Bilateral dialogue between borrower and loan holder, with the aim of finding a mutually acceptable solution for the regulation and conversion of a “red” loan into an informed one, is attempted by the government.

With a series of initiatives, most notably the latest amendment that attempts improvements in the way out-of-court settlement works, it is estimated that this can be achieved to a certain extent.

In the government, they believe that there are those tools available that on the one hand protect the borrower who is in a real inability to service his loan due to the crisis and on the other hand close the “windows” for banks and loan managers to avoid regulation unnecessarily.

As noted by the Minister of Finance, Christos Staikouras, “out-of-court settlement is a mechanism that today, despite the delays, imperfections and difficulties, is proving to be the most successful debt settlement tool of the last 12 years”.

On the way to the ballot box, the issue of bad loans and auctions will, as everything shows, be high on the agenda of the parties that claim the vote of the Greek people.

For its part, the government, as sources from the Ministry of Finance at least report, has brought in the institutional framework which has insurance valves and largely prevents the auctioning of first homes. As a leading figure of the Ministry of Finance notes, at least for the vulnerable, the safety net has a large perimeter provided of course that the borrower will want to cooperate.

The same sources state that the concern and pursuit of the State is to “drag” the bank or the loan manager to the dialogue table, having very little room to avoid the regulation, as long as the borrower belongs to the cooperative category.

Let’s look at the tools that each borrower has at his disposal, so that he can avoid the unpleasant evolution of the auction:

1. Vulnerable debtors have had another “weapon” at their disposal since last September. And what is this? The interim program until the operation of the Real Estate Acquisition and Re-leasing Agency. Therefore, any borrower who has all those characteristics that make him vulnerable, can submit an application to the special platform created at the Special Secretariat of Private Debt, so as to receive the relevant certificate of the vulnerable household. Subsequently and after the relevant certificate has been issued to him, the law imposes the suspension of any enforcement action. Also, the said granting of the certificate paves the way for it to be subsidized by the state for a period of up to 15 months.

2. The second stage of protection for the borrower is the out-of-court settlement, which despite any problems that have occurred in its operation, is now running at a good pace, as at least assured by the Private Debt Management Secretariat. The out-of-court settlement allows for the overall settlement of debts based on the debtor’s income and financial situation, and these include debts to the State, insurance funds, banks, and now they will also include debts to Municipalities.

3. However, the most effective and least time-consuming tool for both sides, the borrower on the one hand and the bank or servicers on the other, is the bilateral arrangement of the debt with the borrower and loan holder being able to come to an agreement. This tool is given a premium by the State, so that debtor and loan holder can come to an agreement more easily. In this direction, the platform will be activated from the end of April, on the basis of which all arrangements will be made electronically with the aim of being monitored both by EGDIX and by the Bank of Greece.

It is characteristic that, as reported by the Association of Loan and Credit Claims Management Companies, until the end of 2022, bilateral arrangements have been reached for loans that exceed a total of 35 billion euros, which, as noted, brings back to the healthy economic cycle more than 700,000 borrowers, individuals and businesses.

Of these loans, as is also noted, more than 8 billion euros have returned to regular repayment status in the last three years and have returned to bank balance sheets as serviceable, restoring access to the banking system for more than 115,000 borrowers.

The Management Companies also report that the consensual arrangements in the majority of cases include debt forgiveness. For the first half of 2023, Loan Management Companies have set a target for loan arrangements and settlements to reach €3.2 billion, up more than 30% compared to the same period in 2022.

The changes in extrajudicial

Finally, it should be noted that the latest amendment to improve the operation of the extrajudicial system includes the following basic interventions, as the Minister of Finance also mentioned:

* Obligation is introduced in the justification of the rejection of the regulation proposal.

* Debtors with a single debt of more than 10,000 euros are given the opportunity to settle their debt and save their property.

* It is possible to settle debts in favor of third parties, such as debts to municipalities

* The consent of microcreditors to the regulation proposal is ensured, subject to conditions.

* The mediation process with financial institutions is modified, for the benefit of the debtor.

* Cancellation of 100% of the interest of the arrangement, in case of repayment of the debts.

* The interest rate for debt settlement is reduced and it is changed from floating to fixed at 3% from 5% that was until now, while it also includes the already existing arrangements through the out-of-court mechanism.