Banks in Spain Are Eager to Get Rid of Foreclosures
Spanish banks have a huge amount of repossessed real-estate properties on their books. According to an estimate made by the Moody's Investors Service these assets are worth about €100 billion, says the Wall Street Journal.
The financial institutions are eager to offer deals to accelerate foreclosure sales as they prepare for the upcoming balance-sheet review by the European Union regulators later this year. Upkeep on those properties is costly, and the Spanish regulation requires them to keep a bigger financial cushion for a foreclosed property than for a mortgage loan.
Some of the major Spanish banks offer clients up to a 100%-financing to buy a foreclosure, compared with a maximum 80% for a property that isn't owned by the bank, according to a research report published internally by one of the banks and reviewed by The Wall Street Journal.
Depending on the terms offered by each bank, borrowers can save 0.24-3 percentage points of the interest rate in case the mortgage loan is to be used to finance purchasing of a bank's foreclosure, as stated in the report. The figures are based on mortgage terms offered to "mystery shoppers" who had visited some of the banks' offices. The mystery shoppers work for a consulting firm hired by the bank to compile the monthly report. That allows the financial institution to monitor its rivals' lending products.