Serbia has introduced a new regulation requiring banks to provide relief for customers struggling to repay loans, especially housing loans, under the recently adopted Law on the Protection of Financial Services Users.
The new law provides two options for housing loan beneficiaries facing repayment difficulties. The first option allows them to sell the property themselves within 60 days and use the proceeds to pay off the debt. The second option involves transferring ownership of the property to the bank, which is considered to have settled the debt. Dejan Gavrilović from the Consumer Association Efektiva explained that while borrowers could previously sell their property to pay off the loan, the new law grants them an additional two months to do so.
If the borrower does not repay the debt or sell the property within the given period, the bailiff is tasked with handling the sale. The two-month extension gives borrowers a chance to sell the property at a more favorable price, as bailiffs often sell properties at significantly lower prices, as has been seen in many cases.
The introduction of these two options is considered a significant improvement in consumer protection. Attorney Nemanja Injac believes that these options provide valuable protection for borrowers in financial distress. The first option allows users to potentially secure a higher price for the property than they would through a forced sale at a public auction, where properties are frequently sold below market value.
The second option lets the borrower avoid a public auction, but it comes with certain conditions. The bank is only obligated to offer this transfer of ownership option if the market value of the property is at least 5% higher than the outstanding debt. Additionally, this option will not be available if the borrower is not the sole owner of the property, if there are legal encumbrances such as secondary mortgages or leases, or if the housing loan is insured by the National Housing Loan Insurance Corporation and approval for this settlement method has not been obtained.
Moreover, borrowers will not be able to use this option if their loan was already declared due in full before the law came into effect.
This new legal framework aims to provide a fairer process for borrowers facing financial difficulties while also offering better protection for their property.
