Filenews 25 November 2022
The Law "On the Transfer and Mortgage of Real Estate (Amendment) (No.4) Law of 2022" concerning the suspension of the procedure for the sale of mortgaged real estate until January 31, was referred back by President Anastasiades.
The law was passed by the Parliament on December 10 and re-establishes the suspension of the mortgage sale process until January 31, 2023, due to the ongoing and intensifying economic and social impact brought about by the COVID-19 pandemic, as well as the war in Ukraine.
The proposed suspension concerns the debtor's main residence, the estimated value of which does not exceed €350,000, the debtor's business premises with an annual turnover not exceeding €750,000, a plot of land owned by the debtor, the estimated value of which does not exceed €100,000.
In a letter to the President of the Parliament, Annita Demetriou, President Anastasiades refers to the reasons for the referral and explains that the regulation as voted is essentially a total suspension of foreclosures, without targeting since foreclosures concerning business premises, regardless of value and loan amount, are suspended. As noted, the reference in the law to companies with a turnover of up to €750,000, covers more than 85% of Cypriot businesses. Also, as the law states, it excludes the majority of parcels, since a maximum value of €100,000 is set regardless of income and loan amount.
It is also noted that both the Ministry of Finance and the Central Bank of Cyprus disagree with the suspension of foreclosures for the fifth consecutive time. In particular, as mentioned given the unprecedented efforts of those involved, including the Association of Credit Acquiring Companies & Credit Facility Managing Companies, that they will not proceed with foreclosures of primary residences up to €350,000 for cases of borrowers who really belong to vulnerable groups of the population.
It is also pointed out that at a time when deposits in the economy appear to be increased, foreclosures without income criteria are suspended, rewarding mainly bad payers and burdening consistent citizens. It is also noted the existence of government schemes such as Estia, Home for the protection of non-viable borrowers, until the implementation of the "rent for instalment" plan.
At the same time, it is stated that the credibility of Cyprus abroad is affected, while discomfort is created at home, in a very difficult period for the economy, and the positive course for further upgrading the debt of the Cypriot economy is called into question. There is, as mentioned, the risk of an increase in the cost of borrowing for the Republic.
It is also stated that the ongoing suspensions of foreclosures marginalise and indirectly penalise consistent borrowers. At the same time, it is noted that the wrong message is given to society that there is no obligation to repay loans, posing the risk of an increase in Non-Performing Loans (NPLs). At the same time, it is reported that thousands of guarantors are being put at increased risk.
In addition, it is reported that there is concern about the effectiveness of the milestone of the Recovery and Resilience Plan concerning the improvement of the environment of NPLs, the achievement of which is under assessment by the European Commission.
The President also says that the failure to implement an effective foreclosure framework will lead the banking system to a policy of more stringent lending.
It is also noted that the continued suspension of the foreclosure legislative framework will lead to an increase in the provisions and losses of the loans of the former CCB that have been transferred to Hellenic Bank and fall under the Guarantee Scheme, with a consequent increase in the compensation claims of Hellenic Bank by KEDIPES.
Finally, it is stated that the aforementioned consequences may also affect the state budget, due to the fact that the direct influence of the financial system has adverse consequences on the state's policy.
