Auction tsunami over the next 15 months

By Leonidas Stergiou

About 50 to 100 auctions are planned for each day of the year, of which not a third are held, while none of them so far involved a vulnerable debtor, and in fact that has been affected by the pandemic crisis.

The data from the electronic platforms of the Special Secretariat for Private Debt Management and those of the auctions are impressive. Of the 37,972 applications submitted to the platform for extrajudicial mechanism and adjustment, from the 1st of June when the new bankruptcy started until today, only 600 applications have been finalized and have reached the hands of creditors (banks, tax authorities and insurance funds) in order to seek redress.

In another electronic platform of the Special Secretariat for Private Debt Management, which operates for the issuance of a certificate for a vulnerable debtor, about 3,000 applications have been submitted, of which almost 300 have been finalized, while only 17 debtors have received the relevant certificate. At the same time, about 90,000 borrowers affected by the coronavirus are already in regulatory and protection status through the “Bridge 1” and “Bridge 2” installment subsidy schemes. In addition, 2,800 households and loans of about 5.5 billion euros are under some protection and regulation regime, including cases from the previous Katselis Law. And all this in addition to the installment programs and other arrangements made by the banks or loan management companies themselves.

Everything became more understandable when we asked specialized executives to explain to us the procedures and what is valid today in the market. From the research of “K” and Capital.gr the following emerged:

1. Pandemic. From the beginning of the pandemic until the end of May 2021, all legal proceedings and auctions were frozen for everyone – vulnerable, crowned and not. This freeze, which concerned from the first stage of a process to the last, brought all the auctions (except the vulnerable and crowned ones) by 9 to 12 months back. That is, auctions that could take place in 2020 are now postponed to 2022 and some reach 2023.

2. Old cases. All the auctions that take place today and until the end of 2022 concern cases 1-2 years before the pandemic.

3. New bankrupt. With the launch of the new bankruptcy law on June 1, auctions have been released for everyone – vulnerable and non-vulnerable. With the difference that the new law provides special provisions for the vulnerable and for the first home.

4. Support for the vulnerable. One of the special provisions was the state housing subsidy for 5 years. This subsidy applies to both first home and rental loans to avoid evictions. It applies both in the extrajudicial phase and in the event that it is fruitless and there is bankruptcy and a second chance, with liquidation of assets. However, especially for the vulnerable, the Real Estate Acquisition and Leasing Agency is foreseen, which is expected to operate at the end of 2022 and will be obliged to acquire the first home of the vulnerable owner and rent it to him for 12 years. The former owner will also be entitled to a housing allowance for 5 years, while the Agency will be able to proceed with the auction if three rents are not paid. For this reason it is estimated that the first auctions of vulnerable debtors will occur from 2023 onwards.

5. Sales & leaseback. Until the operation of the Real Estate Acquisition and Rental Agency, whose international tender starts soon, the auction of the first residence of vulnerable households is considered practically impossible, due to the large volume that comes from the previous years before the pandemic, many cases have and higher sales value, but also the intermediate protection valves with the certificate of the vulnerable household, the “Bridge 1” and the “Bridge 2” (programs extending until the end of 2021 and August 2022, respectively).

6. Certificate of vulnerable debtor. The definition of a vulnerable debtor was legislated, which provides for specific income and property criteria and debt levels. The law stipulates that in order for someone to be considered a vulnerable debtor, they must apply on the online platform and issue the relevant certificate. The latter is mandatory for bonuses but also protection against auctions. Therefore, anyone who wants to protect their property and receive an allowance must apply for this certificate, electronically, on the platform of the Special Secretariat for Private Debt Management.

7. Another vulnerable, another crowned. The concept of a vulnerable debtor is something completely different from that of a coroner. The latter category is protected only by the measures taken for the pandemic and are part of the “Bridge 1” and “Bridge 2” programs. The criteria are different, as the decline in incomes due to a pandemic is taken into account here. However, the crowned ones are also protected until the middle of 2022.

8. Bankruptcy Law Applications. Most out-of-court appeals are delayed mainly to raise more debts to be settled as a result of tax and insurance liabilities, but also from the expiration of protection measures due to a pandemic (including loan installments, contributions, etc.). Another party, almost a third, waits its turn until it is threatened with auction to win two months of protection, while another party is stuck in accepting privacy or other legal issues with co-beneficiaries, guarantors, etc. , for which the case is in accounting and law firms.

9. Debt concentration. From the middle of November, when the new obligations will arise (tax, VAT, etc.) it is expected that the cases of finalization of out-of-court applications will increase (from 600 today) and that the first regulations will emerge that will not mainly concern vulnerable people.

10. Difficulty of auctions. The delay and non-conduct of most auctions is mainly due to the following reasons: First, many people wait until the auction and immediately pay and settle to be suspended. Secondly, there is a huge bureaucracy even today with digital transfers. Because not all certificates and procedures are electronic. Examples are the TAP certificate from a municipality, which may take up to 4-6 months, mortgage offices up to 6 months and the preparation of a contract by a legal bank service for about a year (before the digitization took up to two years). Thirdly, various legal and urban planning issues that lead to suspensions, from “queues” of the Katselis law, etc. Fourth, lack of interest, which is in fact the main reason for the cancellation of auctions.

11. Bid adjustment. Banks and management companies do not choose the auction as the first solution, nor is it in their interest to put pressure on market prices, especially now that they are expanding into real estate. Therefore, they first exhaust solutions such as settling, treating and repaying the former red loans back to the banks and then proceed to create portfolios for sale in a fund or adjust the auction schedule so that the bid is controlled.

All these reasons together compose the picture of the large volume of auctions that are planned but a small part takes place, of the protection tools for the vulnerable that are not used as expected and of the long delay in the finalization of the applications in the bankruptcy law for regulation.