(Visited 520 times, 1 visits today)
(Visited 520 times, 1 visits today)

Disinvestment times halved for NPL backed by real estate thanks to Reoco

23 June, Milano Finanza

The portion of bad loans backed by real estate, as well as those towards companies, has considerably grown in banks’ statements, as these are trying to sell the properties put as guarantee to recover the exposure when an extra-judicial solution is not grated. The data emerges from the latest report on the bad debt market by Pwc. Of the total gross NPL amounting to 165 billion euro at the end of 2017, 50% were secured by real estate, 48% in 2016. The trend has been going on since 2008 when this percentage was 36%. Of the secured NPL, 66% were towards companies, 24% towards small businesses, 8% towards privates for consumer credit and 2% towards others such public administration institutions or financial companies. That said, the amounts of such credits are not large, even when the counterparts are companies. In fact, the NPL amounting to more than 5 million euro are only 31%, hence the presence of many small credits. This phenomenon is crucial, to the point that Banca d’Italia is monitoring it. In fact, its report regarding the duration of the property enforcement procedures stressed the good results of the regulations introduced between 2015 and 2016. Sales within one year or 18 months have increased respectively from 8% to 21% and from 17% to 36%. The average duration has almost halved. We must say though that each court differs a lot from each other. For this purpose, according to Banca d’Italia, the guidelines approved in 2017 will favour the diffusion of best practices among courts. More in detail, the analysis of the underlying factors will help in identifying the solutions for more efficient procedures. After all, it was clear that Banca d’Italia intended “favouring a more efficient management of real estate guarantees”, with its document disclosed in March announcing a new public consultation on the new surveillance regulation on banks’ property investments which was closed on 18th May. In fact, as the document reads, “the additional property requirements for properties acquired to collect a credit has been eliminated. Such requirement was mandatory in the past for amounts exceeding the funds of the bank. Moreover, the immediate divestiture rule has been replaced by the definition of a recovery plan with a set deadline, consistent with the protection of the property value. The intention of Banca d’Italia is “motivating banks to an active management of the real estate guarantees” and “favouring the efficiency and the promptness of the NPL collection also through the direct acquisition, or indirect through specialised companies, of the asset put as guarantee of the credit”.  From this point of view, the document provides specific dispositions concerning Real Estate Owned Company (Reoco) to promote successful enforcement procedures and property auctions, as well as the professional management of the property acquired.

These topics were discussed at a recent workshop organised by the legal firm La Scala in collaboration with the services Gma and the promotion by Tsei association. According to Marco Pesenti, La Scala senior partner, “a State Reoco, capitalised by the Government, might be another solution to satisfy the demand for housing from the defaulting Italian families. Such Reoco should deal with the issues related to NPL backed by real estate by buying at the auction such properties. The great majority of these assets are small houses with a value below 100 thousand euro. The houses are for a large part still occupied. Hence, it’s in the interest of the families of staying in the house while paying a lease lower than the defaulted mortgage instalment, in the hope of an exit from the default. It will allow banks to collect their credits, while the Government will benefit from the rental of the assets”. A similar proposal was advanced last year, but no concrete action has ever been taken.

Source: Milano Finanza

Translator: Cristina Ambrosi