The government and the country’s systemic banks reached an agreement on Thursday on the protection framework for debtors’ primary residence that will succeed the Katseli law.
After weeks of deliberations the two sides agreed that the protection of the main residence of defaulting borrowers will be provided using two main criteria: The first is that the outstanding capital left to be repaid does not exceed 130,000 euros and the second concerns the taxable price of the property to be protected (known as “objective value”), which should not exceed 250,000 euros.
An income criterion has been included in the provision for state subsidies for loan installments, as borrowers with annual incomes up to 20,000 euros will be able to have part of their tranches covered by the state. The amount the state intends to set aside for this purpose exceeds 450 million euros in total for the years 2019 and 2020. Primary residence protection will be provided via an online platform that will be created where borrowers should file their applications.
Borrowers who take the option of settling their debts through the primary residence protection mechanism will be charged a 2 percent annual interest rate while the repayment period will be up to 25 years. If the balance of their loan exceeds 120 percent of the value of their main residence that their loan has been secured against, it is possible that a part of their dues will be written off.
The details of the agreement will be recorded in a text over the next few days and forwarded to the country’s creditors for approval, so that the plan can then be voted on by Parliament to constitute the new protection framework that will apply as of March 1.
The provisions of the existing protection framework, known as the Katseli law after a former economy minister who introduced it earlier this decade, were to expire on December 31 but received a two-month extension till February 28.
The completion of the new protection system is also one of the prior actions Greece has to implement in the context of the second post-bailout review by its creditors.