Panayiotis Rougalas
Three proposals will be discussed at the last Plenary Session of the House of Representatives before the summer recess, along with three scenarios regarding the outcome of the foreclosure framework.
During the Plenary Session, the government's bill for the creation of a special jurisdiction court that will adjudicate foreclosure cases for primary residences valued up to 350,000 euros will be considered. The AKEL party's proposal for the right of the debtor and other interested parties to appeal to the court for the suspension of foreclosure proceedings when the amount owed is disputed will also be discussed. Lastly, the proposal by the EDEK party related to the value of the mortgaged property and its sale price will be presented.
The first proposal, known as the "government proposal" for the creation of a special jurisdiction court, is likely to find support from Members of Parliament and be voted on, while the fate of the third proposal is unclear if it will receive broad acceptance. The second proposal, the controversial one from AKEL, has been the cause of much debate involving banks, the government, the Central Bank of Cyprus, and credit acquisition companies, who have stated that its approval would have negative consequences for the economy. The AKEL proposal, co-signed by MPs from DIKO, EDEK, DIKO, and the Greens, covers all borrowers and not just those with primary residences valued at up to 350,000 euros. This means that every borrower would have the right to seek legal recourse, halt the foreclosure process, and have their request examined by the court. The court's decision would be binding, and the process would proceed based on the remaining balance determined by the court.
As for the EDEK proposal, although it may not initially appear to have enough support, it is not excluded that it may be the one to pass as a "bargaining chip" to prevent the approval of the AKEL proposal. With Mr. Marinos Sizopoulos's proposal, mortgage debtors would have the right to request a revaluation of the mortgaged property based on the procedure provided in the law if they have reasonable grounds to believe that the new valuation would be higher than the value accepted at the time of the initial agreement.
Regarding the scenarios for the "controversial" AKEL proposal, which may be voted on next Thursday, there are three possibilities. It may be approved and automatically introduce new elements to the foreclosure framework in Cyprus. Alternatively, it may be approved but referred back by President Christodoulides. Lastly, it may not be approved, and the discussion on foreclosures would continue after the summer recess. It should be noted that banks and credit acquisition companies have suspended foreclosures until October 2023, but only for cases involving primary residences valued at up to 350,000 euros. The crux of the matter lies in the AKEL proposal, which is also co-signed by other parties, and from the discussions held in recent days between MPs and the Government, it is unlikely that they will vote against it. No one knows what will happen at the Thursday Plenary Session, and the deliberations will continue until the last moment.
There is also a note from credit rating agencies. Amid the "turmoil" in the Cypriot system with implications for the economy that has been discussed for several weeks now, it is possible to see a note from credit rating agencies in the coming days assessing the intentions of the House regarding changes to the foreclosure framework once again. After all, they have previously stated in their reports that the high non-performing loan (NPL) ratio may be the biggest vulnerability of the Cypriot economy.
On the other hand, proper handling of the whole issue and the actual strengthening of the foreclosure framework with the extended time until October 2023 may open up new possibilities for the economy. If they see that the framework has been upgraded rather than merely changed, the subsequent assessments may be favorable for the country and the economy in general.
Regarding the Special Court, the creation of a special jurisdiction court is a step in the right direction for the Cypriot economy and borrowers. The purpose of the bill is to regulate the adjudication of disputes between borrowers/guarantors/security providers and creditors regarding a credit facility secured by a primary residence valued at up to 350,000 euros. Under the guidance of the Supreme Court, the President of a District Court may appoint several judges, subject to the approval of the Supreme Court, to adjudicate cases related to the following two issues: firstly, disputes arising between borrowers/guarantors/security providers and creditors regarding the outstanding balance of the credit facility secured by a primary residence with an assessed value up to 350,000 euros, which is in arrears or default, as well as any other dispute between the aforementioned parties concerning the said credit facility, related guarantees, and/or securities. This includes disputes concerning a credit facility secured by a primary residence with an assessed value of up to 350,000 euros about overindebtedness or abusive terms. Secondly, the sale of mortgaged property, by the provisions of the Transfer and Mortgage Law.
The ultimate goal of regulating the adjudication of these specific cases within the framework of district courts is to contribute to further reducing non-performing loans (NPLs), while simultaneously safeguarding the rights of borrowers, with significant benefits for financial stability and the economy.
[This article was translated from its Greek original]
