Mortgage relief on the way for 40,000 Spanish homeowners

40,000 homeowners with Blackstone as their mortgage provider will have more flexibility under the new plans.

The world’s largest private equity firm Blackstone Group – which holds the mortgages of around 40,000 homeowners in Spain – has announced plans to offer debt relief to any of its customers struggling with repayments…

In a report by Bloomberg, two of the firm’s employees have stated anonymously that Blackstone is offering to cut outstanding debt, thus lowering the mortgage repayments of those clients who have had difficulties and face defaulting on their homes.

The plan also includes the option of dation payments, whereby homeowners can post the keys to their home to Blackstone and simply walk away from their debt. Currently, Spanish law stipulates that banks can still pursue a borrower for outstanding funds even if they have handed over the keys to their property, provided the value of the original mortgage is higher than the value of the property at the time of the foreclosure.

However, Blackstone’s customers would be treated like customers in the US or many other European countries, whereby they become free of the debt if they hand in their keys. Such scenarios are drastic and rare, but they do happen, and Blackstone is eager to reduce the number of defaults on its books as it looks to invest more into Spain’s growing property market.

“The offer of dation in payment is a refreshing way of approaching borrowers that are in negative equity,” Juan Villen of mortgage service company Idealista told Bloomberg.

Blackstone acquired €3.6 billion worth of Spanish homeowner debt when it purchased the assets of struggling Spanish bank CatalunyaCaixa. It is now seeking to restructure more than €6.4 billion in mortgage loans, having calculated that to do so would be easier and less costly than going through the expense of repossessions.

The firm is more easily able to offer such concessions because it is US-owned and not a Spanish bank, which have to abide by stricter central bank regulations and provisioning requirements. “If you are struggling to pay your mortgage, you are undoubtedly better off having Blackstone as your creditor than a traditional Spanish bank,” Villen added.

While any form of default or mortgage struggle is unfortunate, such occurrences do happen, and although Spain’s property market has undoubtedly battled through the worst times, there are some homeowners still struggling with their financial responsibilities. Blackstone’s stance indicates a maturing of the country’s real estate and banking industry, and could well set a precedent that makes it easier and safer to invest in Spanish property than it has ever been before.