“The legislative initiative regarding the debt discharge, approved through Law no. 77/2016, after reexamination, has triggered great uncertainty with respect to the applicability of the law for loans contracted via the First home program, and as regards the impact of the law on the real estate market and the mortgage loan market. These factors triggered a high demand for the granting of guarantees within the program in the first four months of 2016. It has been created an unprecedented situation in which the guarantee ceilings allocated to banks for the whole 2016 were depleted very quickly,” the ministry said.
A total 13,100 guarantees, worth RON1.2 billion, were granted until May 1, 2016, compared with guarantees of nearly RON668 million and of RON536 million, respectively, granted in the same periods in 2015 and 2014.
From the start of the program, in 2009, until May 2016, over 178,000 guarantees have been granted, representing a total volume of guarantees of nearly RON15 billion, which corresponds to financings worth RON29.8 billion.
On April 28, Romanian President Klaus Iohannis signed into law a debt discharge bill allowing retail mortgage borrowers to return real estate collateral to banks in exchange for writing off their loans.
On April 13, 2016, the Chamber of Deputies, decider on the matter, adopted the debt discharge bill, with 207 pros, one con and one abstention. Deputies decided the government-backed mortgage lending First Home program will not remain subject to the provisions of the law, while the maximum ceiling which will be considered when enforcing the law will increase from EUR150,000 to EUR250,000. They also decided the law will also be applicable to properties subject to foreclosure procedures.