A series of legislative proposals concerning foreclosures and loan guarantors were tabled before the House plenary on Thursday, intensifying debate over potential amendments to the existing framework.
Changes to foreclosure reserve prices
One proposal, submitted by MP Stavros Papadouris, seeks to amend the Transfer and Mortgage of Immovable Property Law.
The amendment would ensure that if a mortgage lender continues efforts to sell a mortgaged property after six months have elapsed from the completion of the first auction, the obligation to apply a reserve sale price remains in force. That reserve price may not be set below 50 percent of the property’s market value.
Expanded review powers for the Financial Ombudsman
A second proposal by Papadouris also amends the same law to grant the Financial Ombudsman the authority to examine complaints regarding debt verification after a mortgage debtor receives a so-called “Type I” notification letter from the lender.
The move aims to strengthen oversight mechanisms during the foreclosure process.
Proposal to freeze primary residence foreclosures
Separately, MPs Marios Karoyian, Alekos Tryfonidis and Giorgos Penedex, of the Democratic Alignment (DIPA), tabled a proposal providing for a freeze on foreclosures of primary residences valued up to €350,000 until the end of 2026.
Protections for loan guarantors
Another bill, signed by MPs Zacharias Koulias and Christos Orfanidis, focuses on the protection of loan guarantors.
The proposal amends the Transfer and Mortgage of Immovable Property Law to ensure that, where a mortgage lender does not exercise its right to foreclose and no court judgment has been issued against the primary debtor, the lender must first exhaust all available remedies. This includes pursuing the sale of all tangible collateral and securing a court judgment against the primary debtor before taking any measures against the guarantor.
The proposal further stipulates that if a mortgaged property serving as collateral for a credit facility with guarantors is sold under Part VIA of the law, or is acquired by the mortgage lender, the guarantor’s liability would be limited to the capital specified in the guarantee agreement. If no such amount is explicitly stated, liability would be limited to the original loan principal of the primary debtor, or, in the case of a current account facility, to the agreed credit limit. From that amount would be deducted either the proceeds from the sale of the property or the amount paid by the lender to acquire it, as well as any instalments already paid by the primary debtor.
The same limitation would apply in cases where a court judgment is issued against a guarantor, provided that the lender had secured a sale order under Article 44 of the law but chose not to enforce it and instead proceeded under Part VIA.
Rationale behind the proposals
According to the explanatory report accompanying the bills, the proposed regulations are deemed necessary as a significant portion of the population remains trapped in loans or credit facilities taken out by third parties.
The report states that many guarantors have not derived any financial benefit from the guarantees they provided and remain in a weaker position vis-à-vis mortgage lenders and credit acquisition companies. Despite the liquidation of tangible collateral, guarantors may continue to face financial obligations, even in cases where the principal amount they guaranteed has been fully repaid.
Lawmakers argue that the changes aim to address what they describe as systemic imbalances and to provide additional safeguards for borrowers and guarantors within the foreclosure framework.
