Law on credit erasing by ceding mortgaged asset gets Parliament’s approval. Bankers: Access to lending, drastically restricted

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The draft law that allows a person who borrowed from the bank and can not pay the debt, to pass the mortgaged property into bank’s ownership, was adopted on Wednesday by the Chamber of Deputies, which is the decisional chamber of Parliament.

The project was initiated by Liberal MP Daniel Zamfir.

Thus, a person could transfer the mortgaged property to the bank and have the debt deleted, when he is no longer able to pay his credit.

The debtor must send the creditor through a bailiff, a notary or a lawyer a notice announcing the decision to transfer ownership of the mortgaged property or goods.

All costs of the bailiff or notary and lawyer, as applicable, shall be borne by the debtor. Decision being communicated to the debtor, the creditor can no longer track the co-debtors or personal guarantees and mortgagees to repay the loan.

The draft law provides that when concluding the contract for the transfer of ownership, namely at the date of pronouncement of the final judgment, any debt of the debtor to the creditor will be removed. Also, the latter will no longer require additional money.

In turn, Romanian Banking Association (ARB) considers that the legislative act jeopardizes the real estate loan market by drastically restricting the access to finance, having an impact on property developers and construction sector.

“ARB expresses its concern about the way the Romanian Parliament has ignored the provisions of national and European legislation and the fundamentals of a market economy through the adoption of the law on the payment commissioning of immovable property on redemption obligations undertaken through credits,” a press release of the organization reads.

According to ARB, the adopted law induces systemic risks to banking sector in Romania, with impact on its financial stability by affecting the banks’ solvency with possible consequences for depositors.

In addition, this law creates direct impact on the state budget through ‘Prima Casa’ program, which is 50 percent guaranteed by FNGCIMM.

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