Mortgage indebtedness and home repossessions as symptoms of the financialisation of housing provisioning in Spain

Unveiling an expert term

In early summer 2012, an event was organised in l'Hospitalet de Llobregat, a town in the Barcelona area, by the local Plataforma de Afectados por la Hipoteca [‘Coalition of people affected by mortgages’], the mass social movement that emerged in 2009 as a reaction against the wave of home repossessions. The main claims made by the Plataforma are the generalisation of ‘assignment in payment’ – meaning that, contrary to what the Spanish mortgage law establishes, mortgage holders should not be liable for any outstanding debt after the completion of the repossession process –, the cancellation of debts for insolvent families already evicted, and the transformation of repossessed dwellings into social rented housing. Their activities include several aspects:

– They provide collective support to individual cases in local assemblies, where debtors are provided with legal advice during their negotiations with banks, and where mobilizations are called for in order to put pressure on specific bank clerks and authorities, and to prevent the repossession of specific dwellings.

The Plataforma has spread all over Spain, where 160 local assemblies have been created up to now (Colau and Alemany, 2012, Mir et al., 2013, Sabaté, 2014). ¹

Back to the meeting, two experts and activists coming from the PAH-Madrid were introduced by a leader of the PAH-l'Hospitalet and spoke in front of an audience of mortgage debtors and sympathizers. The announced subject of the event was the possibility to use legal strategies in front of the threat of repossessions. Such focus on juridical aspects is a usual trait of the PAH's activities.

However, that day the first speaker was not a lawyer, but an economist. He started by introducing the case of two partners – a Spaniard and an Equatorian – who created a company called Central Hipotecaria del Inmigrante and acted as middlemen in the real-estate market during the housing bubble years. Taking advantage of their contact with Equatorian associations, they attracted Equatorian households with low, precarious income, who were wishing to buy a home. They profited from the common national origin of potential home buyers – and the assumed mutual trust derived from that condition – in order to convince them to act as guarantors of unknown compatriots who were also applying for a mortgage. ² In exchange, households obtained access to credit and had thus the chance to become home owners themselves. In addition to acting as ‘financial advisors’ for potential buyers, the middlemen played the role of mortgage brokers (prescriptores) for local bank branches, usually on a contractual basis, providing them with closed mortgage-lending operations. They did their job in exchange for commissions, ³ often both from borrowers and lenders. Their links with particular bank managers and property appraisers have not been yet explored by the court for presumed fraud practices.

One of these two partners – the Spaniard, as the Equatorian could not be located – has been prosecuted for his collaboration in fraudulent lending practices and has been condemned by a court in Madrid, in a one-of-a-kind trial until present. Even if such situations of large-scale predatory lending have not been rare during the housing bubble, it is difficult to supply documentary evidence about a large amount of cases, so that a judge acknowledges the existence of a pattern and identifies those responsible for it. As a rule, fraud cases have been revealed in an isolated manner. This has occurred only recently, after the boom years, as mortgage borrowers have become insolvent and repossessions have started to escalate.

Then, once he had presented the case, the economist developed his argument: How can it be explained that banks were willing to lend mortgages to customers in such evident risk of becoming insolvent? And, moreover, why wasn't the customers’ solvency proved at all by the credit institutions themselves? For the speaker, this was not a question of trust on mortgage brokers. Such fraudulent practices, and the paradox that apparently underlies them, can only be explained by addressing certain structural conditions and macro-scale processes taking place in the financial arena. For him, the answer was ‘securitisation’, and the transfers of risks and responsibilities that underlie such operations.

The speaker then tried to unveil in front of a lay audience what the securitisation notion entails. His aim was to empower ordinary people, and specifically those who are confronted with the inability to repay their mortgages, by helping them to interpret such esoteric financial processes and the particularities of financial products, to which no attention at all was paid at the moment of borrowing a mortgage. He also stated his intention to build a website where information on the participation of Spanish banks in securitisation operations is made available to everybody, in the hope of making the process more transparent.

The economist's discourse, that immediately met the audience's approval, also contained a denunciation of fraud and of rapid enrichment through the practice of seemingly abstract investments and financial operations affecting and involving mortgage lending, the specific credit-lending operation that, at a certain moment in recent Spanish history, became the only way to access a basic resource like housing for the majority of the population. The alliance among Spanish banking elites, with the main banks and savings banks involved in the foundation of several national asset securitisation funds (fondos de titulización de activos), was accordingly identified as the strategy that explains the lack of accountability of credit-lending institutions for their abuses. This lack of accountability is due, to a great extent, to the ambiguity of the Spanish legislation on mortgage securitisation regarding who should be considered as the creditor after securitisation: whether the bank, who initially granted the mortgage, or the financial institution, who bought the security (Nasarre, 2011: 2729). Spanish authorities and justice institutions were blamed for the enforcement of deregulation policies that have promoted, or at least allowed, the practice of lending mortgages to – potentially – insolvent customers: a phenomenon that places the Spanish reality not so far away from the US subprime crisis, despite the authorities’ recurrent denial of such parallelism.

The impact of financialisation on housing provisioning

It is commonly accepted that, since a new financial regime was established in the 1970s (Graeber, 2011; Harvey, 2007), credit and debt relations have been the object of an outstanding degree of abstraction and sophistication. This could make them seem unsuitable to be analysed in the light of classical anthropological accounts, derived from the observation of lending and borrowing practices in traditional societies (Mauss, 1979 [1923–1924]). But it will be our argument that, as financial markets do not consist on a separated sphere, unrelated to grass-roots economic practices, an anthropological and ethnographic account of the world of finance is both pertinent and necessary, as it has been showed by several authors (Ho, 2009; Ortiz, 2013).

What we have chosen to address in this paper is a specific modality of the more general process by which debts are turned into objects of investment, in the framework of a particularly invasive financialisation process (López and Rodríguez, 2010; Marazzi, 2009). By means of securitisation processes, “new financial instruments are created by combining different types of assets and marketing them to investors” (Strauss, 2009: 10–11). More specifically, mortgage securitisation involves “parceling mortgages into small amounts, placing them into larger composites, and selling the lots as new securities” (Lapavitsas, 2009: 117). The attractiveness of these operations derives from the fact that they “allow banks to transform into liquidity assets that otherwise would be stuck on the balance sheet until their maturity”. In this way, mortgages taken out by ordinary people intending to become home owners are used by financial institutions to issue sophisticated financial products – derivatives such as mortgage backed securities – that are then sold in international markets. Different phases of the financial process, such as the lending of credit, the management of loans and the investment on those loans as financial assets, are disaggregated and located under the responsibilities of different actors (Levenfeld, 1993: 71), while, as a peculiarity of financial derivatives, risk is traded “without the underlying asset itself being traded”, as “no title to ownership needs to be exchanged” (Bryan and Rafferty, 2006: 9–10).

The results of these processes of financialisation have been interpreted as “the financial expropriation of workers and others” (Lapavitsas, 2009: 126), as “derivatives are intensifying the process of competition between capitals, with direct pressure on labour (as workers and consumers)” (Bryan and Rafferty, 2006: 5). Precisely in this sense, it is our purpose in this article to illustrate how the growing importance of financial derivatives is endangering the livelihoods of wide sectors of the Spanish working class, including recently arrived migrants. This is occurring immediately after a period of time during which getting indebted in the aim of accessing home ownership was widely seen as a wise strategy – sometimes the only one available – to satisfy a household's need for adequate housing.

We contend that an anthropological analysis of mortgage securitisation, and more especifically of how this process is understood and dealt with by mortgage holders threatened by repossessions, is pertinent and necessary for a critical appraisal of a situation that is causing a considerable social suffering, and that in the near future is likely to deepen inequalities through the financial exclusion of a multitude of mortgage defaulters. In our view, ethnographical tools have the potential to show the extent to which financial products and operations have a material anchoring, an impact on crucial aspects of livelihoods, such as the provisioning of housing (Sabaté, 2012). The implications of the financialisation of mortgage lending and borrowing may go unnoticed in times of prosperity, but they emerge in a dramatic manner whenever households face unemployment, the withdrawal of social welfare, and other difficulties arising in times of economic hardship. Moreover, the contribution of social anthropology is much needed to explain the particularities of a realm, that of finance, that, in our view, should be freed from the discursive hegemony of financial experts. Social and human disciplines other than neoclassical economics should apply their critical tools to enhance the visibility of the links between the workings of abstract, de-territorialized financial operations and the risks that society – with a greater exposure of the most vulnerable sectors – is assuming in their name (López and Rodríguez, 2010: 290).

Following the argument introduced in the previous section, mortgage securitisation, apart from being an strategy for banks to obtain liquidity while getting rid of risks (Martín-Oliver and Saurina, 2007), could account to a great extent for predatory lending practices, that is to say, for the eagerness to offer loans on the part of banks and financial middlemen, even to households with scarce economic and social capital, regardless of their actual probability of successful repayment. Securitisation has been described, indeed, as a major driving force for the incorporation of the poor and the working classes to finance economy. This occurred when banks noticed the financial profitability of workers’ wages (Lapavitsas, 2009: 128), and took up the strategy of opening new segments of mortgage markets where, on the one hand, a higher risk is assumed by credit institutions (Rolnik, 2013: 1062), but, on the other hand, greater profits could be obtained through higher interest rates. The suggestion made by Gregory (2012: 384) for subprime lending may apply here: when these mortgage loans were extended, turning credit – with its positive connotations – into debt – with its negative load – for wide layers of the Spanish population, the usual order of events was subverted: it was not borrowers, but lenders, who took the initiative by aggressively offering credit irrespective of the chances of having it repaid. Nasarre (2011: 2730) identifies the legislative changes that promoted such behaviour in Spain:

“Spanish credit institutions were legitimized to securitize […] subprime mortgages, […] which contributed, first, to the generalisation among investors, including international ones, of the risk of repayment failure of those mortgages, and, second, it allowed credit institutions to go on lending on an even riskier manner, because, after all, the risk of repayment failure was transferred to investors”. ⁴

It has already been showed how, during the recent housing bubble in Spain that came to an end in 2007, household indebtedness, and most conspicuously mortgage indebtedness, represented a major opportunity for lucrative investment, triggering and enabling capital accumulation and aggravating economic inequalities (López and Rodríguez, 2010; Naredo, 2011). Many critical accounts tend to attribute these developments to the deregulation policies implemented by the State. However, according to authors offering a more nuanced explanation, the financialisation of the Spanish economy should be attributed to a great extent to the active role of the State itself, through the implementation of pro-cycle policies (López and Rodríguez, 2010), rather than to its supposed withdrawal from regulatory practices. Thus, State regulation is interpreted as having “taken a specific shape that is adapted to the new forms of accumulation based on financial logics” (López and Rodríguez, 2010: 267), ⁶ and therefore an accurate account of the conditions of possibility for financialisation should pay attention to the role of the State as “a major agent in the provision of financial instruments” (Fine, 2010: 13).

The dramatic consequences of the over-indebtedness of households did not become fully evident until the repayment of mortgages became an impossible task for wide layers of the population, and a wave of home repossessions spread all around the country, with more than 640,000 repossession processes being initiated between 2008 and the first semester of 2015. ⁷ These figures highlight to what extent have financial processes become entangled with the satisfaction – in fact the lack of satisfaction – of a human need, with crucial consequences for people's chances to secure their livelihoods and to pursue their life plans.

That was the case, among many others, of Patro and Joaquín, ⁸ a couple in their fifties coming from Southern Spain who had arrived at the Barcelona area and founded their family in the 1970s. By the time they signed a mortgage contract in order to purchase a flat that represented a substantial improvement with regard to their previous housing conditions, they relied on Joaquín's wage as a private security agent and on Patro's disability allowance. Although Joaquín earned a considerable amount of money for working-class standards, his wage included productivity pluses that were contingent to the requirements of particular services and overtime work. With the advent of the economic crisis, the demand for such services decreased, and so did his earnings. Parallel to this, the EURIBOR index to which their mortgage was bond recorded several rises. As a result, the balance between their mortgage repayments and their family income was severely troubled. In view of this, Joaquín started to suffer from depression and lost his job. After a few months, they found themselves unable to cope with their financial obligations. They had not obtained their mortgage from an ordinary commercial bank, but from a firm specialized in mortgage lending they had come into contact with through a real-estate broker. As the firm lacked a network of neighbourhood-based branches, Patro and Joaquín had to address themselves to their headquarters in Barcelona claiming for the assignment in payment. This seems to illustrate what Martín-Oliver and Saurina (2007: 3) describe as “a new type of banking, one where relationship with the costumer is fading”, with “banks (…) becoming mere originators of loans and distributors of their risk”. Indeed, the firm is blatantly oriented towards the secondary mortgage market, while it adopts secretive and reluctant attitudes in front of defaulting customers. For Joaquín, the threat of an eviction became unbearable, and, as a result of the aggravation of his depression and the risk of committing suicide, he was admitted in a psychiatric hospital. In contrast to her husband, Patro devoted herself to the foundation of the local PAH assembly, despite the evidence that, due to the particularities of their creditor, they had little chances to reach a solution under the pressure of collective mobilisation.

Popular understandings of securitisation

During the Autumn of 2012, three months after the event where the economist from the PAH-Madrid made his argument, the term ‘securitisation’ (titulización in Spanish) started to be heard very frequently during the meetings of the PAH in l'Hospitalet, where an average of fifty people – many of them with a migrant background and all of them members of the working classes, with a big representation of unemployed people – congregated every week. In a mid-September meeting, three people complained about bank branches denying them the ‘assignment in payment’ – which would free them from any outstanding debt after handing the keys back to the bank – with the argument of the securitisation of their mortgages. As a result, bank clerks argued, the decision was not in their hands any more, as mortgages had been grouped and then transferred to another institution, an asset securitisation fund, controlled by a managing firm, that had in turn sold them to an investor. Negotiations were blocked in this manner, with the consequent aggravation of debtors’ difficulties to overcome their insolvency.

Such situations multiplied during the following months, and were particularly prevalent among the customers of a specific savings bank, Catalunya Caixa, that was said to be about to be bailed out by the State. ⁹ It should be noted here that about 70–80% of the members of the PAH-L'Hospitalet assembly at that time were Catalunya Caixa customers. ¹⁰

The argument of securitisation met a variety of reactions among PAH members, who made very different interpretations of bank clerks’ accounts. For some of them, it was indisputable, and constituted and endpoint to their hopes to obtain any concessions from the bank: there were no chances in front of such a technical statement made by banking experts. It was interpreted as follows: the mortgage no longer belonged to the bank that had lent the mortgage to the customer, and, as a result, nothing could be done to obtain the assignment in payment. As Jose, a PAH-L'Hospitalet leader put it, “going to bank branches and trying to renegotiate securitised mortgages is wasting one's time”.

In contrast to this attitude, many other debtors were not ready to surrender. They argued that securitisation was not their problem, but the bank's, and thus it was the credit institution who was responsible for the way transactions with other financial institutions were managed. For them, customers should not suffer the consequences of abstract, opaque financial business beyond their control.

There was still another stance, a particularly interesting one for our purpose, in front of the securitisation issue. It was the one adopted by a minority of PAH members, several of them coming from – or closely related to – other PAH assemblies in nearby cities, including Barcelona. They were determined to unveil and to understand the real consequences of securitisation, and, especially, its implications in terms of the bank's responsibility towards customers, for example concerning the possibility of assignment in payment or the cancellation of debts. Their strategy was to provide debtors with an argumentative tool-kit that could be used in their negotiations with banks. In this aim, they undertook a research of relevant legislation, looking for the details concerning the responsibilities of actors in the face of mortgage securitisation processes. They specifically wondered if banks retained the capability of conceding the assignment in payment after having sold the debt to other financial institutions. Parallel to this, they also succeeded in finding a court decision where assignment in payment had been conceded even if the mortgage had been securitised. They intended to use that case as a precedent that would strengthen the position of debtors while negotiating with bank clerks. However, the bank affected by that particular sentence was not Catalunya Caixa, which somehow played down the argument for many PAH members. A case of assignment in payment with Catalunya Caixa was also looked for, but, to our knowledge, it was never found. Besides, some efforts were also made in order to add information about the securitisation of mortgages to the database of cases that had been created by the PAH. In all, what should be highlighted here is the fact that a number of PAH members, none of them a lawyer or a legal expert, became involved in the design of a collective strategy against the banks’ securitisation argument.

In connection with these efforts, Álvaro, a member of the PAH-L'Hospitalet whose mortgage had also been securitised, engaged in a personal battle against the bank's securitisation argument. He found out the current status of his mortgage, the specific fund where it had been included, and started a campaign against the firm who managed that fund, pointing at it as the real owner and thus as the responsible for the concession or denial of a potential assignment in payment. His strategy consisted on sending them letters and fax offices. Álvaro was, apparently, the only member of the PAH-L'Hospitalet who had become fully aware of the connection between his particular case and the abstract workings of financial markets. Even if he sometimes advised other PAH members to emulate him, at that time he seemed to have lost trust in the power of collective strategies: his was a lonely battle against a financial institution.

Finally, a very distinct attitude could be noticed among yet another sector of the assembly, some of the founding members among them. Meeting after meeting, when participants told that bank clerks had denied them the assignment in payment or the cancellation of their debt with the argument of securitisation, those who usually assumed the role of answering questions and providing tips to newcomers reacted in an almost aggressive way: they denied the relevance of the securitisation status of particular mortgages, or even the very existence of securitisation itself. They also repeatedly refused to answer participants who asked for a definition of the term, probably as a result of their own lack of technical knowledge, but also of their determination to minimize that discussion during the meetings. For them, the recurrent securitisation argument was nothing but a new alibi invented by banks in order to avoid the inconveniences of negotiation with insolvent customers, or also another strategy in order to waste time, make late payment interests grow, and wait for an imminent bailout. In one occasion, Manuel, one of the founding members of the assembly, became really irritated in front of another member who was trying to collect data on securitisation cases. He told him to “take off the blindfold of his eyes” and totally quit that task, as it was a waste of time and efforts needed to be made in the traditional manner: calling for mobilisations and collective action against bank branches, irrespective of securitisation claims. For Manuel, securitisation had more to do with the internal organisation of banks, who were now gathering unpaid mortgages and other ‘toxic assets’ in specific departments that would be then intervened by the State. In a similar spirit, Rosa, another charismatic leader of the local assembly, stated once that the owners of securitised mortgages were the banks themselves, and they should be made responsible as such. Securitisation, for her, was “a pantomime”, and she also affirmed once that it reminded her of “a zombies story”: something that was not real.

Folk narratives and practical knowledge in front of expert discourses

The evidence we have brought from the field shows, first of all, how securitisation has become an authoritative argument used by banks in order to render debtors even more defenseless, preventing them from negotiating their position or from arguing back. Assignment in payment and the cancellation of debts, two of the main claims made by the PAH in front of the wave of repossessions, are usually denied with this justification. The elimination of any space for negotiation appears thus as a result of the use of an opaque terminology that represents the statu quo as something given and indisputable.

However, as it has been showed, the bank's strategy to deny a renegotiation of mortgage conditions by using an expert term and an obscure, authoritarian reasoning has not been equally successful for every sector of mortgage debtors and participants in PAH meetings. It is true that some of them can be said to have surrendered to the bank's argument. Such cases could be interpreted as an evidence of how lay people trust expert systems, as a consequence of their inability to verify the authenticity of every expert system influencing their everyday activities under the conditions of modernity (Giddens, 2004: 37). But there are some convincing alternatives to this interpretation. First, and perhaps most evidently, mortgage debtors can also be depicted as the victims of the unequal distribution of cultural capital and expert knowledge (Bourdieu, 1979, 2001), a condition that constrains their sovereignty as consumers both in housing and credit markets, and serves, ultimately, to the reproduction of given social structures and power relations. Besides, expert knowledge and discourse can also be seen as effective tools in dispossessing mortgage holders of the practical knowledge that could allow them to resist the bank's intentions. As Scott (1998) points out, such practical knowledge or ‘mētis’ emerges from daily experience in front of a constantly changing natural and human environment, and from the interaction with counterparts (p. 313). For this author, through its anchorage in a particular locality and social context, ‘mētis’ is especially useful to deal with transient, shifting, disconcerting and ambiguous (p. 320) situations that require quick adaptation (…), responsiveness, improvisation and successive approximations (p. 315). Indeed, our ethnographic evidence reveals how mortgage holders may benefit very much from the application of this kind of practical knowledge during their repossession processes and, more specifically, during their negotiations with banks. A knowledge that can be only partially captured as standardized formulas, such as protocols or handbooks, ¹¹ and that is best transmitted in the framework of face-to-face discussions among lay people. The PAH’s assemblies and mobilisations are an opportunity for such discussions. The necessary social conditions for the reproduction of practical knowledge, according to Scott (1998: 324, 334), are met in that kind of setting: a pressing need affects mortgage holders; a community of interest is established among them, who constitute themselves a vast army of freelance experimenters; information is accumulated both along the history of the local Plataforma and the personal trajectories of its participants, pointing to a few promising leads that worked in analogous contexts; experimentation with trial-and-error strategies takes place, and results are shared through mechanisms that resemble in a way those described for oral cultures. In addition, and also importantly for our case, a certain institutionalization is introduced within the time-space framework of meetings that are specifically intended for the exchange of opinions, stories, news and advice. What emerges is the kind of pluralistic knowledge that is suited to resist the logic of control and appropriation (p. 335) underlying the political struggle for institutional hegemony by experts and their institutions (p. 311).

We can state, thus, that, by means of the unequal distribution of expert knowledge (Bourdieu, 2001) and the suppression of alternative views based on local, practical experience (Scott, 1998), the securitisation argument plays a crucial role not only in legitimizing economic reality – through people's everyday acts of faith in an expert system (Giddens, 2004) –, but also in concealing and shaping it.

This does not mean, however, that resistance is impossible. In contrast to those uncritically assuming the authority of the expert argument, many other mortgage holders have engaged in the creation of what we can call a ‘folk narrative of securitisation’, in the framework of a more general narrative of financialisation. As we have showed, ordinary, working-class people lacking expert knowledge about the workings of financial markets can reach different degrees of understanding of such processes. But, irrespective of their level of achievement in this sense, what can be most interesting is that they seem to do it in correlation with their expectation to apply such knowledge to their own concerns, with a stress either on individual or on collective goals, depending on the case. These folk narratives are based on the close observation and interpretation of the processes that are visible for ordinary people, and the knowledge accumulated in this way is constantly tested on the basis of its practical efficacy. As Scott (1998: 324) puts it, this efficacy is derived from the fact that mortgage debtors have a vital, direct stake in the results of close observation and, at the same time, they are consumers of their own conclusions. To the extent that they succeed in building practical knowledge, they may be capable of challenging the power relations governing the encounter between experts and lay people on the arena of banking and finance. As our example has shown, claims for particular aspects of social justice, such as the social function of housing, are entangled with the design of more or less sophisticated strategies aiming at securing the livelihoods of households in a material sense. According to this, folk understandings of financial products can be seen, first of all, as a challenge to experts’ monopoly on the arena of economic knowledge. They are also constitutive of people's claims for the restoration of the accountability of banking and real-estate activities, after the legitimation of irresponsibility implied in poorly regulated securitisation practices. We contend that through such folk narratives, practical knowledge and the strategies grounded on them, the right to decent living conditions is asking for a chance under finance capitalism.