Starting Friday, any individual that has a mortgaged-backed loan worth up to EUR 250,000 can give transfer his or her house to the bank, while the lender will wipe out the debt.
This controversial law has already angered the banking system. Some of the biggest lenders, including French BRD-Groupe Societe Generale and Austrian BCR, have increased the minimum down payment for mortgage loans in a bid to reduce risks. Nine out of the 10 largest banks in Romania have changed their lending policy for homes.
According to the law, the debtor and the representative of the bank will go to a notary to ink the transfer deal for the property. The banks can challenge this procedure in court. Its provision will also apply for individuals who had their homes foreclosed.
The new law does not apply for loans taken out under the Prima Casa scheme. This is a state-backed program for first time home buyers.
Banks have constantly said that the law breaches the Constitution because its provisions apply for all contracts, even for the ones that were sealed before the approval of this new bill.
The initiator of the bill was liberal MP Daniel Zamfir.
The law has been heavily criticized by business associations in Romania and also by the European Commission, the executive arm of the EU, and by the IMF.