Government seeks to limit foreclosures on family home

The Cabinet on Friday approved a code of good practice for banks that includes the possibility of handing over the keys of the family home to the mortgage lender to cancel debt obligations.

If banks are willing to do so, the code allows for deed in lieu of foreclosure for families all of whose members are out of work and with mortgages of up to 200,000 euros.

“These measures seek to alleviate the dramatic situation of many Spaniards who have lost everything,” Deputy Prime Minister Soraya Sáenz de Santamaría said. She noted that there 1.5 million households in Spain with all of their members unemployed.

The 200,000-euro limit applies to cities of over one million inhabitants. The ceiling is scaled down according to the size of the city and is set at 120,000 euros for towns and cities with under 100,000 people. This option also applies to households that are unable to service their mortgages using 60 percent of their revenues. The code also sets a cap on punitive rates charged for delays in mortgage payments.

The measures will be retroactive. According to judicial sources, there have been 150,000 foreclosures during the current crisis, while another 300,000 are pending.

Sáenz de Santamaría declined to estimate how many banks will sign up for the code. “We are talking to the banks to prevent families that have lost their jobs from also being thrown out of their homes.”