Banks are preparing for their first property auctions, which will start on September 15, when a number of noncompliant borrowers will see their assets go under the hammer.
Bank officials say that the aim of these initial auctions is to send a message to debtors who have systematically avoided cooperating with their lender that their grace period has long passed. The delay in the start of the auctions was due to strikes by lawyers and notaries.
Officials add that the first auctions will involve properties valued at over 300,000 or 400,000 euros, associated with debts that have been nonperforming for more than two years. This will concern some 2,000 residences whose owners refuse not only to pay up but even to talk to their lender despite being proven to have deposits at other banks.
Banks say that some of these strategic defaulters have been provocative in their refusal to meet their obligations, taking advantage of the years-long effective freeze in property auctions by banks that was only recently lifted.
Credit sector officials insist that banks will not target people in vulnerable social groups that are in genuine distress, or small properties belonging to families that have negligible or no other assets. They stress that in no case will there be similar phenomena to those seen in countries such as Spain, where small owners have been evicted from their homes after massive auctions by banks.
The aim is to bring strategic debtors back to the negotiating table. A massive wave of auctions would not be in the banks’ interest either, as they would have to take major losses from the drop in commercial values of properties.
The freeze in auctions is reflected in data from the country’s courts, as in the first seven months of the year only 2,700 property auctions were scheduled, against some 7,000 in the same period last year. The figure has been in constant decline since 2009, when they numbered 52,000. They fell to 44,000 in 2011, to 19,200 in 2013 and to just 8,700 last year. These figures include auctions organized by the state and private parties, not just banks.