The Government is unhappy with the recent increase in the price of old small apartments, which has been supported by the state-backed Fist House program, and will likely change the law.

Until then, the state will not allot any more guarantees for the program, reports local Economica.net.

Local banks have been complaining that the extra funds allotted for the First House program this year only covered a quarter of the loan requests filed by their clients. The demand for First House loans saw a strong increase in the first months of this year as the new giving in payment law determined banks to tighten their financing terms for new mortgage loans.

The giving in payment law, which allows mortgage debtors to discharge their loans by giving the mortgaged assets to the banks, does not apply to the First House program. Thus, the First House program remained the only option for many Romanians who want to buy a house. The program offers state guarantees for half of the mortgage loans value, for the purchase of houses with prices up to EUR 60,000.

Some local banks took in more requests for First House loans than they had covered from the allotted guarantees hoping that the state would grant extra guarantees. They told clients that they qualified for the program, and the clients made down payments on the desired properties. Now, the banks that have exhausted the guarantees complain that their clients stand to lose the down payments if the state doesn’t grant more guarantees.

However, the Finance Ministry told these banks that it was their responsibility how they handled the problem. The ministry doesn’t plan to grant any extra guarantees. However, the guarantees unused by some banks may be redistributed to those who have exhausted theirs.

editor@romania-insider.com