Romania’s Chamber of Deputies endorsed the controversial debt discharge bill almost unanimously, by 207 votes to one, with one abstention, on April 13.
Mortgage holders will be able to give collateralised property back to banks in exchange for final termination of their contracts with no further penalty, under the law, also known as the datio in solutum or giving in payment law.
Lawmakers made some amendments to the text endorsed in autumn 2015, but the bill has still been fiercely criticised by bankers, who have warned they will challenge it through the Constitutional Court as soon as possible.
Among the immediate effects of the law, the banks will increase size of the deposits they take from mortgage borrowers, extending loans only for 60%-70% of the value of the collateral.
The bill was endorsed by deputies in the form already passed by the Senate, with amendments introduced by the Chamber of Deputies’ legal committee. It will now be promulgated unless it is challenged through the Constitutional Court by president Klaus Iohannis.
They include an increase in the cap on the size of the loans subject of the law from €150,000 to €250,000. Compared to the text of the law endorsed last autumn, lawmakers also clearly specified that only individuals who live (or whose relatives or guarantors live) in the property used as collateral for the loan can benefit from the new law. However, the loan would not have to have been used to buy the property.
Regarding the government-guaranteed Prima Casa programme, under which young persons can take out mortgage loans under favourable terms (including a deposit of just 5%) due to state guarantees for 50% of the loan, the law specifies nothing in particular. The interpretation of the law is that the state will service the guarantee to the bank, in case of a default, and will issue a claim against the recipient of the loan. These situations should be addressed by another law, the initiator of the datio in solutum bill, MP Catalin Zamfir, has said.
The bill has been a hot topic in Romania in recent months. While being harshly criticized by commercial banks, the central bank and the finance ministry, it is likely to have brought MPs more popularity ahead of the general election this autumn.
Lawmakers from both major parties have accused banks of irrational behaviour and suggested that they should bear part of the costs involved in the real estate crisis and the appreciation of the Swiss franc.
The central bank has warned that real estate prices could fall by 10%, at least for a short period of time, as a result of the bill, while commercial banks have announced they will adjust their lending terms to the new bill, mainly by reducing the share of a property that can be financed by a mortgage loan.
Romania’s government has said that the bill potentially breaches the constitution, infringes ownership rights, could bring credit institutions to bankruptcy and would generate macroeconomic imbalances, hotnews.ro reported last month quoting a position document sent by the executive to lawmakers.