Plan puts brake on bank auctions

Ministry, lenders examine proposals as rising interest rates and inflation put strain on household budgets

The government met with the Hellenic Bank Association (HBA) yesterday in a bid to put together a plan that will slow down lenders from repossessing homes on default loans as rising interest rates bite into household incomes.

Economy and Finance Minister Giorgos Alogoskoufis met with HBA President Takis Arapoglou and other senior bankers where they assessed the proposed changes, a senior ministry source said.

“Generally speaking, the banks did not have a problem with the proposals but they pointed out that the existing legal framework in Greece is the most protective toward customers in the European Union,” the source said.

Rising interest rates, in combination with high inflation and a slowing economy, are putting a strain on some borrowers struggling to keep up with loan payments.

One in two Greek households have currently contracted some form of debt, usually a credit card or a homeowner’s loan, but the country’s borrowers are not yet considered to be in over their heads.

The ministry’s proposals include not allowing first homes to be auctioned for debts of less than 20,000 euros. Currently the limit stands at 10,000 euros.

Additionally, the Finance Ministry has called on lenders to give their clients in financial strife up to a year to redraft a new loan agreement or repayment scheme before launching procedures to repossess their home.

Banks are believed to have opposed the one-year grace period, citing the rising cost of money and tougher rules being implemented by the European Union’s Basel II directive.

The Finance Ministry is expected to finalize the legislative amendments and submit them to Parliament by the end of the year.

Greek banks auctioned off last year 2,634 real estate properties belonging to customers who defaulted on loan payments, HBA said last month, denying press reports that the figure was closer to 100,000.

Bank of Greece data show that 51.4 percent of Greek households have taken out some form of loan, versus 47 percent in 2005, when the survey was last held.