Mortgage Nightmares: Evictions Become Focus of Spanish Crisis
After a record number in 2012, evictions in Spain have become the symbol of a crisis that shows no signs of improving. Next year isn't likely to be any better, but with more attention now being paid to those losing their homes, relief in the form of legal reform may soon be on the way.
Joan Peinado Garrido, 59, can't sleep at night and he's lost his appetite. He takes various medications and has resumed stuttering when he's upset. The frail man gently guides his 86-year-old mother, María José, from the tiled kitchen to the living room.
The old woman uses a cane and is dependent on her son's help for more than just walking. For half a century, the family has been living in the white corner house at 52 Avenida Mediterránea in the town of Vidreres, near the provincial capital of Girona northeast of Barcelona. Now, Peinado has to vacate his home -- and he has no idea where he, his unemployed daughter Mireilla, 28, his seven-year-old grandson and his mother will find lodging.
It smells like cleanser in the house. The floors of the kitchen and bathroom are sparkling clean, and the wineglasses are arranged in neat rows in the living room glass cabinet. Grandson Marc has created a nearly perfect circle with his toy cars in front of his bed. His grandfather sleeps on a nearby cot. There are no boxes or other indications that the family is about to move.
Some 400,000 eviction proceedings have been opened in Spain since 2007, with roughly half of the families involved having already lost residential properties due to foreclosures. For most of them, these were their homes. Now, in the fifth year of the financial crisis, the evictions have become an iconic image of the country's economic plight. During the first six months of this year alone, the Consejo General del Poder Judicial, which oversees and organizes the Spanish judiciary, registered 94,502 repossessions -- and the evictions reached a record 532 a day during the first half of 2012.
No End in Sight
What happens to people who lose not only their jobs, but whose homes and hopes for a better future are taken away? There are now 1.7 million Spanish households in which not a single family member still earns a salary. Nearly 4 million people have lost their jobs since late 2007, when the real estate bubble burst. More than half of those out of work in Spain are now considered to be long-term unemployed. The result is that an increasing number of them can no longer service the loans they took to purchase apartments, houses and commercial space during the boom years prior to the crisis.
According to a forecast by the Spanish central bank, the number of foreclosures will increase by another 30 percent in the coming year. And as the year draws to a close, there is no end in sight to the financial crisis. The outlook for 2013 is grim.
Small companies are facing bankruptcy, large companies are announcing additional layoffs and international corporations are pulling out of the country. The Madrid Confederation of Employers and Industries estimates that economic output could drop by a further 1.3 percent in the coming year, with the ranks of the unemployed likely to swell to over 6 million.
Currently, 12.7 million people are already forced to survive on less than 60 percent of the average Spanish income, meaning that 27 percent of the population is living below the poverty threshold. A joint study by UNICEF, Oxfam and Doctors Without Borders concluded that the country will need over 20 years to regain the standard of living it attained in the prosperous, pre-crisis years.
The crisis has "altered Spain's DNA," says Francisco Lorenzo, who heads a social research group at the Catholic aid organization Caritas. Lorenzo notes that "we are currently transforming from a society with poverty to an impoverished society."
One year after the government of Spanish Prime Minister Mariano Rajoy took office, the country is worse off than ever. In mid-December, Spain received nearly 40 billion ($53 billion) from the European Stability Mechanism (ESM) to restructure its ailing banks. But experts in Madrid and Brussels still fear that the government will have to apply for a bailout of the entire economy in early 2013. And the unstable political situation in Italy could also drive up interest rates on Spanish sovereign bonds, making it increasingly difficult for Spain to acquire fresh capital.
Justice for the Rich?
In early December, Rajoy said that if his country needed to ask the ESM for a bailout, it would do so, but he insisted that Spain currently does not need such aid. To quarantine toxic mortgages issued by the country's savings and loans (known as cajas) and other banks the government has created a "bad bank" as part of its package of measures to combat the crisis. They have not, however, managed to restore the Spanish people's lost confidence in their own economy. Teachers and students are protesting cutbacks in education spending, doctors oppose the privatization of public hospitals, and judges object to plans to charge a fee for civil court cases, which they say would mean justice only for the rich.
The mounting poverty across the country -- and its most visible manifestation, the evictions -- now affects pensioners, who have used their own homes as collateral to take out loans for their sons and daughters, along with the once well-off middle class and young self-employed professionals. The situation is particularly dire in Catalonia, above all in the area around Girona, where unemployment has now reached 26 percent.
It is a situation that has received much attention in recent weeks, following four suicides of people who were about to lose their homes. The Rajoy government quickly ordered a two-year moratorium on evictions -- but only for cases of extreme hardship. Families will be given a temporary reprieve if they have more than two children and an annual income of less than 19,000, more than half of which has to be used for mortgage payments. This also applies to single parents with children under the age of three. But the interest on their loans continues to accumulate.
The moratorium does not apply to Joan Peinado. A food chemist, he used to work at the local dairy and now receives a disability pension following a work-related accident 20 years and 10 knee operations ago. He is not recognized as a hardship case.
At 8 a.m. on Friday, Dec. 14, over 100 women and men braved icy winds to gather under clear skies in front of Peinado's white house in Vidreres. It was the day when the eviction squad was due to arrive, but the assembled supporters were determined to stand in the way. Two police officers parked their patrol car on the other side of the street.
Peinado's ordeal dates back to when he signed a mortgage for 160,200 with the Caja Madrid savings and loan, which was looking to acquire new customers in Catalonia. In early 2006, he decided to purchase the parental home in Vidreres from his widowed mother.
At the time, his wife was still working. But she left him three years ago. His daughter lost her job and, with her small son, moved back to live with her father, who also has to look after the grandmother. With a disability pension of 1,050, Peinado could no longer afford to pay the monthly installments of 700. To make matters worse, the family's old-fashioned house has become virtually unsellable. It is located in the aspiring community of Vidreres, where large new condominium projects were rapidly built on the outskirts of town during Spain's real estate boom years.
In May 2010, Peinado's savings and loan, which has since been purchased by the Spanish banking conglomerate Bankia, took him to court and demanded early and instantaneous repayment of the entire loan -- including interest on arrears and legal fees. All in all, Peinado was asked to come up with more than 210,000. Since he could not meet their demands, the presiding judge ordered his eviction in September. Bankia, which was nationalized in May, subsequently repossessed the property at 60 percent of its original estimated value.
The amount remaining on the mortgage, however, still has to be paid to the bank. According to Spanish law, Peinado, though he lost his property, remains legally liable to service the home loan, including late charges -- if need be, for the rest of his life. In desperation, Peinado turned for help to an initiative called "Plataforma de Afectados por la Hipoteca" (PAH), or "Mortgage Holders' Platform." Since it was founded in Barcelona nearly four years ago, the organization has been able to prevent 510 evictions. Lawyers provide free services to help individuals deal with legal formalities and negotiate with banks. Protest and support groups are forming all across the country. Even Spain's predominantly conservative judges have taken to the streets to protest the widespread evictions.
On the day when Peinado was to be evicted, Marta Afuera from PAH came from Girona to support him. She accompanied him to the courthouse in the small city of Santa Coloma de Farners to review the eviction notice. They had already managed to get a four-week extension back in November. Afuera says that it's "inhuman" to leave the family in suspense right up to the last minute.
Tarninshing Its Image
When Afuera and Peinado returned to Vidreres that morning with the news that the family's eviction had been postponed until further notice, the crowd clad in green PAH T-shirts cheered. Two days earlier, Peinado's bank had asked the presiding judge to suspend the eviction. The financial institution had just received billions in EU bailout money -- and apparently didn't want to risk tarnishing its image just a few days before Christmas.
The eviction, to be sure, has not been permanently averted. Nevertheless, young and old protesters waved red cardboard stop signs and hand-painted banners. "Together we are strong," they chanted. Peinado grabbed a microphone, said thank you and hardly stuttered at all. He beamed with relief, finally freed of "the noose that I have felt around my neck for days now."
Joan Bossacoma from the town of Celrà also stood in front of the Peinado family house and applauded. The burly man used to earn good money selling clothing at weekly markets. But one day, while he was out, he was evicted from his home. The Catalan police had simply had the locks changed. He had never received a court order for eviction. Acting in "self-defense," as he says, Bossacoma has illegally moved back into his own home. During the crisis, even otherwise compliant Spaniards have been forced to become "okupas" and have occupied their own repossessed homes or other empty apartments. Bossacoma says that he even has the backing of the local mayor.
Indeed, Celrà Mayor Dani Cornellà, 34, is championing the rights of the town's new poor. The mayor, a member of Catalonia's left-wing and pro-independence Popular Unity Candidates (CUP) party, has been in office for the past year and a half. To help Bossacoma, he personally informed the judge of the man's predicament and intervened on his behalf in negotiations with the bank.
Cornellà contends that financial institutions which have been bailed out with public money should be forced to increase the amount of social housing available at low rents. He says that the banks should have to accept the return of property in lieu of mortgage payments. Until now, says Cornellà, borrowers who defaulted on their mortgages were simply excluded from society and never again granted a loan. "How can someone be expected to work when all his money goes to the bank for the rest of his life?", asks the mayor.
Simply at Home
The situation, says Cornellà, has to change, and he expects that demonstrations over the course of next year will force a reform of what he calls Europe's harshest mortgage legislation. Even the conservative Professional Association of Magistrates is calling for a reform. José María Fernández Seijo, the head judge at the provincial capital's third mercantile court, sparked the debate when he submitted a query to the European Court of Justice (ECJ) in Luxembourg concerning the eviction case of a Moroccan living near Barcelona. In a preliminary ruling, the ECJ confirmed in early November that the Spanish law regulating such evictions was incompatible with European norms because it does not sufficiently protect consumers against abusive clauses in mortgage contracts and excessive interest rates.
Judge Fernández Seijo says that he expects a final decision in February. "The law has to be fundamentally amended," he says. Along with many of his colleagues, he is urging a portion of mortgage-holders' debts to be forgiven, to give "them a second chance."
It remains to be seen whether Peinado and his family will be able to remain in their home, whether he will be able to free himself of his debts, and whether he will be able to sleep soundly again at night. On January 6, when his grandson Marc, like all Spanish children, is looking forward to receiving presents on the Epiphany, Peinado hopes that they will be able to celebrate the holiday at 52 Avenida Mediterránea. Not with friends. Not in an emergency shelter. But simply at home.
Translated from the German by Paul Cohen
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