Loan managers are reporting an improvement in repayments in May, after the debt servicing delays recorded in the second half of March and the whole month of April. The restoration of payment flows signals a gradual return to normality, said Anastasios Panoussis, chief executive officer at Eurobank FPS and head of the Association of Loan Managers, at SmithNovak’s European conference.
The portfolios that have suffered most during the coronavirus crisis are those with loans without collateral, mainly consumer and corporate loans, while there was a better picture among mortgages and guaranteed business loans. This, according to Panoussis, “offers a positive message for the securitizations that have been made or are being planned.”
The head of Greece’s biggest loan manager added that “an extra problem as regards the legal aspect of activities, which was already burdened with delays, has been the suspension of the operation of the courts and of the forced execution of legal action and auctions, with a negative impact on the business plans of investors and on the targets for the reduction of banks’ nonperforming loans.”
The pandemic will also affect and bring changes to the operation model of servicers in the post-coronavirus era, Panoussis pointed out, as the reduction of debt collection automatically means a reduction in the revenues of bad-loan management companies. This dictates the review of operating expenses and the rationalization of costs, which in turn “may accelerate the realization of mergers in the sector and the creation of stronger entities, especially among smaller market players.”
The framework of changes for the day after the pandemic must take into account the following elements: the new bankruptcy code that will be announced in June and start applying from January 2021, improving the bankruptcy process for households and enterprises; the law on the protection of main residences that offers a last chance for protection up to July (with a significant increase in applications expected); and the changes to the law protecting borrowers, known as the Katseli law, by taking all pending applications to a new platform with specific eligibility criteria – this way the process will be rationalized, putting the stock of bad mortgages in order, and strategic defaulters will be dealt with properly.