Four days before the municipal and regional elections, Podemos is trying to recover the initiative on housing. After a start to the campaign marked by the right-wing discourse on EH Bildu, the party’s general secretary, Ione Belarra, announced this Wednesday that her formation will soon promote a bill in Congress that contemplates the creation of a Responsibility Fund Social with contributions from the banks that operate in Spain to “protect” families from rising mortgage prices. In addition to helping those households that cannot afford the installments due to the strong rise in the Euribor in recent months, this fund would have a compensatory nature and would serve to recover the bank rescue from the 2008 crisis, Podemos sources specify.
Training returns to the charge with the return of public aid from the financial rescue derived from the Great Recession, although in practice the entities that received most of the aid, the old savings banks, no longer operate having been swallowed up by other entities. The bank would be in charge of paying a compensatory fee based on its size, customer portfolio, credit risk and an estimate of possible negative contingencies in the financial sector. Specifically, the party led by Belarra calculates that the fund would have some 1,500 million euros per year (entities would pay 0.15% per year of their credit volume).
In this way, Podemos tries to alleviate the possible damages that those mortgaged at a variable rate may suffer. “It is indecent for working families to see that the variable rate rises by 100, 200 or 300 euros a month,” stressed the also Minister of Social Rights at an event with the 28-M candidates in Tarragona. In Spain there are about five million mortgages, of which 3.7 million are at a variable rate (these loans are updated based on the Euribor, usually once a year), according to the latest figures handled by the Bank of Spain. That is to say, they will suffer the blow of the increase in the Euribor in the last year, in parallel to the increases in interest rates dictated by the European Central Bank (ECB) to combat inflation.
The Financial Sector Social Responsibility Fund, according to party sources, would be a “sort of insurance” to protect the population from future economic crises, rate hikes or massive foreclosures. In practice, they would be mandatory reductions in loan installments. This fund would be made up of all entities that carry out their activity in the country and would be created in a similar way to the Deposit Guarantee Fund or the Salary Guarantee Fund. In addition, it would be permanent and would be directed by a management committee with a majority of representatives of the public sector (the ministries responsible for the corresponding matters and the Bank of Spain), as well as representatives of financial institutions.
The Podemos proposal —whose wording is not yet finished— will also contemplate the limitation of the debtor’s liability to the mortgaged asset. That is, the assets that the bank could use in case of default are reduced to housing. Until now, they have an impact from the party, families “respond with their present and future assets, since the responsibility is universal and unlimited.” With the modification, the debt would be settled with the delivery of the home, which is now regulated by dation in payment, although it is a non-obligatory mechanism that depends on the agreement between the client and the bank.
More defaults
The purple formation justifies the measure in anticipation of a massive increase in bank delinquency once the monthly installments are updated to the new Euribor level. So far, the feared defaults have not surfaced. Although the party that Belarra leads believes that the annual review of quotas will have a huge impact on the pocket of citizens, which will materialize from June.
According to data from the Bank of Spain, default in the financial sector closed February at 3.55%, at historically low levels (during the Great Recession, the rate reached 13.6% in December 2013). Despite this, the coalition government tried to prevent this situation and therefore agreed with the banks to extend the Code of Good Practices to help up to one million mortgagees in trouble. A figure that the Bank of Spain lowered and considers that this social shield will effectively reach some 200,000 households, according to its latest Financial Stability Report. Sources in the sector do not want to enter the political battle of the elections and insist that time must be given to see how the new aid protocol works.
“The crisis derived from the pandemic and the war in Ukraine suggests a massive increase in defaults on mortgage loans and consumer credit with terrible social and economic consequences for the entire population. And this is what has led Podemos, together with the non-return of the bank bailout, to propose a series of structural, anti-inflation and protection measures for families that the financial sector pays for”, explain Podemos sources. The proposal intends, among other issues, to minimize foreclosures and not punish the population with perpetual debts.
fourth proposal
With this announcement, there are already four proposals on mortgages raised by the Belarra party since September. The right to housing has been one of the main flags of the organization this legislature, and in recent times it has already demanded from the PSOE that the transition from variable-rate to fixed-rate mortgages be permanently free or limit the rise temporarily of mortgages for vulnerable families. Podemos underlines that it is a “solvent” and “technically viable” proposition, although its drafting has not been discussed with the Ministry of Labor and Social Economy, in the hands of Vice President Yolanda Díaz.
The text will also include other issues. For example, it will oblige the entities to report the conditions of the credit assignment operation to the debtor, so that he can exercise his rights of first refusal, preferential acquisition or withdrawal. On this issue, although not in the same terms, the Government has been working for months to transpose a European directive. The forecast is that it will be closed before the end of the year and will include the obligation to inform clients when a loan is transferred to a third party, as well as that the exceptions that the original contract had will be maintained.
Despite this, Podemos’ proposal goes further and wants to give mortgage debtors the option of more alternatives. For example, the right of withdrawal, which would allow customers to “pay the amount or the amount for which the credit has been assigned with its interest to the new creditor”, they explain from the training. In other words, if the entity sells the loan at a discount, it is understood that the final customer will only have to pay that amount, not the original amount owed.
The proposal also proposes a modification of the Civil Procedure Law to protect debtors. In this section, the text will include that it is prohibited to order an execution in the event that the bank has breached the Code of Good Practices. In addition, the norm regulates the clause Rebus sic stantibus, which is what allows contracts to be reviewed whenever there are new circumstances that alter the conditions that existed when the obligations came into effect. On the other hand, there will be a specific regulation for when banks refuse to renegotiate contracts. In these cases, once the motivation for activating the clause has been accredited, as well as the null will of the entity, mandatory deductions and dation in payment may be applied.
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