11.11.2022
When the moratorium was last extended in July of this year, Elizabeth McCall (Member of the European Central Bank’s Supervisory Board) advised caution regarding foreclosure law amendments, stressing that “such a policy could also backfire and destabilize the banking sector, if it is randomly designed.
At the time, ratings agency Moody’s warned that the amendments approved by the Cypriot parliament to the regulatory framework governing the foreclosure of mortgaged property were “credit negative” as they were expected to “impede banks’ efforts to reduce NPLs”.
Moody’s said the amendments are “likely to lengthen the foreclosure process”.
“The amendments are likely to make it more difficult for banks to foreclose on collateral held against insolvent borrowers. It is important to note that the amendments expand the grounds on which a borrower can appeal the foreclosure process and challenge the real estate auction, which is likely to result in long delays in the process due to the inefficiency of the Cypriot judicial system.”
The freeze protects homeowners with a primary residence worth €350,000 or less; businesses with a turnover of less than 750,000 euros and land worth 100,000 euros or less from re-ownership.
Supporters of the bill argued that it would bring relief to debtors during the ongoing financial fallout from the COVID-19 pandemic and Russia’s invasion of Ukraine.
While the bill will protect financially vulnerable households, it will also protect “strategic defaulters” (i.e., borrowers who can pay their mortgages but decide to stay).
