Some examples of Spanish subprime mortgage loans
At that time, political and bankers did not stop repeating that in Spain there were no such mortgages and Leopoldo Abadia put the term Ninja Crisis into fashion, to refer to the recession triggered by loans granted to people without work, demonstrable income or property. I admit that I smiled to myself; maybe they were not granting subprime mortgages in the American style, but subprime in Spanish, I did see in my day-to-day work.
One of the young usually thinks that banks know what they do; they have entire departments of market analysis, risk, investment and a long list of grandiloquent names. And many of these groups of professionals succeed in their recommendations. What I would like to know is the managers who end up making the decisions; because many have done it wrong, very badly.
Garbage mortgages made in Spain
From my professional experience, I can extract some practical examples of mortgages granted with excessive “Spanish joy”.
One of the most widespread and that is being sadly topical is the purchase and sale with mortgage financing of several properties at the same time. The most normal thing would be to think that any financial entity requested the Bank of the candidates to obtain financing, right? Requesting the debts that one has and is registered in the Bank of Spain is one of the bases of the process of granting a mortgage.
There are two types of junk mortgages related to Bank some of which are responsible for the malfunction of the risk analysis of certain banks and another for the picaresque of the applicants (and of the real estate agents or brokers that processed the loan):
- The banks that did not ask for: the one I know is American, of those who have given problems to the whole world. Imagine that I have two personal loans and a mortgage. I go to that bank and request a mortgage to buy a house with my new partner. Normally, they saw my debts and denied me more debt. Normally, I say, since with some banks the loan could be obtained, by not requesting our debts from the Central de Risks of the Bank of Spain.
- A couple buys a flat with the endorsement of the siblings (or the firm as holders of the non-owner mortgage), who in a few days or weeks buy another home with the endorsement of the first holders. Between the four they collect enough income to pay a mortgage, but obviously not two. The Bank is not updated as often as would be logical (at the time of signing the mortgage), but it takes several months. Many times it was not an operation designed by the owners, whose financial culture used to be low, but by unscrupulous real estate agents or financial intermediaries eager to charge commissions. Which does not exempt the mortgaged from their responsibility.
Another type of subprime mortgages are those of certain immigrants with less than one year of working life who bought with other partners (sometimes not even from the same country of origin). Let’s be direct without falling into folly: there are nationalities that have neither the same legal regime in mortgage matters, nor the same financial culture nor the same habits of complying with bank obligations. Therefore, without entering into other types of considerations, nationality is a fact to analyze when granting a mortgage, as well as age or type of work.
Many financial institutions started to capture the immigrant collective
With aggressive mortgage campaigns; There is nothing wrong with segmenting the market. The wrong thing is not knowing how to segment it . There is no defined group to call immigrants. There are Chileans, Japanese, Germans, Guineans or Russians, but each of them has different characteristics in terms of blackberry. Some pay better than the Spaniards and others much worse (on statistical average). The banks did not know how to distinguish between the good and the bad payers, in fact they did not consider it until the blackberry was shot.
I don’t want anyone to understand that when I talk about immigrants I talk about junk mortgages. There are prime immigrant mortgages as there are many subprimes of Spanish. The subprime to which I refer have the following peculiarities:
- Foreign nationality with little or no financial culture (of the Spanish legal framework) and without a consolidated mortgage market in your country.
- Whose work-life was less than one year and had his family in his country of origin.
- What do you buy with a friend or family member, sometimes from different countries?
If one grants a mortgage to someone who does not have his family in the country
Who has been working for less than a year and who buys with a friend, it is not necessary to be an expert to know that the risk of any of them losing their job or Going back to your country is high. If you also buy 100% more expenses and have no savings, granting them a mortgage is not a favor, it is a risk that can condemn them to financial exile if they cannot pay the mortgage.
Thanks to the banks, real estate agents and other economic agents in the sector, who “sold” the mortgage as “a way to pay the same as rent and buy a home on property ” rotten apples have been offered to them and the sector Financial as a whole.