Sister Inmaculada Torano, a 47-year- old Spanish nun, stepped in to negotiate when Bankia SA tried to repossess the home of a student at the school where she works over missed mortgage payments. "The bank may have a right under the law to evict, but there's a difference between what's legal and moral," said Torano, who teaches at a school run by the Sisters of Charity of the Sacred Heart of Jesus in the working class Madrid suburb of Villaverde. The intervention helped persuade Bankia, led by former International Monetary Fund head Rodrigo Rato, to delay eviction until the student finishes the school year in June, she said. With Spain's economy set to contract in 2012 for the third year out of five and unemployment at 23 percent, banks are increasingly easing terms for customers who are missing payments on mortgages underwritten during the country's decade-long housing boom. Pressure to renegotiate debt and delays in repossessions are raising doubts that default rates on Spain's 613 billion euros ($817 billion) of mortgages have stabilized. "It probably is going to be worse than people expect, even though the banks say it's not a problem," said Daragh Quinn, an analyst at Nomura International Plc in Madrid, on the outlook for mortgage arrears. "The more they kick the can down the road, the less visibility we have on what is really happening with asset quality."
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