Panayiotis Rougalas
Cyprus is heading towards suspending first residence property foreclosures up to 350,000 euros until the end of October. This 'intermediate solution' is expected to serve as a compromise, allowing either the government, the Central Bank of Cyprus, or both to come up with proposals that will effectively address the issue of non-performing loans. Just yesterday, Tuesday, July 4th, President Christodoulides called on the parties involved in the foreclosure matter and who have the power to make decisions to find a solution and prevent what is likely to be voted on next Thursday, July 6th. President Nikos Christodoulides, in the role of a 'conductor,' wanted to prevent the events expected on Thursday, namely the four laws related to the framework of foreclosures and specifically the law that would allow the debtor to halt the foreclosure process after disputing the amounts owed.
Such a decision, according to banks and credit acquisition companies, would cause significant and lasting complications, both for the banks and the wider Judicial System, which is already considered slow in its procedures, thus halting the foreclosure process for 4-5 years. The proposal to be adopted by the banks and credit acquisition companies, with the consent of the state, cannot be called a 'suspension of foreclosures.' Although it will have this character, it will not have a horizontal application, as it will only apply to first residence loans, and under no circumstances will it be applied to loans and borrowers who are on the fringes of the 'strategic defaulters' with similar characteristics. The goal, as 'K' is aware, is for the state to return with viable solutions by the end of October, and also for the law that would allow delays in court to determine the debtor's debt to not be voted on next Thursday, July 6th.
Meanwhile, discussions were held on Tuesday morning at the Central Bank of Cyprus regarding creating a mechanism to facilitate the framework of foreclosures and how to handle the overall predicament that has arisen. While the government is working on solutions it intends to offer regarding the major issue of non-performing loans, the Central Bank resurfaces with a discussion from the summer of 2019, specifically regarding the creation of a resolution mechanism that would operate to the benefit of both banks and credit acquisition companies, as well as debtors. The profile of the proposed mechanism by the Central Bank has not clarified whether it will involve debt recognition or, in general, the process of resolving customer-creditor disputes in old non-performing loans (NPLs).
Next Thursday, July 6th, the plenary session of the Parliament is expected to bring before the Members of Parliament for voting four draft laws that amend the laws on Property Transfer and Mortgages. The puzzle remains whether the Parliament will proceed with the voting of laws related to foreclosures, even after the decision to suspend foreclosures on primary residences until the end of October 2023. If the Parliament votes on these proposals despite the decision to suspend foreclosures for primary residences up to €350,000, it is not excluded that President Christodoulidis will also proceed with their referral. Specifically, the referral may be specifically related to the proposal that gives the borrower the right to determine the amount, thus halting the foreclosure process until a decision is issued by the court.
Another scenario for resolving the whole issue created by foreclosures is through the Financial Commissioner, Paul Ioannou. Essentially, he will be given more powers, and his decisions will be binding. Thus, through the Financial Commissioner, the right of appeal will be granted, "whether you are a bank or a client." This may also be a solution that we will see by the end of October.
What does the government plan in this field? Certainly, by the end of October, the government will have implemented the Mortgage-to-Rent Scheme and will have progressed with the process related to the establishment of a Special Court.
It is worth noting that three weeks ago, the Director-General of the Ministry of Finance, George Pantelis, had stated that the ministry is ready to present the plan for the Special Court to the Council of Ministers, but so far, nothing has been officially announced.
Regarding the four draft laws, banks and credit-acquiring companies are not opposed to all of them. For example, concerning the draft law related to the obligation to send standardized information with the "Letter H," banks are positive and request a satisfactory transitional period in order to adjust their systems, conduct the necessary audits, and be able to systemically provide the required information (system alignment/implementation).
[This article was translated from its Greek original]
