From 2006 to 2009, 85,000 families were granted housing loans in Swiss francs by credit institutions in Greece. But, as MPs point out, the exchange rate’s deterioration has turned any supply-side ratio for borrowers upside down.
Arrangements aimed at protecting borrowers of Swiss franc loans from extreme fluctuations in the exchange rate are proposed, with an amendment submitted to the draft law for the ratification of the Public Revenue Code, by the Parliamentary Group of PASOK-KINAL.
From 2006 to 2009, 85,000 families were granted housing loans in Swiss francs by credit institutions in Greece. But, as MPs point out, the deterioration of the exchange rate has upended any supply-side ratio for borrowers, leaving them in dire straits. “Due to the extreme reversal of the rate, these borrowers today are ultimately required to pay not only higher interest rates, but also pay back a much larger amount of capital than they received and used to purchase their home. The result is that, despite almost 15 years of service of these loans, usually of course through arrangements, the debts from the loans always remain high and in several cases even higher than the capital that the borrowers finally received and used”, state the deputies of PASOK. As they explain, the amendment they submit does not intervene in the disputes that have been caused regarding the observance of the rules of information and enlightenment during the granting of these loans or the issues related to the validity of the terms of the contracts. It does, however, take into account the fact that the reversal of the exchange rate against the euro took on such extreme dimensions that both contracting parties did not consider as a possibility at the time these loans were granted.
“The insistence on applying an exchange rate that inflates the borrower’s debt beyond all economic logic and measure is particularly burdensome for the latter, leads to a dead end situation for the borrowers and ultimately affects the credit institutions as well, since it makes it impossible to service of these loans. On the contrary, mitigating the consequences for borrowers will restore better repayment conditions, mitigate the disputes that have been caused and allow better servicing of the loans in question for the benefit of the credit institutions as well,” the MPs note.
The settings
The proposed regulations organize and deliver a fairer and more balanced distribution of risk, as stated in the explanatory statement of the PASOK-KINALL amendment. Particularly:
– It is recognized, in principle, that the borrower bears, with regard to housing and consumer loans granted or converted into Swiss francs during the period 2006-2009, exclusively the risk of the exchange rate of euro to Swiss franc until, however, a reduction of 10% in relation to the value of the exchange rate at which the loan was disbursed in Swiss francs.
– From the entry into force of the provisions of this amendment, in the event that the deterioration of the exchange rate exceeds 10%, the exchange risk for housing and consumer loans granted or converted into Swiss francs, during the period 2006-2009 , is assumed by two-thirds by the creditor (credit institution or its successor) and by one-third by the debtor (first paragraph). “The banks that included in their strategy of credit expansion and made available, under insufficient institutional conditions for the protection of consumers and without substantial hedging products, Swiss franc loans now assume the largest share of responsibility”, emphasize the deputies and point out: “Thus , a Swiss franc loan disbursed in 2007 at an exchange rate of 1.62 and repaid at today’s rate of 0.98, with the effect of the amendment will be repaid applying an exchange rate of 1.41.’
– Provision is made for the retroactive application to the specific contracts of an exchange rate more favorable to the debtor, which is set at half the price resulting from the exchange rate that existed when the loan was disbursed in Swiss francs and the exchange rate in force at the time of the respective payment. Thus, payments made to repay debt with a lower exchange rate should be calculated against this limit and thus reduce the balance of the debt today. In case, based on the payments that have been made, it appears that a larger amount has been paid than what was required to repay the loan, the creditor is not obliged to return the difference.
– It is ensured that the benefits of the above provisions will also be enjoyed by the borrowers, whose contracts have been terminated or their debt from them was converted for any reason from Swiss francs to euros.
– It is ensured that the arrangements do not affect and do not limit existing legal claims or rights of the borrowers from the conclusion of the Swiss franc loan contracts, whether they arise from the terms of the contracts or, of course, from favorable court decisions.
RES-EMP
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