20.06.2023
The government is pushing ahead with plans to speed up financial dispute resolution between borrowers and banks, which will provide some protection to the 20,000 mortgaged primary homes.
On Monday, a finance ministry spokesman told MPs that a government bill would give district courts special jurisdiction to expedite such financial disputes.
Finance ministry spokesman Avi Lapitioti said the aim was to prevent the confiscation of key housing worth up to 350,000 euros. Lapitioti argued that this should help about 20,000 distressed borrowers who are at risk of losing their homes. He clarified that the bill would not apply to cases that had already been heard in the courts or were being heard.
The Cabinet of Ministers was due to approve the bill last week but delayed its decision because Finance Minister Makis Keravnos was abroad. The bill will receive approval at the end of this week, after which it will immediately be submitted to Parliament.
George Panteli, permanent secretary of the Treasury Department, told the House of Representatives that the total NPL is 25 billion euros and has not changed over the past decade. Panteli defended the passage of a foreclosure law allowing banking institutions to seize homes from insolvent borrowers, noting that there is a limit to the number of individuals who apply for a loan restructuring before a warning is received.
“Since the legal framework governing the recovery process exists, it partially achieves its goal. Upon receiving the first collection notification, 18% of borrowers respond, and 30% respond after receiving the second notification,” Panteli said. He said that banks and credit acquiring companies (CACs) had not taken action to recover principal residences valued at less than 400,000 euros. A spokesman for the Cyprus Banking Association said that most bad loans have not been serviced for more than seven years.
Anty Exadactylou, who represents credit acquiring companies, said they prefer to restructure loans rather than return property.
Meanwhile, most MPs disagree with the government on the right of defaulting borrowers to challenge bank decisions to foreclose their main home for a maximum of 350,000 euros.
Opposition parties support a law allowing borrowers to seek a court order to freeze the foreclosure process. This proposal was supported by MPs from AKEL, DIKO, DIPA, EDEK, ELAM and Greens , who received 33 votes in the 56-seat chamber.
The Government’s Expedited Courts Bill does not provide for the right of borrowers to request a freeze on the foreclosure process. However, the government and banks have warned that allowing loan defaulters to suspend the foreclosure process poses a huge risk to the banking sector, the economy and the country’s creditworthiness.
The ECB and rating agencies have raised alarms about this development, arguing that it could render the foreclosure process pointless, encouraging strategic defaulters.
