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Troika Pushes Greek Banks to Bring Under the Auction Hammer 100,000 Properties

Does the big bang rolls with forceful violence towards Greece’s property owners? Are those who bought homes on loans and found themselves unable to meet their obligations at risk to be kicked out of the four walls and the ceiling,  they used to call ‘their own’? The Troika apparently puts pressure on the banks to start foreclosures by the beginning of upcoming year and get rid of thousands of  “bad loans” and real estate properties and mortgages. Target? To “drop prices in the Greek real estate market”. And for the shake of the creditors’ rescue, I would add.

According to daily TA NEA, the country’s lenders, the Troika, puts pressure on the banks to lift the ban on auctions even for small amounts with the aim to drop the prices in the Greek real estate market.

Currently there is a ban on auctions for properties with a debt of up to 200,000 euro. The ban expires at the end of 2012 and the Troika reportedly does not want to allow extension of the ban. Should the Troika insist on auctioning, properties of all kinds, sizes and values could and would come under the hammer already at the beginning of 2013.

Such a development is expected not only to kick property owners out of their homes but also to trigger a free fall in the value of properties as auctions start with a low first price.  

Renting Instead of Repaying Loan

Apparently banks try to avoid such a property doomsday development as their property portofolios would sharply lose in value.  Accorcing to TA NEA they work out two scenarios that enable some less painful solutions to property owners without money to repay their loans:

1) One scenario is based on the UK model, that predicts increase of the maximum loan term from 40 years – today- to 99 years. In this way, the loan repayment rate is reduced to the level one would pay for renting a property of equal value. Banks are reportedly plan to give debtors the option to reduce the duration of the loan or to repay earlier without penalty, should their economic situation improve.

2) Banks will take ownership of the property and allow original owners to stay inside while paying rent to the bank. A rent that can be even lower than the average rent, in a form of leasing.

A friend of mine who deals with loans, bankrupt companies and other sensitive issues, was telling me that a third scenario is not to be excluded too: that is that big real estate companies would buy the property loans from the banks and find themselves with .

The issue is ‘under construction’ so to say and we have just keep an eye on it.

Finance Ministry Reaction

UPDATE – Aug 13/2012/Monday: with a two-day delay, Greek Finance Ministry said in a statement that “the Troika never demanded auctions for properties of owners who have stopped paying back their loans.”

Either the finmin officials were trying to contact the Troika and confirm or dismiss the claims or they were enjoying a summer weekend on the beach, while thousands of Greek property owners came close to heart attacks, brain strokes and  insomnia…

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9 comments

  1. A drop in price will make housing more affordable. Artificially high prices cannot continue when salaries and pensions have been dropping.

  2. We are not talking about “price”, “market” or “correction”, we are talking about kicking people out of their home, the very last thing they have, or they believed to have !
    No matter how you call it, that’s criminal, and the consequences will surely be more tragic than a distorted market price in a country where 80% are proprietors of their house !

  3. Can we have the same reasoning for the price of bread, potatoes, vegetables, petrol, home heating fuel, etc….

  4. Ειδήσεις

    Troika and poverty are the same side of the coin.
    News about more measures send will send Greeek socitety to povetry
    http://www.rodacino.gr/article.jsf?id=7251BDE2CC7259544C8364817B725454&at=1

  5. 99 year mortgages are not the UK model – it’s a few years since I bought a house, but I have never heared of such a long term mortgage. 40 years would be normal. 99 years has the psychological barrier that you would never get to own your house, so it wouldn’t happen in any big way in the UK.

    Anyway – if you need proof that the Trioka is not the answer for Greece this is it. Of course the price crash would blow the banks and everyone else’s collateral. This is simply a “fire sale”. The foriegn creditors getting what little of their money back that they can. And God help Greece.

  6. What a kick in the teeth for anyone in Greece who has endured incredible hardships doing their damnedest to cope with austerity programs including stripping them of their jobs all in order to BAIL OUT BANKS….Then these self same bankers set their sights on taking their homes too. To reduce house prices to enable banks to re mortgage cheaper properties and make more money. This financial system cripples us all and the EU and IMF are leaders in the art of theft this corrupt monetary system has to be challenged and replaced.
    My god when will the worm turn ???

  7. Negative equity is the big problem with pushing the prices of houses down. of course, the real problem lies with the thouroughly inflated prices set by property speculators during the “good” (sic) times.
    It is THE big problem in Ireland as we speak. People purchased a house for lets say 350K (which is a modest house for a modest family who want a home, not an investment!) now finding that their house is “worth” only 180K.
    Even if they do manage to find a buyer, they are still going to have to pay 170K back that they now suddenly find their house was “overvalued” at when they bought it. Nobody questions the overvaluing, it’s the “markets” you know. No, it’s people’s homes, it not another chip on the gamblers roulette table!
    The only way out of this mess is to prevent speculation on a basic need like housing and to stop the price of houses fluctuation the way it does. Instead of fulfilling a need (to house people), housing became yet again a gamblers paradise for the banks and financial institutions, and once again, instead of paying for their own losses, Joe Soap is made pay for them instead.
    The banks should be forced to double the repayment terms and halve the repayment value for everybody. They should also be forced to fix the interest rate at the same rate they get the money at, meaning, they should provide a service to enable people to buy a home instead of gamblin on a “market” with other people’s money.
    Just another exponent of the corrupt immoral financial system created by corrupt and immoral financiers and rubber stamped by corrupt and immoral politicians. As I keep saying, the whole system is rotten to the core, and the sooner we say “enough”, the better.

  8. This all happened in Finland during early nineties. Houses were sold at firesale prices for cousins and brothers of bankers, then remaining loans were tranferred to a new government owned trash-asset bank. Some debtors are still in the hook, socialist finance minister didn’t allow debtors to buy themselves off, and government continued the rip off from the point where banks left them.

    Many here share belief that Finland has managed to avoid worst of euro-crisis thanks to the memory of this episode being so fresh. People are still very aware about risks of private and public debt, and mortgages generally have clauses that make crisis more manageable for debtors.

    In my opinion, only some of the worst serviced mortgages should be left for banks to auction properties away, but this shoud be done very carefully to avoid corrupt practises and property price crash. In Finland price crash overshot seriously and few well connected cashed in royally when prices later recovered.

  9. If you still had any doubts, here you go, doubt no more! Mr. Mike Soden is a former CEO of Bank of Ireland, you know, one of those beautiful institutions who took the Irish people for a multi billion € ride, and then ended up having to be bailed out by the same Irish people for another multi billion amount of “bailout” money. Part of the “cheapest bank bailout in history” (sic) was the setting up of NAMA, a state run company with the sole purpose of selling off all toxic properties and getting the money back for the Irish tax payer.
    According to this bankster,

    Because if you woke up tomorrow morning and the headlines in the Thursday property section of the newspapers read that property prices had increased by 10%, the wonderful factor of greed would re-enter the marketplace, and you would find that there is a turn in the marketplace.

    Straight from the horses mouth. Greed is wonderful!
    This is how these guys thought, think and will keep thinking until we do something about them!

    http://www.breakingnews.ie/ireland/soden-nama-intervention-would-bring-wonderful-factor-of-greed-back-to-property-market-563144.html