Filenews 13 October 2024 - by Eleftheria Paizanou
Six main residences worth less than €350,000 each were sold at auction (during the first auction of the process) from March to the end of June 2024, according to the Central Bank's quarterly report sent to Parliament.
Also, three other properties (main residences), worth more than €350,000, were sold during the second auction process (due to the failure of the first auction). The total value of the nine main residences that went under the hammer was €2.85 million.
Six months after the strengthening of the legal framework for foreclosures and the expansion of the Financial Commissioner's powers, the number of notifications sent by banks and credit acquiring companies to borrowers who do not pay their instalments and do not service their loans has increased.
According to Central Bank (CB) data, 146 notices were served on mortgage borrowers who had the main residence as collateral for the loan. With letter (I), the debtors were informed that between March and June 2024 their arrears exceeded 120 days.
In fact, the notifications concerned 133 main residences, with a market value of less than €350,000 each, as well as 13 first homes whose value exceeded €350,000.
Subsequently, during the same period, 323 letters were forwarded by banks and credit acquiring companies informing borrowers that the property that is their main residence would go under the hammer. These are 284 first homes with a market value of less than €350,000 as well as 39 main residences whose value exceeds €350,000.
This was followed by the service of 69 notices (type IA), informing debtors that the date on which the mortgaged properties would be put under the hammer was set. It is worth noting that the 45 properties designated to be put up for the first auction were worth less than €350,000 and for 25 their value exceeded €350,000.
What did lenders buy?
According to CB data, the sale was successful in the first auction for six main residences with a lower value of €350,000 and three first homes worth more than €350,000 at the second auction.
In addition, after the failure of the auction, a main residence of less than €350,000 has been sold directly to third parties. At the same time, ten main residences have been purchased by mortgagees six months after the completion of the first auction.
It is noted that one of the main residences was worth less than €350,000 and the remaining nine have a market value of more than €350,000. Compared to the first quarter of the year, that is, from January to March, only one main residence worth €1.1 million was auctioned. And that was during the second divestment process.
Few are taking advantage of the new framework
It is reminded that since last December the new framework has been implemented, focusing on the protection of the main residence, with a value of up to €350,000. However, borrowers have not used the tools provided by the new framework to the extent expected.
Under the new framework, borrowers can appeal to the Financial Ombudsman for the out-of-court settlement of disputes they have with creditors in cases of over-indebtedness, unfair terms and foreclosures. The Commissioner can be addressed to borrowers with an initial loan amount of up to €350,000 and securing a primary residence or business premises worth up to €350,000, requesting the appointment of an intermediary, to resolve the dispute with the creditor, with the aim of avoiding the sale of the property.
At the same time, a second chance is given to those who have terminated loans with an initial loan amount of up to €350,000, who within 6 months will be able to appeal to the Financial Commissioner, requesting the appointment of a mediator for an out-of-court settlement of the dispute.
In addition, borrowers with an initial loan amount of up to €350,000 can also appeal. and with a business mortgage worth €750,000. Moreover, in the event that a court decision is issued to postpone the court proceedings for the purpose of appealing to the Financial Commissioner, the creditor must have the obligation to suspend the sale of mortgaged property that secures a terminated credit facility until the end of the postponement given.
At the same time, the possibility for the creditor to send a negative decision on a borrower's request for restructuring of a credit facility that is in arrears is clarified.
There were 265 divestments
According to CB data, a total of 265 mortgaged properties (including) first homes totalling €22.6 million have been sold in the second quarter of 2024. in relation to 156 properties amounting to €14 million in the first quarter of 2024.
Among the properties for which the auction succeeded in the first process until June were 45 apartments and residences under construction worth €33.5 million, nine commercial properties including offices, shops, factories and livestock premises worth €908,000, eleven plots with a total value of €1 million, 153 parcels and fields worth €4.6 million. In the second auction, a house worth €255,000, three plots worth €369,000, were sold. and 27 fields worth €753,000.
Special Jurisdiction in District Courts Ignored
Under the new foreclosure framework, the Financial Ombudsman can examine disputes between a mortgagee and a mortgagor regarding the amount declared by the mortgagee in notice "IA" when selling a primary residence up to a value of €350,000.
Subsequently, in case of non-acceptance of the Commissioner's decision by the creditors, the sale procedure will be suspended until the Court decides on the amount of the amount due.
Although the new framework was approved more than ten months ago, a Special Jurisdiction has not yet been established at the level of a District Court, to which citizens could appeal with bad loans secured by the main residence, worth up to €350,000.
The Supreme Court has not yet appointed judges to hear disputes arising between a borrower, guarantor or collateral provider and a creditor regarding a credit facility secured by a primary residence, the estimated value of which does not exceed €350 thousand.
As all the data show, the Special Jurisdiction is not expected to work, as conditions are not considered to be ripe.
It is worth noting that in order for Special Jurisdiction to function, the Court will have to issue procedural rules and instructions for Special Jurisdiction to function. As we have been told, despite the adoption of the new legal framework, citizens continue to go to court under the previous regime, for issues related to loan repayments or contestation of loan agreements.
