By Kyriacos Kyriacou-Nicosia
Cyprus is threatened not to receive its sixth tranche as part of its eurobailout program which started March 2013, if the parliament does not approve the new foreclosures legislation. Cyprus` lenders want the bill approved before the next Eurogroup meeting in mid September. But all parliamentary parties, except ruling Democratic Rally, said on Monday that the foreclosures legislation will not pass as it is and asked the government to renegotiate with the Troika of international lenders. Families in debt fear that their houses will be taken easily by banks with the new legislation.
Earlier today, at a joint session of the Parliamentary Committees on Financial and Budgetary Affairs and on Internal Affairs, Interior Minister Socratis Hasikos presented to the members of the two Committees the Troika`s negative reply to the amendments proposed by the parliamentary parties.
Finance Minister Harris Georgiades, who also participated in the meeting to present with the Interior Minister the foreclosures legislation prepared by the Government, said that foreclosures should proceed not only for villas, but also for apartments for which the debtor has not paid a single instalment.
Foreclosures for apartments too
“Foreclosures should not proceed only for villas. They should proceed also for an apartment for which the borrower has not paid a single bank instalment since it was bought”, the Minister noted, adding that “tolerance is unfair” to the depositors, but also to those borrowers that pay their dues.
Georgiades said that “the key to addressing the accumulated debt is the restructuring of loans”, adding that the Cabinet has approved an outline of amendments to existing laws, that is the insolvency framework, referring to the restructuring of loans, aimed at giving a second chance to borrowers that are struggling to pay their debts.
In any case, this framework must contain the tools needed for the banks to recover loans from debtors that do not cooperate or debtors with unsustainable loans, he noted.
Hasikos said that the foreclosures legislation is not aimed at massive foreclosures on mortgaged properties, but at correcting the current law.
The bill aims at exerting pressure on both the debtor and the bank to negotiate and find ways to restructure a loan, he noted.
Hasikos said that the Government has drafted a scheme under which the state, through the Cyprus Land Development Corporation, will help those who cannot pay and have exhausted all available options, to keep their primary residence, either by buying their home or by paying the interest on their loan, which the debtor later would have to pay back to the state.
Attorney General Costas Clerides noted that under the legislation the debtor has the right to participate in the foreclosure process by appointing an appraiser.
Central Bank Governor Chrystalla Georghadji noted that non-performing loans are the biggest problem of the four banks in Cyprus that will undergo the 2014 EU-wide stress tests carried out by the European Banking Authority. Georghadji said that there are borrowers who cannot pay their bank instalments and others who “naively believe that they punish the banks by not paying”.