MADRID, Spain — Federman Heredia hopes the bank will take his home.
It would be better if the government deferred his mortgage payments for two years. But they haven’t. So Heredia, who hails from Ecuador, walked more than 250 miles from Valencia to Madrid with 19 other homeowners unable to meet their monthly obligations to plead for leniency.
Bleak as it is, foreclosure seems to be a hopeful alternative to more and more immigrant homeowners in Spain. Unlike most cases in the United States, in Spain the debt does not end when the keys are returned to the bank.
“When the borrower cannot pay the mortgage, the Spanish bank does not only get his house,” says attorney Gustavo Fajardo. “The bank gets the owner’s bones.”
The bank continues to persecute the failed homeowner for the rest of his or her life, says Fajardo of the Americas-Spain Solidarity and Cooperation Association (AESCO) in Madrid that works with approximately 27,000 people who have difficulties paying their mortgages.
If the house value has decreased and the auction does not bring the amount of the original loan, the borrower is liable for the difference. It can be applied against any future earnings and property. One of AESCO’s goals is negotiating foreclosures that terminate the homeowner’s debt. AESCO is also lobbying for changing the Spanish mortgage laws to standardize this practice. So far they have had 4,000 accepted cases.
During the housing boom in Spain, loans were easy to come by, says Fajardo. Buying was comparable to renting. Lending institutions encouraged those who did not qualify for a loan to get guarantors. In some cases, five or six mutual guarantors combined into millions of euros of debt.
These “mortgage chains” were most frequently attached to borrowers in the worst social situations: Mileuristas or young professionals earning no more than 1,000 euros (or $1,500 USD) a month, single mothers, and immigrants. The last group was most adversely affected because they lack social networks, says AESCO’s president Juan Carlos Rois.
AESCO was established as an immigrant organization, but Spanish families have also used its services. Fajardo points out that critics characterize the problem as one of immigrants, incorrectly coloring what is a national malady.
Sixty percent of AESCO’s clients are immigrants, says Rois, but the mortgage crisis shows an inverse ratio: Nationally, 60 percent of the approximately 5 million families in Spain at risk of delinquent loans in the next six months, are native Spaniards, while 40 percent immigrants, says Rois. More than 50 percent of AESCO’s clients are Ecuadorians, the third-largest immigrant group in the country.
A recent report by Spanish Mortgage Association (AHE) predicts that 2009 will close with approximately 4 percent of mortgages in arrears. Until about a year ago, banks were not willing to negotiate, says Marisol Toapanta, a social worker at the Hispano-Ecuadorian Center for Integration and Participation (CEPI Hispano-Ecuatoriano), a municipal government organization that offers immigrant services.
But increases in mortgage defaults have encouraged alternatives.
Loan interest rates are tied to the Euribor, the rate at which banks lend to other banks, and when that increased, some mortgages doubled. The situation was difficult enough for the gainfully employed. Rising unemployment in Spain aggravated the problem. Unemployment, according to the AHE report, is the main reason for more non-performing loans in 2009.
The economic crisis has hit Spain especially hard, where unemployment is the highest in the European Union, reaching 17 percent in first quarter 2009. Figures are even more alarming for the immigrant population: The National Statistics Institute reports that unemployment among immigrants grew to a staggering 28 percent for the same period.
The Spanish government has established a partial deferment for some homeowners under its stimulus plan. It projects that 500,000 families could benefit from the program that allows up to 50 percent reduction of the monthly payback, when negotiated with the lender.
The gravity of the situation is evident in drastic moves like those of the despairing Heredia and his fellow mortgage-holders.
They walked the fields alongside highways. They bathed in fountains and in homes of welcoming strangers. Some had to quit with severe blisters. But the feeling remained positive among the immigrants from Latin American countries who were encouraged and helped along the way by Spaniards sympathetic to their cause.
“While walking, I was less stressed. I wasn’t thinking about my debt, I was thinking only of our goal – to arrive, to arrive, to arrive. I forgot about this pressure that I carry with me all the time, of not being able to pay my mortgage,” Heredia says.
Heredia bought his home three years ago, paying 580 euros ($820) a month. With the increase in the interest rates, his payments rose to 680 euros ($960). In December he lost his job, and his unemployment benefits – 830 euros per month, or $1,180 – cannot cover the basics.
“I just want to give my house to the bank and go back to Ecuador,” Heredia says. He would lose three years of payments, a dream, but at least “I would be free of this drowning debt,” he says. But if there were a moratorium, he would reconsider. “That would be something different.”
This report comes from a journalist in our Student Correspondent Corps, a GlobalPost project training the next generation of foreign correspondents while they study abroad.