Filenews 20 June 2023 - by Eleftheria Paizanou
Through the Foreclosure Court approximately 20,000 borrowers will be able to temporarily protect their primary residences from foreclosure.
Based on the estimates of the Ministry of Finance, about which the parliamentary Committee on Finance was informed yesterday, about 20,000 red loans will be covered by the perimeter of the Special Court, as it is expected to be established at the level of the District Court, through a bill that will be approved in the coming days by the Council of Ministers and will be forwarded to Parliament.
The figures in relation to the perimeter are based on the criteria that beneficiaries must meet in order to go to court. Specifically, the non-performing loan should have as collateral a primary residence worth up to €350,000. Also, cases that have become final and those that are already in the process of being heard in courts will not end up in the Foreclosure Court.
According to data presented to Parliament, the total value of bad loans in the system, i.e. banks and credit acquiring companies, amounts to €25 billion, which concern credit facilities for both housing, business and other types of lending.
If one takes into account the total number of loans of those who will be able to take their case to court, perhaps the number of beneficiaries is small, as based on some calculations made by various bodies, it is estimated that bad loans secured by primary residence up to €350,000 correspond to a value of €1.3 billion.
The bill does not specify the maximum length of time cases will be heard, as this would be deemed unconstitutional.
During yesterday's discussion in the Parliamentary Committee on Finance of four bills concerning foreclosures, the financial director of the Ministry Avgi Chrysostomou-Lapathioti said that the bill gives borrowers tools to go to court.
In addition, a representative of the Legal Service indicated that cases would be dealt with quickly by the Court of Justice and not by law. It is recalled that the bill of the previous government, which was withdrawn shortly before it was brought to the plenary of the Parliament, provided for the hearing of cases within 60 days.
Although the Government may officially submit the bill to Parliament this week, there is strong dissatisfaction from officials of co-governing parties for not being informed by the Ministry of Finance. Besides, a meeting between the parties and the finance minister has not yet been rescheduled, as the previous arrangement was cancelled due to misunderstanding.
Commissioner's position
Financial Commissioner Pavlos Ioannou supported the DISY-DIKO bill, which requires foreclosure letters to include an analysis of the balance of the debt.
He also agreed with AKEL's proposal that in case of exchanging property for debt, the market value of the property should be chosen instead of the forced sale price.
However, he disagreed with the proposal for a law on access to justice for borrowers (as provided for by the proposal of AKEL and others) on the value of the property. He said that on a practical level this change is not particularly helpful for distributors.
Pantelis: Most strategic defaulters
The general director of the Ministry of Finance, George Panteli, noted that banks and credit acquiring companies have not proceeded with the foreclosure of primary residences. He also pointed out that the €25 billion worth of bad loans in the system relate to loans granted 20 years ago, adding that in most cases they concern strategic defaulters.
According to Mr. Pantelis, the assessment made by the European Banking Authority in relation to non-performing loans indicates that Cyprus has recorded the lowest performance in Europe.
He explained that one reason for this finding is the way the courts work. He said that one of the reasons why the Cypriot economy was not upgraded by the credit rating agency Fitch, which it will not do even in the next 12 months, is the ongoing discussions on foreclosures.
Mr. Panteli said that the legal framework for foreclosures, approved in 2018, was never implemented, as suspensions of the implementation of the law were constantly passed.
Asset disclosure
The Association of Banks' senior director, Michalis Kronidis, said strategic defaulters could be identified through authorization to list their assets, as is done in the Estia Plan.
On behalf of the Association of Loan Management and Redemption Companies, Anthi Exadaktylou said that most of their members have secured the relevant license from the Central Bank. He also said that the loans they have in their portfolio are more than 7 years old, pointing out that companies prefer restructurings. Finally, the need to protect the primary residence was stressed by borrowers' associations.
MEPs insist on access to justice
Despite the government's disagreement, MPs from the co-governing parties EDEK, DIPA and three DIKO MPs, as well as AKEL, insist on their proposal to issue a court order to challenge – freeze a sale. In fact, in addition to this proposal, the majority of parties demand that all four proposals related to foreclosures that are being discussed in the Finance Committee be brought to the plenary session of the Parliament in July.
