Although dealing with distressed debt and non-performing loans (NPLs) has always been part of the banking business, the large amount of distressed mortgage-backed debt in the hands of financial institutions in Spain is absorbing significant resources, including capital, people and management time.

Such circumstances, combined with the state of the real-estate sector in Spain, have meant that many Spanish or foreign financial institutions with significant interests in Spain might be ready to sell their mortgage-backed loan portfolios (performing and non-performing). However, the M&A market of mortgage-backed loans is not for the time being as busy in Spain as it is in the UK and other EU markets, or as might be expected in light of the current economic situation.

Although some might think that this shortage of transactions might be due to the legal framework affecting these transactions in Spain, an analysis of other applicable laws, such as English...