Debtors to receive up to 80% “discounts” to buy off NPLs

12 October 2016
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Greek banks are considering plans to offer debtors the possibility to buy off their non-performing loan, before selling them to funds. Such a plan however would have strict security measures and conditions, in order to exclude the estimated 1 in 6 debtors who strategically avoid paying their NPL.

This plan was revealed by the Governor of the Bank of Greece Yannis Stournaras in Parliament on Tuesday. The Governor also announced plans for conversion of ‘red’ business loans into shares.

According to a report in the Ethnos newspaper, the plan for buying off NPLs will first apply to consumer loans and debtors without any assets, while for housing loans the general direction is for the buy off price to at least match the commercial value of the real estate.

With funds generally offering about 7% to 10% of a loan’s value, especially in the case on ‘red’ consumer loans, the banks are considering offering debtors the ability to buy off their loan with a discount that can reach 80%. Strict conditions will apply in such a case.

For example, if a debtors has a 10,000 euro loan, he may pay the bank 2,000 euros in a lump sum and the bank will write off the remaining 8,000 euros. Should the bank decide to sell the loan to a fund, it will receive about 700 to 1,000 euros.

Similar discounts will be offered to debtors for housing loans, where funds typically offer 20 to 50 euros per 100 euros of the loan, depending on property value. In this case banks will make significant value, typically matching the real estate’s retail value.

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