Three in one mortgage receivers are most likely to lose their homes after Greece and creditors agreed on the measures to “protect the first residence”. Income criteria for first residence protection are set extremely low, the state is willing to subsidize and help the banks and the poor borrowers with some 100 million euros in total. On the other hand, several thousands borrowers may lose their homes as soon as possible and thus under speedy and extremely humiliating conditions.
In order to avoid foreclosure of the first residence, homeowner and debtor has to have annual income:
€8,180 euros if single
€13,917 if a couple
€20,139 if couple with two children.
In all cases, the value of the residence must be below €170,000.
“This is thought to cover roughly one in four mortgage payers. Some 350,000 of 1.2 million mortgages are not being serviced on time at the moment,” notes Kathimerini.
There is also a second category of homeowners who will enjoy some kind of “protection”. This category refers to commercial value of first residence up to €230,000. Borrowers have to have an annual income of
up to €35,086 for a couple with two children
up to €13,906 for an individual
up to €23,659 for a couple
These debtors will be able to reach an agreement with their banks, who will have the right to take into account other wealth criteria.
If the homeowner has another property, like a country-house, this will not be protected.
The first category where the first residence is protected refers to 25% of borrowers, that is 100,000 loans. “This category will be subsidized by the state with a potential cost of 100 million euro: if the borrower is not be able to pay the monthly debt repayment installment to the banks, the state will subsidize,” news portal News247.gr stresses.
For the second category the bank arrangement will be for 3 years, while the income criteria will be based on reasonable living cost calculated at a rate of 1.7 stable for three years. The repayment installment will be stable. After three years the arrangement will be reviewed taking into consideration the prevailing economic condition of the borrower.
Main thing for all these arrangements is the economic behaviour of the borrower until the start of the Greek crisis and how “cooperative” has been in paying back the loan.
Procedures for foreclosures and home auctions will speed up as of 1.1.2016.
“The means of defense against execution of foreclosure and auction are limited in number. The first auction offer will be based on the market value of the property and not on the objective value as the practice is today. If no bidder shows interest, a repetitive auction will take place after 14 days and the first bid price will be set at the half of the commercial value.”
There are still some vague points in the bill. However what is clear is that:
a. if borrower of First Category cannot pay the installment, this will be subsidize by the state – with taxpayers’ money, I suppose.
b. for the Second category, criteria is the commercial value of the property.
Before the crisis, commercial values (real purchase prices) were higher that the objective values set by the state(for tax office, notaries etc). Nowadays and after six years of crisis, commercial values have decreased at 40-60% and are much lower than the objective values. Yet the tax office calculates the Property Tax (ENFIA) at the objective values that were valid in 2007.
c. When a borrower took a mortgage in 2007 property had value -let’s say 200,000 euro. Now this value is maximum 100,000 euro if not less. In case of a repetitive auction, the borrower will see his home go under for just 50,000 euro.
Of course there are also these borrowers for whom the criteria do not apply, and I’m afraid they may lose their homes as soon as possible.
As the Greece-creditors agreement protects only 25% of the mortgages, 300,000 borrowers could potential see themselves at risk of losing their homes if they will be considered as “non cooperative” by the banks in case they will disagree with the banks demands.
Finance Minister Euclid Tsakalotos told during a press conference that “households will pay 5%-10% of their income as mortgage repayment.”
Greece and its lenders have not reached an agreement on the remaining nonperforming loans (NPLs) – like business loans, households loans for other purposes etc etc. – and under what conditions banks will be able to sell them to distressed debt funds.
I wonder, how many of SYRIZA-ANEL coalition will vote in favor of this bill on Thursday, that could lead to a real and massive social problem.
PS I hear that banks write-off debts of up to 20,000 euro, I hear that the state will subsidize “nonperforming mortgages.” There are times I almost wished I had a loan by the bank just for the sake of “benefiting” from the kindness of the banks and the state.
I also wonder when the banks will give account as to why they gave so many loans with so little securities. But that’s another story.