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

Posted by in Economy

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…