The sale of mortgages and loans to funds
Any interested fund will buy these loans at relatively large discounts that might range around 30%-40% of the previous value, not only because the buyers are taking a huge risk, but because they should then sell these loans at a profit. The offer of prospective buyers and the level of discount that will be required will depend on the quality of the package that will be offered.
Loans with good mortgages will benefit from smaller reductions, while the not so good or ‘bad loans’ for which there is demand, will have a greater discount. There will even be offers at around 15%-20% in the cases where the loan guarantees will have little demand, such as agricultural fields, unfinished projects and generally mortgages with difficulty top foreclose.
That is why lenders are preparing loan packages which include attractive mortgages or enterprises, including unattractive loans, that will act as the carrot in the offer, something similar to what is happening now in Greece.
Therefore, the next step for the lenders is to prepare such packages for sale both in terms of quality and in terms of variety and value diversity of the purchase amount.
We may not all be experts on this new issue, but given the nature of our mortgage market and the small size, I do not really expect strong interest from abroad, while domestic demand is rather impossible to highly unlikely.
The value of these packages is also directly linked to the existence of title deeds for the mortgaged properties. Unfortunately, despite all the efforts of both the Interior Ministry and the Lands and Survey Dept., the entire matter of issuing title deeds is still stuck in bureaucracy. As much good will as these two may have, the process for issuing these title deeds remains the same as it has been for the past 40 years, so it is not possible to meet the current required speed, as described in our obligations to the Troika. The failure to issue title deeds will also have a direct impact on the stage of placing packages for sale.
So, for you to better understand the levels of bureaucracy, allow me to submit the following example.
Awaiting the certificate for final approval, an additional request was submitted for three pools in three housing units. The government employee was on leave and returned in 12 days; he had “other duties” and concluded the on-site visit after two and half months from the date of the application. When the case file was submitted for approval, the higher ranking officer was away, so now we are still waiting.
You cannot solve the issue with only the good intentions of the responsible Minister, without implementing radical changes, while the unique project in question may be in the hands of the Land Registry, however the issuance process has to be seen to be believed because the workload in the government office will probably double leading to the adoption of this measure.
Another issue that is of equal significance is the need to finance the purchase of the package.
Certainly the sellers/lenders should be prepared with some sort of plan and I can fully understood their hesitation to offer such funding, since the whole endeavour is the liquidation of the mortgage or collateral and not its reclassification or restructuring.
As we grow older and mature in age, so do we learn new things, even through an unexpected manner, while these new developments will lead to many socio-economic problems, the ramifications of which will only surface several years from now, especially impacting the next generations.
Finally, allow me to agree with the proposals put forward by borrowers that there be exceptions in cases of foreclosures and exchange of debt, both for tax purposes and for transfer fees.
Rest assured that this cost will be charged by the lender onto the borrower and in the end both (tax + transfer fees) will be burdened on the loans, making them costlier to repay. Even though it is understood that the exemption of both the taxes and the transfer fees will be to the detriment of the State, it should be considered so that lenders are also helped in such cases, otherwise new burdens will be added with lenders and funds suffering even further and at the end of the they will all want a haircut, for which the taxpayer or the state will have to pay.