Greece eases ban on mortgage foreclosures

08/01/2014

The government sought a solution to prevent abuse of the foreclosures ban.

By Andy Dabilis for Southeast European Times in Athens -- 08/01/14

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Evangelos Venizelos, leader of the Panhellenic Socialist Movement (PASOK) party, said some citizens have systematically abused the country’s ban on foreclosures. [AFP]

The Greek government partially lifted a two-year moratorium on foreclosures to help the country's recapitalised banks start lending again, officials said.

Banks can now repossess homes from people that defaulted on mortgages, exempting for a year households whose annual net income is less than 35,000 euros and those with homes worth less than 200,000 euros.

"The best scenario is that for another year many people will keep their homes, but after that the government will vote for a complete lifting of the ban," said Kostis Chatzidakis, Greece's minister of development. "This is a fair, balanced regulation which is being introduced without the clear agreement of the troika but, I would like to believe, with [its] understanding."

The EU-IMF-ECB troika insisted Greece end the foreclosure ban that was enacted by the previous socialist PASOK government.

The current government said it estimated between 85 and 90 percent of households will be protected, but did not explain how the banks will benefit if they repossess the rest.

Parliament, however, backed the measure by a scant two-vote majority. Prime Minister Antonis Samaras ejected a veteran member of his New Democracy party for voting against the proposal.

The government refined the proposal to win reluctant lawmakers fearful that the image of banks confiscating homes will weaken support for the ruling New Democracy-PASOK coalition that currently stands at about 25 percent. Those with homes and incomes under the thresholds will have to pay on a sliding scale of 10 to 20 percent of their income.

But critics said many of the 230,000 people whose mortgages are in default will be unable to pay, raising fears of a new wave of homelessness.

"It is contradictory to say that this decision will help the banks, while at the same time help the vast majority of the debtors," Alex Sakellariou, a sociologist at Panteion University in Athens, told SETimes.

Banks are not keen on foreclosures, but the government yielded to the troika's pressure, said Haralambos Tsardanidis, director of the Institute for International Economic Relations in Athens.

"The banks are not interested in the houses because they will not be able to liquidate them. If they are obliged to sell them, they will not get half the price and will have to write off losses," Tsardanidis told SETimes.

Tsardanidis said Greece's international lenders may have miscalculated the market in trying to prevent abuse of the foreclosures ban.

"The troika believes many people will not pay back their loans but despite that, prices are very cheap and the market is dead," he said.

Property prices have plummeted during the seventh year of deep recession in Greece. Some apartments in Athens are on sale for as low as 10,000 euros, but still there are no takers.

Samaras said he will not impose more austerity, fearing social unrest and a backlash, especially as Greece now holds the six-month EU rotating presidency.

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The Bank of Greece said non-performing loans had risen to more than 29 percent in June from 24 percent a year earlier because many borrowers could not pay their loans, credit card debts and mortgages.

The troika agreed to some modifications of the lifting of the ban, said Simon O'Connor, spokesman for Olli Rehn, vice president of the European Commission.

"We want a solution that will protect the truly vulnerable, but will also allow banks to put things in order. The general moratorium on foreclosures allows for systematic abuse from people who are trying to get away without paying," O'Connor said.

What can Greece do to prevent mortgage foreclosures? Tell us what you think in the comments space.

This content was commissioned for SETimes.com.
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