Banks keen to agree 100 per cent loans to sell property in Spain

In an attempt to get billions of euros worth of properties off their books, Spanish banks have started to offer mortgages on ‘pre credit crunch’ terms.  The Financial Times reports that banks are offering loosened criteria for distressed properties in order to try and offload properties that they have repossessed during the country’s property crash.

100 per cent mortgages available on distressed property in Spain

Several of Spain’s biggest lenders are now offering 100 per cent mortgages for up to forty years in an attempt to offload repossessed residential property.  The FT reports that Spain’s three largest banks – Caja Madrid, BBVA and Banco Santander – are now offering 100 per cent deals as are La Caixa and Bancaja, the savings banks.

According to the Bank of Spain, high ‘loan to value’ mortgages (those above 80 per cent) represented 11.9 per cent of all mortgages in Spain in 2010, roughly the same level as in 2008.

The FT reports that ‘mortgages that are loaned at a higher loan to value ratio than 95 per cent are ineligible for inclusion in covered bond sales in Spain unless they are provided with additional credit insurance, according to the country’s mortgage law of 2007.’

Banks keen to sell property in Spain to remove it from their balance sheet

Experts believe that the banks’ keenness to agree mortgages that they would struggle to sell on is a sign of the pressure many banks are under to remove exposure to property assets. 

Angel Mas, president of mortgage insurance at Genworth Financial, said:  “Different rules need to be imposed by the regulator to protect banks, borrowers, and taxpayers applying international best practice.

“High loan to value mortgages are absolutely essential for first-time buyers’ accessibility but they have different risk profiles and must be treated as a different asset class.”

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