Confusion about foreclosures

Banks insist the agreement to spare homes up to 300,000 euros is only for a limited period of time

Brussels and Frankfurt were displeased yesterday to learn of statements by Deputy Prime Minister Yiannis Dragasakis and Finance Minister Euclid Tsakalotos on Wednesday, according to which there is a deal between the government and the banks that no homes valued at less than 300,000 euros should be sold at foreclosure auctions.

“If there is such an agreement, if it is a binding one, it should be taken into account in the upcoming stress tests, as in practice it cancels the collateral that concerns properties worth less than 300,000 euros,” a European official told Kathimerini.

The issue blew up yesterday at the European Central Bank as the ministerial statements coincided with what the head of the Hellenic Bank Association said on the matter: Nikolaos Karamouzis told the Financial Times that Greek lenders had coordinated their plans to make sure that homes valued below that amount would be not be included in the first auction rounds, adding, “We took into consideration the social reaction to this process.”

ECB officials demanded explanations from central banker Yannis Stournaras, while sources say an ECB official had also been in contact with Karamouzis. Both Greek officials assured that foreclosures will begin with large properties while adding that this does not mean that smaller debtors with smaller properties will be excluded from the process; after all Karamouzis had referred to the first auction rounds only.

On October 11, Justice Ministry sources leaked that an agreement had been reached with banks to exclude homes valued at up to 300,000 euros from online auctions. However, banking sources clarified that the freeze on such foreclosures would only apply for a limited period, till year-end – in effect for just one month, as online foreclosures begin on November 29. 741.13 1.1630

Ahead of the stress tests that are scheduled to start in February, a leading bank official explained that “the higher the number of auctions that take place up to February, the smaller the reduction in the value of collateral will be.” The creditors have made it clear to Athens that for the process to have the necessary credibility and count positively toward the stress tests, there should be auctions of properties across the country by all banks.