Council of Ministers
Government approves measures to support needy mortgage defaulters
Council of Ministers - 2012.3.9
Moncloa Palace, Madrid
The Council of Ministers has approved a Royal Decree establishing measures to mitigate the problem of evictions of persons at risk of social exclusion. The reform is supported by a Code of Good Practice.
The Vice-President of the Government, Soraya Sáenz de Santamaría, explained that the beneficiaries of the measure are those families with only one property and no income, with all its members out of work. The mortgage repayment cannot exceed 60% of income.
Certain limits are set on the acquisition price of these properties: for those cities with more than one million inhabitants: 200,000 euros; with more than half a million inhabitants: 180,000 euros, and with more than 100,000 inhabitants: 150,000 euros.
Soraya Sáenz de Santamaría explained that for families that fall in the exclusion threshold, the applicable interest will be the result of adding the interest agreed in the loan to 2.5% on the amounts owed and unpaid. She also indicated that the procedures for out-of-court enforcement will be reformed so that they are "quicker, cheaper and more transparent".
Code of Good Practice
The Royal Decree Law incorporates a Code of Good Practice into its text, which establishes various phases for avoiding evictions: the restructuring of debt, the removal of part of the mortgage and, as a last resort, the handing over of the property in lieu of payment.
The Vice-President of the Government indicated that the first phase establishes a period of grace of four years for the repayment of capital, the term of the mortgage is extended for up to 40 years and the interest rate is capped to a maximum of Euribor + 0.25. If the debtor is in an economic situation that impedes these conditions from being assumed, a second restructuring process is set which includes the possibility of removing part of the mortgage in accordance with a series of percentage calculations established in the Royal Decree Law.
In the event that the debtor is unable to assume this restructuring process and the situation becomes unviable, the provision is established whereby the keys to the property are handed over in lieu of payment of the debt.
Soraya Sáenz de Santamaría indicated that in this situation provision is made so that for a period of two years the tenant may lease the property that had been handed over, making payment of a limited price calculated by applying 2% to the amount of the outstanding debt.
The Vice-President of the Government underlined that the banks may voluntarily apply the Code, but that once they have subscribed to it, its application is mandatory and is subject to judicial authority. A monitoring committee will also be set up that will publish a twice-yearly report on compliance therewith.
Fund to finance payment of suppliers
The Council of Ministers approved the creation of a Fund to finance payments to suppliers, which will enable them to start to collect outstanding debts in the month of May. In addition to collecting their trade debts with local authorities, it will represent a significant injection of liquidity into the productive economy.
This tool may also be applied to outstanding payments with autonomous regions in line with the agreements reached at the Fiscal and Financial Policy Council on 6 March.
The measure will mean an injection of 35 billion euros into the productive economy and is the largest ever refinancing operation carried out in Spain.
The Vice-President of the Government stressed that "for the first time a payment mechanism is established to make the public authorities credible again, which is an important stimulation to reactivate the economy and inject liquidity in a complicated year for all Spaniards".
Other agreements
• Approval of a credit line from the Official Credit Institute for the island of El Hierro to mitigate the economic effects of the recent seismic activity suffered on the island.
• Agreement to ask France to extend the extradition of the member of ETA, José Luis Urrusolo Sistiaga, for the offences of attempted murder and terrorism
