Greece’s new bankruptcy code will provide for the main residences of bankrupt borrowers considered financially vulnerable to be transferred to a state entity and leased back to the original owners. This will replace the existing framework for the protection of debtors’ main residence from repossession.
The government is therefore examining the creation of a corporation that will take ownership of the borrowers’ homes and lease the property back to them, with the possibility of a buyback option under certain conditions. This proposal appears to enjoy the support of banks, which are keen to find a way to stop bad mortgages from soaring due to the financial crisis resulting from the coronavirus pandemic.
This idea was discussed extensively at a teleconference with the participation of government and credit sector officials and will form part of the new bankruptcy legislation to replace the existing protection system that expires on April 30.
Borrowers will be eligible for this scheme after the liquidation of all their assets, as long as their monthly disposable household income does not exceed the standard living costs as determined by the Hellenic Statistical Authority (ELSTAT), and the officially determined value (“objective value”) of the main residence does not exceed 120,000 euros for a single borrower, rising by 40,000 euros for a married debtor and another 20,000 euros per child (up to three children).
The transfer of a debtor’s main residence to that entity will be at a price equal to the commercial value of the property. The borrower will be able to stay in the property paying a monthly rent for 12 years. Three years after the start of the lease, the debtor will obtain the right to transform the rental agreement into a 20-year contract with a buyback option.
The blueprint, which is still being discussed between the government and the banks, will provide that the rent will be set based on the average floating mortgage rate adjusted to the European Central Bank interest rate.
If the debtor pays all rental tranches for the duration of the contract, they will regain ownership of the home or be able to transfer it to their legal heirs. However, the agreement will be terminated if the borrower fails to pay three monthly rents.
Original Story: Ekathimerini | Evgenia Tzortzi
Photo: Photo by Takis Kolokotronis / FreeImages.com
Edition: Prime Yield