Imagine taking out a mortgage and buying a house, but being able simply to return your property to the bank with all liabilities taken care of if you cannot sustain your mortgage payments. Sounds utopian? Surely lenders would never agree to such a deal. True – unless the government passes legislation forcing it through, as has happened in Romania.
Regardless of the asset’s market value, borrowers can now hand over their keys and leave. Thousands are expected to take advantage of the new law, but banks have drawn the short straw. Lenders are likely to turn into unwilling property owners, and ratings agency Fitch warns that the legislation threatens to “disrupt the Romanian banking sector’s improving performance”.