Creditors dispute foreclosure laws and strategic defaults

Creditors reluctantly agree to extend the freeze on main residence foreclosures up to €350k, but tensions arise over proposed legislative changes.

In a heated debate, credit buyback firms holding red loans of €22 billion vehemently oppose the Financial Commissioner's expanded powers and a law incorporating the Central Bank's mechanism for red loans.

While banks, dealing with non-performing loans of €2 billion, support the Commissioner Bill with modifications, they reject the Central Bank's proposed mechanism. The Ministry of Finance joins the fray, urging focus on the Commissioner Bill.

As debates intensify in Parliament, credit companies argue the legislation is impractical, while banks advocate for maintaining the current foreclosure framework. Strategic default concerns persist, creating a complex legislative landscape.

The Association of credit repurchase companies contends that the proposed legislation makes the foreclosure framework ineffective and time-consuming, negatively impacting collateral values. They stress the bills infringe on constitutionally guaranteed rights and compliance obligations.

Furthermore, they highlight that constant talks of changing the law benefit strategic defaulters, provoking those who remain consistent with their obligations.

The Association emphasizes its commitment to supporting the government's plan by intending to join the Rent-For-Installment Plan but criticizes the impracticality and ineffectiveness of the proposed bill and law.

Their main concerns about the Financial Commissioner Bill include the inclusion of both professional housing and terminated loans, affecting creditors' rights. Regarding the law proposal on the mechanism, credit buyback companies stress it limits creditors' rights.

On the other side, the Association of banks supports the Commissioner Bill but stresses the importance of ensuring a dispute resolution body meets its obligations promptly. They express concern about the Central Bank mechanism, fearing it will render the foreclosure process ineffective, make debt recovery difficult, and favor strategic defaulters.

The banks argue that the existing legal framework for foreclosures is satisfactory, suggesting the proposed changes will have a negative impact on the stability of the financial system and the credit rating of the Cypriot economy.

Amidst the clash, there are reports of coalition government parties considering the Central Bank mechanism as a bargaining chip, while others contemplate withdrawing the law proposal to meet December deadlines.

 [With information sourced from Philenews]