LISA MULLINS: I'm Lisa Mullins. This is The World. Spain continues to struggle with its own version of the sub-prime mortgage crisis. Unlike in the US, the problem there isn't so much bad mortgages, but too many housesï¿½about a million of them, new and unsold. The glut in Spain has caused the housing market to freefall. Now a promoter has come up with an idea to reactivate sales. The World's Gerry Hadden explains from Madrid.
GERRY HADDEN: When couples separate in Spain, 9 out of 10 times the woman keeps the home, the man moves out. Such was the case with 46-year-old airplane mechanic Carlos Vesperinas. Vesperinas says when his divorce came through, his monthly expenses went through the roof. He says, ï¿½I've been paying half the mortgage on the house that my wife kept. Plus, I pay a food allowance for my daughter. We're talking in total about 60 percent of my salary.ï¿½ Desperate, Vesperinas did what many Spaniards in his shoes do. He moved back in with his mother. That was 7 years ago, and he still can't afford to move out. Spain has hundreds of thousands of divorcees like Vesperinas, and a company called Ternum smelled an opportunity. Here's the deal: Spain's builders owe banks millions of dollars in loans they took to build new houses; that's money they can't pay back because they can't sell the houses. The banks are desperate, too, because they need those loans repaid. Ternum's Daniel Millan explains the deal.
He says, ï¿½I ask a builder, ï¿½How much do you owe the bank for that house?' He says, for example, ï¿½$300,000.' So that's exactly what I offer him. At first, the builder balks. But then he realizes that he needs to unload the house to get the bank off his back. Problem solved for both sides. The builder still makes a little money on the sales commission. And what does the divorcee get? Well, here for example, about half an hour south of Madrid, Milan has just sold this house to a newly single father. It's a 1600 square-foot brownstone style home, fully furnished. The price? $315,000 dollars. That's about 40 percent below the current market price. And, Millan says, under his program the buyers don't have to put any money down. And even better, he says, the buyer doesn't pay a dime until a year has passed. The builder pays the first year's mortgage. This is great for someone recently separated, he says, because he has no resources. That free year isn't just about money, says Juan Luis Rubio. Rubio is president of the Spanish Association of Divorced Fathers. Rubio says a free year in a new home gives people the space and peace of mind to pull themselves together. He says, ï¿½When you separate you have a really hard time. You suffer a lot. You might not be able to see your kids as much as you'd like, and therefore, your self-esteem drops. You can get terribly depressed.ï¿½ Ternum, the company brokering the divorcee housing sales, is well aware of this, too. To keep their buyers stable and paying, they're also offering counseling services. In the first two days of Ternum's program, it received 1500 inquiries from divorcees. The company is now thinking of extending the program to young Spaniards who've been unable to leave their parents' homes, but they'll have to act quickly. People realize this deal will only last as long as the housing glut. Once Spain's housing market stabilizes, builders will inevitably start looking once again for better profits. For The World, I'm Gerry Hadden in Madrid.