By Yannis Anifantis

A joint question to the Minister of Finance, Kostis Hatzidakis, was submitted by 11 New Democracy MPs, bringing the issue of bad loans to the Parliament.

On the subject of “unprotected property of borrowers, guarantors and small and medium-sized enterprises”, the majority MPs ask the government to intervene to limit the profits of funds, servicers and banks and to protect borrowers.

In their text they point out that “the out-of-court debt settlement mechanism did not help households and businesses due to the incomprehensible refusal mainly of the management companies to actively participate in the prescribed process and only in the last period of time after many and persistent pressures from the authorities showed some small upward positive trend”, adding that the “legislative framework that protects the first home of households does not exist”.

In total, the MPs put 7 questions to the minister, asking, among other things, to make it mandatory for banks and servicers to participate in the provisions of the out-of-court debt settlement mechanism with guaranteed arrangements for borrowers, and to regulate the protection of the first residence in such a way as to protect as many borrowers as possible.

In detail, the question of the New Democracy MPs to Kostis Hatzidakis

To: Minister of National Economy and Finance

Mr. K. Hatzidakis

Topic: “Unprotected property of borrowers, guarantors and small and medium enterprises”

The transfer of loans by credit institutions solved the chronic problem of non-performing loans for banks. According to the data of the Bank of Greece, loans amounting to 86.96 billion euros are now in funds.

However, the same did not happen with the borrowers, who, having in front of them the most profitable private companies based outside Greece and not the domestic banks, are faced with the risk of auctioning their property and especially their residence which seems to be the main priority of funds to obtain profits.

The securitization of these claims is governed by the provisions of Law 3869/2010. In essence, it is a modern form of financing for banks and is achieved by leveraging their assets. Elements of the bank’s assets, which are utilized in the context of securitization, are the latter’s claims from the granting of loans to its customers (borrowers).

The bank, through the securitization of claims, instead of expecting income from the monthly repayment of loans, proceeds with the process of securitization of claims, in order to directly draw funds from the international markets. In this way, the bank proceeds to sell the loans to a special purpose vehicle (FUND) and in fact rids its balance sheets of these loans, most of which are “red”. The management of the loans, such as regulation, enforcement and liquidation operations, has been assigned to loan and credit receivables management companies.

The legislator’s long-term effort to establish a framework for out-of-court settlement of debts to avoid the sale of private property did not bring tangible and substantial results in this direction. As stated in the press release of the Union of Loan and Credit Claims Management Companies from 17-5-2024, the debts under management amount to a total amount of more than 90 billion euros and concern 2,271,548 debtors.

The out-of-court debt settlement mechanism did not help households and businesses due to the incomprehensible refusal, mainly of the management companies, to actively participate in the prescribed process and only in the last period of time, after pressure from the authorities, has it shown some small upward positive trend. Mandatory regulation for vulnerable debtors and those with a disability of more than 67% was certainly a positive step by the legislator. However, narrow vulnerability criteria leave the majority of borrowers without substantial protection. In addition, other bankruptcy court proceedings that the borrower may have do not involve protection of the principal residence.

In fact, during the debt settlement process through an out-of-court mechanism, after the final submission of the application, the debt settlement proposal and counter-proposal is prepared through the computer tool. The debtor, in contrast to financial institutions, does not have the possibility to know the settlement proposal or counter-proposal, as long as the financial institution rejects them (proposal – counter-proposal), so that it can protect itself before the Court.

Additionally, a legislative framework protecting households’ first residence does not exist.

They were recently publicly denounced with evidence and another tactic. The bank sells the loan to the fund at a low price compared to the face value of the loan. The fund, in turn, through the servicer, demands from the borrower the nominal value of the loan plus interest and auctions off the property – residence. The residence is acquired from the auction by a real estate company with the same name as the fund that bought the loan, while a sole proprietorship with a sole partner is the bank itself that transferred the loan. In this way, the bank ensures that the profits of the funds are not taxed in Greece.

In the context that governs the relationship between the borrower and the management company, the following phenomena are also encountered:

Excessive delay in processing requests for out-of-court settlement, without a bona fide suspension of enforcement measures. Many times the examination of a request exceeds 6 months, while the borrower is faced with the serious possibility (or actual) loss of his main residence.

Unfavorable repayment terms with a prepayment obligation at devastating levels, even of the order of 30%-40% of the debt against article 281 of the Civil Code. The investor’s policy is constantly presented as an excuse.

Lack of valid and timely information to each borrower about the balance of his debt, not even about the adjustment of the installment, due to fluctuations in interest rates. As a result, many borrowers, whether they have been subject to 3869/2010 or not, while paying their pretend installment receive letters that there are overdue debts. In a relevant case, the borrowers are never informed by the collection companies about the nature of the debt, but only its existence without justifying it.

Lack of meaningful communication between regulatory and legal departments. While many borrowers have been vindicated in court with stay of payment orders and foreclosures, representatives of the management companies for the arrangements ignore this and insist on the possibility of execution against the borrower’s property.

Delay in response and non-participation of management companies in the new mechanism of the out-of-court mechanism platform n.4738/2020, unless they are vulnerable borrowers.

Considering that this whole situation is dangerously undermining social peace and cohesion, Mr. Minister ask:

Of the settlements reached through the out-of-court mechanism, how many involve financial institutions and how many of these involve vulnerable debtors and people with disabilities?

Will the debtor’s right to be informed of the proposal and counter-proposal for settlement of his debts drawn up by the calculation tool of the out-of-court debt settlement mechanism be legislated?

Will it become mandatory for banks and servicers to participate in the provisions of the out-of-court debt settlement mechanism with guaranteed arrangements for borrowers?

Will any preliminary proceedings be made mandatory before the imposition of confiscation?

Will you set up your first home protection to protect as many borrowers as possible?

Will the reported tactic on the part of the banks to ensure the profits of the funds by acquiring the borrowers’ residences from the auctions be checked?

Do you intend to proceed with the creation of an electronic platform, where all the funds will participate in a binding manner and will obligatorily answer to the citizens for the loans they manage against sanctions, even removal of the operating license?

Athens, September 17, 2024

The questioning Members of Parliament

Arabatzi Fotini

George Vlachos

Yogiakas Basilios

Davakis Thanasis

Kaklamanis Nikitas

Karamanli Anna

Karaoglou Theodoros

Christos Boukoros

Salmas Marios

Styliavidis Euripides

Maximos Charakopoulos

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