Categorized | Finance and Mortgage

Mortgage Lender Adds to Spanish Banking Crisis

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The rest of Europe is watching very closely as Spain’s economy continues to spin out of control. The situation went from really bad to unbelievably worse on Friday after the nation’s biggest mortgage lender Bankia announced that it would need a bailout of more than twenty-three billion euros. The bank had been absolutely decimated by delinquent mortgage loans.

Spain is doing everything in its power to prevent the bank from collapsing and then folding, as such an event could have a very dangerous impact on the banking industry in Spain and throughout Europe. Bankia is not the only bank facing a desperate situation. Banco Popular and Bankinter are both facing a mountain of delinquent loans, and could be next to fall.

The reality is that Spain does not have the funding to cover the more than one trillion euros in deposits at these banks, and is desperate for Europe’s help. While the banking system faces an uncertain future, the country’s residential real estate market is facing a very difficult situation as well.

Many of the bad loans held by those banks in crisis are mortgage loans. Most economists believe that the bursting of Spain’s real estate bubble has led to the current situation, and that its impact may be even greater worldwide. They are likening the current crisis to that which crippled the United States economy for the last five to six years.

It has yet to be seen as to whether or not Spain’s banks will face similar lawsuits and criminal charges like those in the United States following the banking and real estate crisis there.

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About Drew Wilson

Drew focuses on the Commercial and Mortgage/Finance categories.

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