No more than 180,000 borrowers qualify for new protection system
Fewer than half of the 400,000 borrowers who are not servicing loans secured against their primary residence stand to benefit from the new regulations on the protection of debtors’ homes that were agreed on Thursday by the government and the managers of Greece’s systemic banks.
The deal reached during a meeting at Prime Minister Alexis Tsipras’s office provides for the potential inclusion not only of defaulted mortgages in the new system, as the Katseli law provides for until February 28, but also of corporate loans secured against the debtors’ primary residence. It is this opening up of the pool of borrowers to those with corporate loans that takes the number of potential participants in the new process to 180,000 according to bank estimates.
The online platform to be created at the Special Secretariat for Private Debt will incorporate all protection applications pending at Greek courts, which according to end-2018 data numbered 135,000. Applicants for protection under the law named after former economy minister Louka Katseli whose cases have not yet reached the courts will have to resubmit their application and be subject to a screening process.
The homes of borrowers will not be protected until the platform has screened their applications to see if they meet the new criteria – the property must be valued at no more than 250,000 euros and the unpaid balance of their loan must be 130,000 euros or less. The sum of the loans that enter the new arrangement is expected to reach 10 billion euros.
Those who decide to resort to justice instead of the arrangement proposed by banks will have to pay 30 percent of their tranche due each month before their case is heard in court. Borrowers who fail to pay three tranches will lose protection status and their home will automatically be returned to the online auction system.
Over the next few days the banks will assess the impact of the measures on their capital and forward the results to the eurozone banking regulators, who will then issue their approval for the implementation of the agreement.
A vital condition for the agreement to be implemented from March 1 is the creation of the online platform at the Special Secretariat for Private Debt, although it is not clear whether this is feasible in the few days left until the protection under the Katseli law expires.