An important change to the extrajudicial mechanism for the protection of first homes was announced today by the Minister of National Economy and Finance, Kyriakos Pierrakakis. The new arrangement allows for the first time debtors to separate their main residence from the rest of their property, in order to achieve a larger “haircut” and lower monthly payments.

Ministry officials said debtors will be able to opt for protection of their primary residence in exchange for liquidation of other assets. Under the new arrangement being worked out by the General Secretariat for Private Debt, the amount of the “haircut” and the monthly payment will be based on the value of the debtor’s first home in relation to the total debt owed to financial institutions.

Subject of new regulation

To improve the out-of-court mechanism in such a way that the debtor, if he wishes, can choose to save only his main residence. In this case, the out-of-court mechanism, in calculating the resulting proposal, will take into account only the value of the main residence to be rescued and not the other assets.

As a result, the instalment and the “haircuts” of his debts will be substantially streamlined to reflect only the value of his home and income, the debtor’s main home will be saved, while other assets will be sold through an electronic auction process.

  • Algorithm will only take into account the value of the primary residence if the debtor chooses to do so.
  • The value of the dwelling will be as already stated in the extrajudicial law (i.e. the maximum between the commercial value as declared in the system by the creditor or the ENFIA value)
  • The proposal will include the sale of the debtor’s other properties (other than the first home).
  • The divestment will be incorporated as a condition in the restructuring agreement and will be carried out electronically through the e-auction process.
  • The debtor has the right to reject or accept the proposal generated by the algorithm.
  • If accepted, the restructuring contract is drawn up with the above features (instalment to rescue the main residence if complied with and sale of other properties).

Benefits of the arrangement

  • Significant write-offs and lower payment in the generated proposal (note: if the property value is lower than the total amounts owed to financial institutions)
  • Rescue of the main house through a gradual repayment of its value to financial institutions.
  • All the housing rescue tools that have existed in the past have had exactly this feature: gradual repayment of the value of the house. This is what the new arrangement will do.
  • Secondary properties sold by auction which were often not possible to sell (due to not finding a buyer etc.

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