Roberto Grao Gracia
What has been called "property bubble", that is the disproportionate and continued increase in the prices of houses and all buildings that were built until the year 2008. It was not an exclusively Spanish problem but the western world, including the USA and Europe.
We ask about economic mess causes that reached levels of annual percentage growth rate of 16% and up to 20 % or more, and we did not finish to understand and accept that things had to be as well. Some economists have discovered that the decisive factor was that the financial institutions were behind this. They granted mortgage loans to many buyers without any guarantee of payment by insufficient income or even lack of work, and with buildings ratings above their market value, trusting in the unstoppable increase of prices. The case was to make a lot of mortgage operations, although they lacked warranty, and even "securitize" many of these operations in packages, selling them to other speculative financial institutions with appetizing interest. Hence the name of bubble as something artificial and fragile, full of air and always ready to disappear.
While the bubble is maintained, all or most of those who involved in the transactions make a packet. They exponentially increased their income, including the savers who preferred to invest in the purchase of homes, in search of increased profitability. More and more housing and buildings were projected, without looking at the needs of the market. But as we can see in the middle or end of the year 2008, the bubble broke and many financial institutions went down the drain, bankruptcy and economic ruin confirming once more the old popular saying that "if you are too greedy you end up with nothing reed breaks the sack." It was necessary to help these entities with subsidies and loans to family and personal economy would not suffer irreversibly, causing panic among those who usually have money in the Bank (the vast majority of taxpayers).
Now, the worst consequence of the great crisis was suffered by the borrowers of the mortgages who due to they could not pay were seized and dispossessed of their housing and what is more serious, were sentenced to pay in the present or in the future with their own property and professional income. In my opinion here lies the great injustice of the Spanish mortgage system that requires that the borrower respond the loan, not only with the housing acquired, but with their own assets and income. I remember that on top of everything else a few years ago, moneylender entities require the signature of two responsible guarantors (usually the parents) of the repayment of the loan, if case the borrower couldn't make it, a requirement that was deleted some time ago.
Well, in Anglo-Saxon countries, like the United Kingdom and the USA, does not happen it. The responsibility of non-payment is limited to seize the house, without the borrower being affected in its property, and then putting on sale at public auction the property to the loan, conforming to charge the amount of the sale, offsetting the unpaid amount. If recovery from the auction exceeds the unpaid portion of the loan, the difference is given to the borrower. This is the right and not the system we have in Spain, the greater injustice to the borrower, the greater security for financial institutions lenders. They will argue that in this case the interest of the loan will be significantly higher than they are recovering. Well, "Every man for himself."
Roberto Grao Gracia
Independent Forum of Opinion (Spain)