By next April, the government plans to launch the Property Acquisition and Re-Lease Entity, a mechanism aimed at protecting vulnerable borrowers and their primary residences.

The Entity will allow citizens in financial distress to remain in their homes by leasing them, thus preventing evictions and foreclosures by banks and loan servicers, while also offering the possibility of repurchasing their property in the future.

The basic operation of the Entity is straightforward: it will acquire the primary residence of vulnerable borrowers who are facing bankruptcy or forced foreclosure and lease it back to them for 12 years. During this period, the state will support borrowers with a housing allowance ranging from €70 to €210, depending on household composition, income, and asset criteria.

In this way, citizens retain the right to stay in their homes and avoid eviction. However, consistency in rent payments will be a critical condition for remaining in the program, as the right to repurchase the property will be lost if payments are delayed by more than three months.

For example, a retiree with a monthly income of €700 who cannot meet their mortgage payments and is at risk of foreclosure will be able to join the program. If their house is worth €100,000, the Entity will purchase it at a 30% discount (i.e., €70,000) and lease it back to them. Rent will be calculated based on the property’s value and the market rate, with the state covering part of the amount through the allowance. Thus, the retiree can remain in their home, paying only a small portion of the rent from their pension.

Another example is a family with three children and a total annual income of €15,000, at risk of losing their home due to an overburdened loan. Through the Entity, the family can stay in their home for up to 12 years while also receiving the rent subsidy. If their financial situation improves in the meantime, they will have the option to repurchase the property at 70% of its market value at the time of repurchase.

The government has secured the participation of the four systemic banks, which will contribute €100 million to finance the Entity. This amount is sufficient to purchase approximately 2,000 homes, covering a significant number of vulnerable borrowers. The process of selecting the entity that will manage the program is underway, with binding offers from potential investors expected by January 2024. Among the candidates are major international groups such as Bain Capital Credit, Fortress Credit Corp, and others.

In the event the tender process fails, the government’s plan remains solid, as the €100 million funding from the banks will allow for the immediate launch of the Entity’s operations.

Participation in the Entity will be facilitated through a dedicated online platform. Vulnerable borrowers will need to submit an application, along with all necessary documentation, such as property titles, foreclosure notices, or proof of participation in public contribution programs. Required documents include a copy of ID, foreclosure notices or bankruptcy declarations, property titles, proof of vulnerable borrower status, and any documentation showing participation in public contribution programs, along with a signed declaration from the sole owner or all co-owners.

A site inspection by an engineer will follow, who will assess the property’s value and check for any unauthorized constructions. Once the application is approved, a lease agreement will be signed, and the Entity will pay the transfer amount to creditors. The rent for the first year of the lease agreement will be calculated using a mathematical formula based on the average floating-rate mortgage interest rate, the additional margin set by the preferred investor, and the value of the borrower’s home acquired by the Property Acquisition and Re-Lease Entity.