Bloomberg News

Spain’s Socialists Pledge Changes to Mortgage Law for Debtors

October 15, 2011

Oct. 15 (Bloomberg) -- Spain’s ruling Socialist party, lagging in the polls ahead of next month’s general election, pledged changes to rules on mortgages that would make it easier for defaulting homeowners to walk away from their debts.

The Socialists pledged incentives to allow homeowners to cancel mortgage debt by handing over their homes, according to a manifesto approved today. Most Spanish mortgages allow the bank to claim the difference from the borrower if a foreclosed property is sold for less than the outstanding mortgage, and has access to borrowers’ present and future assets and earnings.

“We will incentivize agreements to cancel debts by handing over of the property as a more efficient solution, to benefit mortgage-debtors of good faith,” the text said. It will encourage “balanced agreements” between debtors and creditors in the case of default.

The party will also make banks offer mortgage contracts in which the loan is backed solely by the property, and proposed measures to encourage the rental of the 700,000 unsold new homes left over from a decade-long construction boom.

The Socialists are battling to retain voters amid the deepest austerity measures in at least three decades and with unemployment running at 21 percent. Prime Minister Jose Luis Rodriguez Zapatero isn’t seeking re-election and his party chose Alfredo Perez Rubalcaba, a former deputy prime minister and interior minister, to replace him as its candidate.

The opposition People’s Party has a 14.4 percentage-point lead over the Socialists, according to a poll published yesterday by the Fundacion Ortega y Gasset institute and the University of Murcia.

Rubalcaba proposed a tax on hydroelectric and nuclear energy to finance renewable energy. He would take measures to cut public spending by avoiding overlap between different administrations, and would encourage citizens to buy Treasury bonds by making it easier for taxpayers to invest their annual tax rebate in bonds.

--Editors: James Kraus, Kim McLaughlin

To contact the reporter on this story: Emma Ross-Thomas in Madrid at erossthomas@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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