Greek Foreclosure Conditions Set

Greek PM Antonis Samaras (L) with his Deputy Evangelos Venizelos
Greek Prime Minsiter Antonis Samaras (L) and Deputy PM Evangelos Venizelos say banks will be allowed to foreclose

With criticism within the ruling parties mounting over a plan to let banks seize even the primary homes of people who haven’t been paying their mortgages, the government of Prime Minister and New Democracy Conservative leader Antonis Samaras and his coalition partner, PASOK Socialist leader Evangelos Venizelos, have modified the terms to identify people who have been ducking their obligations.

Three main criteria will be used to decide whether banks should foreclose on primary residences from next January, government sources have told Kathimerini.

Under pressure from banks who want to go after homes, and from its international lenders, the government said foreclosures must be allowed because the number of loans in default is growing rapidly after three years of austerity measures and it fears the number of non-performing homeowner loans will soon hit 30 percent.

Samaras and Venizelos agreed to allow a lifting on the ban against foreclosures which began in 2009 and expires at the end of the year, although a number of lawmakers in their parties oppose it and the government has only a five-seat majority in the 300-member Parliament. Samaras and Venizelos said would-be rebels would be spoken to and brought in line.

There are fears that the lack of foreclosures are distorting the property market and the auctioning of some homes could rekindle buyers’ interest. In the first quarter of this year, only 4,600 properties changed hands and many of these were houses that were passed from parents to children. It is estimated that there are currently about 150,000 unsold homes in Greece. Government sources said that up to 280 professions are relying on the collapsing construction sector receiving a boost.

According to the measures being discussed by the Finance and Development ministries, the government will introduce a five-year suspension on foreclosures. This means that homeowners will have five years from when they stop making mortgage repayments to when their home is seized. However, the moratorium will apply retroactively. The government believes this would lead to between 6,000 and 7,000 homes a year being auctioned.

Another criterion will be what effort the homeowner has made to repay his or her mortgage. Finally, the objective value of the property, as set by the tax office, will be taken into account. Currently, the limit is set at 200,000 euros but the government is considering reducing this by up to 10 percent per year.

According to Bank of Greece figures, 22.9 percent of mortgages were not being paid at the end of March, while the overall proportion of NPLs was 27.8 percent, which amounts to 63.6 billion euros. However, banking executives fear that the proportion of NPLs had risen to 30 percent by the end of June, although official figures are not available yet. They believe that if the issue of nonperforming loans is not addressed, banks could need a fresh injection of capital.