13.11.2022
Finance Minister Konstantinos Petrides will ask President Nikos Anastasiadis to reverse the decision of the House of Representatives to extend the moratorium on foreclosure, arguing that confidence in Cyprus among foreign investors and crEditorrs will be undermined.
“Unfortunately, the adoption of the proposal to extend the moratorium on foreclosure leaves the Treasury with no option but to recommend that the President of the Republic use the powers granted to him by the Constitution to return the enacted law,” Petrides said in a statement on Friday.
The comments follow the House of Representatives on Thursday approving an extension of the foreclosure moratorium until the end of January 2023, indicative of the difficult financial climate created by the coronavirus pandemic and the war in Ukraine.
This is the latest in a series of such extensions, with an initial foreclosure freeze imposed as early as August 2021 as borrowers came under pressure from restrictions due to COVID-19. The last extension expired at the end of October.
Petrides said the government is disappointed with the MPs’ decision as it hurts the economy, hindering efforts to overcome the financial crisis.
“This practice is detrimental to the creditworthiness of Cyprus in relation to rating agencies. As a government, we will do our best to mitigate the negative impact.”
He called the parliament’s decision an unnecessary event after the credit companies committed themselves not to sell the first houses. He said that this is an event that does not have a significant impact, but creates negative consequences, given that the adoption of the law is associated with the payment of the first installment from the Recovery Fund.
“Foreclosures are suspended without regard to income or other criteria, thus rewarding strategic defaulters and shifting their debts to law-abiding citizens,” Petrides said.
Opposition parties accused the government of not presenting an alternative to solving the problem of non-performing loans.
The extension was supported by 34 MPs belonging to opposition parties against 12 ruling DISY MPs.
Foreclosures on the first houses
The first houses worth up to 350,000 euros, commercial premises worth up to 750,000 euros and land plots worth 100,000 euros will not go under the hammer until January.
Deputies weren’t convinced by the commitment of banks and debt-purchasing companies that they would not auction any major residences.
The Minister of Finance added that the law regulating foreclosure would operate along with the protection system. He cited mediation and insolvency mechanisms that protect defaulters and government plans to help people who default on mortgages, such as the ESTIA scheme and the mortgage-to-rent scheme promoted by the government.
The Mortgage-Rent Scheme will cover all non-viable households that have applied for the ESTIA program but whose income is insufficient to make payments.
Under the proposed mortgage scheme, households will pay low rent for five years, after which they will be able to buy their own home.
ESTIA was launched in September 2020 to cut down on Cyprus’ mountain of bad debts.
The state subsidized one-third of the monthly payments of toxic borrowers after the loan restructuring was agreed with the lender.
However, the scheme was deemed a failure due to low participation rates, as only 20% of submitted applications were approved.
