The Real Estate Acquisition and Leaseback Agency was established in 2020 as a “lifeline” for vulnerable debtors, purchasing their primary residence in cases of bankruptcy or foreclosure. It has not yet begun operations.
The proposed procedure includes the following steps:
- Purchase of the property by the Agency: The property is purchased by the Agency at a 30% discount on its market value.
- Lease-back: The debtor rents the property for up to 12 years, paying rent calculated based on specific criteria (household composition, income, etc.).
- Rent subsidy: The government covers a portion of the rent, with amounts ranging from 70 to 210 euros.
- Buyback option: After the 12-year lease, the debtor may purchase the property back from the Agency by paying 70% of its market value.
Problems for debtors
- Loss of primary residence.
- They remain in the property as tenants (with the government subsidy, rental costs become more manageable), and, in addition, they assume the property’s maintenance costs.
- They must move to another property after 12 years.
- The option to repurchase is a hollow promise, because, in essence, no debtor will be able to reclaim their property once they reach an advanced age.
The Real Estate Acquisition and Leaseback Agency was established in 2020 and has not yet become operational. The first attempt to introduce this institution was made in 2014. However, the troika rejected it on grounds of adverse selection and moral hazard.
Indeed, these two risks characterize all insurance mechanisms, because in reality this novel institution is a poor imitation of the insurance product known as Reverse Mortgages (which we will discuss immediately below). At that time (in 2014), the Bank of Greece aligned itself with the troika’s position.
The six-year delay in establishing and operating the Agency demonstrates the ineffectiveness of the endeavor, due to inherent flaws in the nature of the agency. All inherent problems will be overcome by adopting the correct financial tool for managing “non-performing loans,” namely reverse mortgages, which are used throughout Europe (and) for this very purpose.
Use of Reverse Mortgages
Non-performing loans (NPLs) for individuals amount (as of 2025) to 41 billion euros (25 billion in mortgages and 16 billion in consumer loans). The overwhelming majority of borrowers are over 60 years old (HERMs: Home Equity Reverse Mortgages are available to individuals over 60).
The inability to repay non-performing loans over the past 15 years has led to a series of legislative measures, which, however, have not resolved the problem because (a) borrowers lack the means to repay the loans, and (b) foreclosures result in the borrower being evicted from their home.
Both of these problems can be effectively addressed with reverse mortgages. The average loan-to-value ratio ranges from 15% at age 60 to 60% at age 80.
The amount of the reverse mortgage will be used to fully and permanently repay the Fund/Servicer, while the borrower will continue to live in their home until the last day of their life, with no further financial obligations to anyone (including loan repayment). Upon the borrower’s death, the property will become the property of the Reverse Mortgage Agency.
Conversion of the Entity
It is very easy to find foreign funds that could raise the necessary capital to manage “non-performing loans.” However, it would be advisable for such an agency to be controlled by Greek interests, so that the tens of thousands of properties/residences that will be acquired in the coming years can be integrated into the country’s overall housing policy. Therefore, it is proposed that the Purchase and Lease-Back Agency be converted into a Reverse Mortgage Agency.
A legislative “Non-Negative Equity Guarantee” clause will be required to protect heirs (in the event of the borrower’s longevity and/or a decline in the property’s value).
The time required to prepare and launch the program (legislation, establishment/sourcing of a fund, organization, and operation) does not exceed three months.
Legacy of the crisis
“Non-performing loans” are the legacy of the 2009–2019 crisis and have evolved into a critical economic and social cancer, while all relevant measures have proven ineffective. The tens of thousands of required foreclosures on debtors’ homes have sparked massive social backlash, which is nearing a breaking point.
This problem can be addressed immediately and swiftly by introducing the new institution of reverse mortgages, just as is the case in all European countries.
* Miltiadis Nektarios is an emeritus professor at the University of Piraeus