socialist Party today.
By law families must pay the balance of their mortgages even if they lose their homes. In the first six months of this year an average of 317 people a day lost their homes. Last month magistrates denounced forced evictions, which they said had risen by a fifth this year. They complained of “aggressive judicial procedures against debtors” who “find themselves defenceless in a crisis that they did not cause”. There were 350,000 such evictions between 2008 and last year.
Mrs Egaña, 53, a human resources manager from Barakaldo in the Basque Country, died on Friday morning when bailiffs from La Caixa bank arrived with locksmiths. The mortgage on the house she owned with her husband rose from €164,000 to €213,000 with charges and interest. The bank had auctioned the house for €190,000. After her death, the walls of banks in her town were daubed with “murderers”.
It’s not like the banks require the inventory right now; there’s no glut of Spaniards looking to purchase homes. Foreclosures ravage communities, bring down property values and cost roughly $250,000 a piece to the greater economy. The properties are out of reach for those who need housing – there are an estimated 2 million vacant units in Spain, a country of 48 million – leading to a crisis of homelessness and an epidemic of squatters and takeovers of properties.
No one tracks the number of squatters. But Rafael Martín Sanz, the president of a real estate management company, says squatting has become so common that some real estate companies are reluctant to put signs on the outsides of buildings indicating that an apartment is available.
“The joke is that half the people touring apartments that are on the market are actually just picking out which apartment they want to squat in,” he said.
Obviously the situation is a complete mess, the inevitable result of failing to stimulate the economy and allowing it to wither with austerity.
The major parties meet today to discuss alternatives to evictions.




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Some images from the Spanish bubble, last April:
What is the financial reason to foreclose for the bank, is it to get a loss for tax purposes? Some of the houses in my neighborhood have been vacant for over a year and some aren’t even listed as for sale. No money has been going to the bank on these properties and I doubt they will sell even at auction, unless they go way below market and then the new owner will have a low payment like the previous owner was asking for.
In Chicago, a forecloser can walk on a vacancy that does not complete the foreclosure process, without recourse by the city. That gets them off the various costs of maintaining the vacancy that the holder of a REO (real estate owned, or foreclosure that has cleared the process and reverted to the bank) would have to pay and for which the city would, if they kept the property through that stage, be able to sue them.
A servicer of a vacancy is also responsible to the securitization pool for continuing the payments that were due from the mortgages on those properties, but I do believe that walking on incomplete foreclosures might also let them walk on those payments, which the trust will then write off. I’m sure it’s possible to ration those writeoffs carefully and make them work for you.