• SYRIZA Note on the Situation of Non-performing Mortgages

  • 27 Nov 15
  • Documentation on the outcome of the recent negotiation of the SYRIZA government with the creditors about the protection of primary residence from foreclosures by the banks.

    1. What was in force until the negotiation?

    The “Katseli Law” allowed borrowers who were unable to meet their debts, to resort to a court order settling their loan obligations. The court was taking account in the settlement all the borrower’s assets. Of these assets, if the borrower so wished, he/she could ask for the exception of his/her main residence. In practice, in many cases the borrower had to liquidate the remaining assets if he/she wished to protect his/her main residence.

    Auctions were suspended upon conditions until June 2015.

    The Creditors were pressing from the outset to remove this suspension and to abolish any protection for the main residence. There was an imminent danger of a massive auction-off of residences belonging to the popular and middle classes who could not meet their obligations.

    The previous New Democracy – PASOK government, had undertaken the commitment to push through these demands, at least according to the reply that the vice-president of the European Commission, Jyrki Katainen, gave last October to a parliamentary question by MEP D. Papadimoulis. 

    2. According to the recent agreement:

    a)     Those that have already been put under the protection of the Katseli Law, are still being protected by the relevant provisions.

    b)     Concerning the non-performing mortgages (about 230.000), who have not joined the Katseli Law:

    Approximately 58.000 (25% of total) are fully protected, as long as:

    • The tax value of the residence does not exceed 170.000 EUR

    • The borrower's income is at the limit of a decent living: For a family with two children, this limit is a declared monthly income of 1720 euros, before taxes.

    Furthermore, approximately 81.000 (35% of total) is protected as long as

    • The tax value of the residence does not exceed 240.000 Euros.

    • The borrower's income reaches up to 70% higher than the limit of a decent living: For a family with two children, this amounts to a declared monthly income of 3.000 Euros before taxes.

    • There is no malicious breach of loan liabilities.

    It is important to note that in the second category, the settlement between the bank and the borrower will be based on the current market value of the property and not on the market value at the time of acquisition. This is a form of a loan "haircut". 

    3. We point to the opposition’s stance, especially of the New Democracy party on this issue:

    As long as the negotiation was open, there was from the part of New Democracy no intervention in any direction (EU partners, European institutions and officials, European parties) to protect popular residences.

    The only intervention from New Democracy was an occasional pressure on the Government "to accept the institutions’ proposals and quickly seal a deal with them."

    As soon as the result of the negotiation was announced (for which the government did its best) New Democracy resorted to demagoguery, talking about "thousands of homes that will come under the hammer." The reality is that out of the 230,000 non-performing mortgages not under Katseli Law, 60% composed of the weakest borrowers, is protected.

    It is obvious that New Democracy, and other political and media power centers, invested once again in the failure of the negotiations in order to wear down the Government. Let us hope they realize that it didn’t work out as they expected and they terminate the misinformation and scare-mongering campaign.