Banks resort to forgiving parts of loans

Banks are placing emphasis on long-term debt settlements, particularly for mortgage loans, which under certain conditions would include forgiving part of the original amount owed.

Senior sources from National Bank of Greece say that borrowers who face genuine problems in meeting their obligations are given the option of an arrangement that includes the review of each debtor’s financial situation and their loans. Then the overdue debt is split into two parts, one that can be paid according to the debtor’s reassessed capacity, and one that cannot be serviced.

The part that is deemed unpayable is frozen and the borrower is given the chance to have it written off provided they service the “healthy” part of the debt.

The same sources note that 50 percent of mortgage loan settlements are conducted according to the above framework, with the target being for this rate to advance to 80 percent soon. They add that, since December, when online auctions were introduced, there has been a major increase in the arrangement of mortgages, a trend that continued strong in January.