By Leonidas Stergiou
The meetings of the institutions with the banks and the government on issues related to the auctions and the evaluation of the bankruptcy law during the first six months of its operation were completed yesterday.
The discussion focused on two main issues:
Firstly, the creation of a transitional scheme for vulnerable debtors, in order to protect them from auctions until the operation of the Real Estate Acquisition and Rental Agency, which is postponed to 2023. With the current legislation, there is no provision for the first residences of vulnerable households, so to be protected from auctions, in case they fail to regulate in the out-of-court mechanism. For these cases, the creation of a Body was foreseen that would compulsorily acquire these properties and would lease them to the former owners for 12 years. At the same time, the former borrower could receive a housing allowance.
Second, search for the reasons that delay the out-of-court process. Indicatively, it is reported that out of the approximately 44,000 cases that have opened an account on the online platform, only 1,000 applications have been finalized and have reached the creditors for negotiation, with the arrangements to date being just over 50.
The answer from the Greek side was that this is a new tool, with which users and especially accounting and law firms should become familiar. According to the executives of the Ministry of Finance, the rate of finalization of applications is gradually increasing. However, many applications (approximately 300) of those finalized by the end of 2021 were canceled either due to technical problems or because a guarantor had to be added.
Also, many applications are not submitted as guarantors do not consent to the lifting of banking and tax secrecy. There are also a number who either believe or are advised to delay in order to raise other debts for settlement. There are also cases, as shown by the auction data, that leave the debt settlement until the last moment, ie before the auction.
First home auctions
Regarding the auctions of the first residence of vulnerable debtors, the Greek side proposed a transitional protection scheme, until the operation of the Agency, which is expected after a year. According to the proposal, the banks would play the role of the institution until their operation, taking them and the housing allowance of 10 million euros (of the Ministry of Labor). Thus, instead of an auction, the banks would acquire the first home of the vulnerable borrowers, which they would lease until the Agency operates.
The “no” of the institutions
This is a proposal that was discussed again last year with the institutions and which was rejected. The same happened at the recent meeting of institutions and government. Institutions believe that any transitional protection against auctions, other than bankruptcy law, does not contribute to a culture of payment and that this protection hides or encourages strategic defaulters. On the contrary, the fear of auctioning off the first home of a vulnerable household creates a culture of payment.
The Greek proposal
The argument of the Greek side was that in practice the vulnerable borrower (who has received the relevant certificate from the platform) can go to court and at first instance can block the auction. Until the appeal is heard and the whole legal process proceeds, the Agency will have functioned, while the case will remain frozen in the courts.
Thus, a new queue can be created with pending cases, where the “Katselis law” in the courts. At this point, the institutions were content to say that the issue of a transitional protection could be discussed, but with very strict and specific criteria. Something that should be discussed first with the technical ladders and if there is an agreement at this level, then the Greek side and institutions will be able to discuss it again. This whole process means that the issue will be discussed again in about two months, at best.
Of particular interest are the data discussed between banks and institutions on Monday and between government and institutions yesterday. Banks, companies and the government have already reached an informal agreement to protect the first residence of vulnerable households until the operation of the Agency, as published by “Capital” on Saturday, January 22, something that the institutions also do not want. This is because economically and legally, it is neither in the interest of the banks nor is it possible in terms of time to hold an auction of the first house of a vulnerable household. The issue came up again only for fear of the existence of some properties (first house) which are of great value and which in theory the banks could proceed with an auction.
The side of banks and management companies has argued that the cases of really vulnerable households at risk of losing their first home are minimal. Of these, the majority of properties are of low value or have various legal and urban problems and that are not a priority in auctions. Nor is it in the interest of the banks or the management companies to acquire such a property, to pay all the expenses and ENFIA, when in a year the Agency will be operational and they will have to transfer it to him.
The figures show that the € 10 million housing allowance has been estimated at 2,000 vulnerable debtors. So many are the initial applications that have been submitted through the electronic platform for the certification of the vulnerable debtor. Of these to date, only 100 have been published. The vulnerable debtor with the certificate is not legally protected from auction, however he can receive an allowance for 5 years up to 210 euros. It is noted that the same allowance can be received in case of failure in the out-of-court mechanism, ie it goes into the phase of bankruptcy and the second opportunity. At this stage, the specific allowance is terminated, but he can receive another one, again up to 210 euros, to pay the rent to the Agency that will have acquired his property.
This is the amount proposed to be given to the banks, so that they have an incentive to acquire the property of the vulnerable debtor and offer it for rent to the borrower, instead of an auction. Here, the crucial detail is the following: The Institution is obliged to acquire the property and rent it to the vulnerable debtor, regardless of value or possibility of goodwill, etc. Banks are not obliged to acquire properties that are not of interest, so a motivation. However, in practice no bank is interested in entering into this process, without anticipating an auction, especially if the property will not be in demand, when the Agency will operate in early 2023.
In this sense, banks and management companies do not emphasize these cases, which are minimal and in most of them would not bring any profit even in an auction. An exception could be some individual cases of vulnerable people with a high value first home that would make sense for an auction immediately. The Greek side wanted to cover this case, although to date no one has emerged that has been launched, among the 109,000 cases that are on the auction platform.
It is clarified that the whole discussion and the obligation of the Institution to acquire the first residence concern only the certified vulnerable debtors. According to the law, they must meet specific income and property criteria: the bachelor must have an annual income of up to 7,000 euros and the objective value of the main residence should not exceed 120,000 euros.
For a couple the income should not exceed 10,500 euros and the value of the house 135,000 euros, for a family of three the income increases to 14,000 euros and a house value to 150,000 euros, while for a family of four to 17,500 euros and 165,000 euros house value. All these categories are currently entitled to housing allowance (application is required on the platform of the Special Secretariat for Private Debt Management). Also, those who fall into this category must apply to receive the relevant certificate and then the allowance, while they can make use of the Early Warning Mechanism.
This Mechanism, in addition to the “check up” and the credit rating of the borrower (and its inclusion in a scale of low, medium and high risk), offers advisory on the institutional framework, financial management, and even psychological support. concerns households and businesses, vulnerable and not.
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Source From: Capital