By Angelos Anastasiou
The foreclosures bill will not be submitted to the Cabinet for approval today as it was originally scheduled as government legal services couldn’t review it on time, sources told the Cyprus Mail last night.
“There is a 99,9 per cent chance that the bill won’t be submitted to the Cabinet for approval,” said the source, explaining that since the bill was handed over to the legal services late on Tuesday, there wasn’t enough time for a proper review.
With the end of August deadline looming, Cabinet must now schedule an extraordinary session to approve the finalised bill and subsequently submit it to the House of Representatives for deliberation and vote.
House president Yiannakis Omirou told the press last week that he is willing to call for an extraordinary session of the House in August, if there is real need.
While the Cabinet session for approval and the plenum vote can be scheduled for the same day, parliamentary parties have asked for time to discuss the bill’s provisions.
The bill has acquired ‘prior action’ status, meaning it needs to have been passed before the next tranche of international aid to Cyprus can be released, which will be decided at September’s Eurogroup session.
According to sources cited by the Cyprus News Agency, the bill had not been finalised as of Tuesday morning despite a Monday marathon session attended by Finance minister Harris Georgiades, Interior minister Sokratis Hasikos and the Troika mission heads that yielded some consensus.
Contact between Georgiades and the Troika chiefs continued throughout Tuesday. According to state radio, discussions focused on two points raised by the government and resisted by the Troika: one, it wanted to furnish borrowers with the right to appeal the foreclosure process in court if procedure is breached, and two, it wanted to include the borrower’s right to an independent property appraisal which would be part of the proceedings.
Some commentators have sided with the Troika, arguing that overprotecting delinquent borrowers will only serve to drag out foreclosure proceedings, much in the manner diagnosed as one of the current system’s core weaknesses, slowing down troubled lenders’ course to recovery.
“A balance must be struck so that those who can afford to repay their loans are forced to do so, without victimising those who have no such issues,” said Michalis Pilikos, the employers’ association boss. “If those who can pay refuse to do so, it will fall on all the rest to pay, which is something we will not allow.”
Dimitris Georgiades, head of the government’s Fiscal Council, was also critical of the government’s insistence.
“If one’s home is foreclosed, it is not up to the banks to protect him – it is up to the state,” he said. “The responsibility lies with the government. If the issue of non-performing loans is resolved then funds will be released that banks can channel to other uses.”
But Bar Association head Doros Ioannides came out unequivocally in favour of protecting defaulting borrowers.
“At the end of any foreclosure process, time-consuming or not, we can’t allow anyone to infringe on another’s right to property unilaterally,” he argued. “Because it’s never just a case of a borrower taking out a mortgage – there’s also the lender who granted it. Why would we want to protect only the bank? Should we not take a balanced view to promote the borrower’s interests too? We must be very careful with the rules to ensure that borrowers are protected as well.”
Ioannides suggested that borrowers need to be allowed to appeal the foreclosure proceedings so that the risk of “wealth being accumulated in the hands of a few people or banks” is mitigated.
“The problem does not end with property foreclosure,” he said. “Do we want to save the banks while bankrupting individuals or companies?”
During Tuesday’s discussions between the government and the Troika, the bone of contention appeared to be determining the price at which a foreclosed property may be sold, in order to prevent fire sales.
The government’s aim is to maintain the secured price, meaning the minimum amount that can be accepted as an initial offer on a property, relatively high even after a public auction has failed to attract bidders.
The same sources claimed that the bill allows lenders a three-month window to resort to the open market to sell a foreclosed property at a significantly reduced selling price, after the initial public auction fails to procure buyer interest.
But the clause may unintentionally encourage abuse by lenders, who may collude with potential bidders to secure a heavily discounted price.
Additionally, in case a property is sold at a price much lower than its appraised value, the mortgagor may remain unable to pay off the remaining mortgage, resulting in the loss of property and significant debt burden.
This would also further depress property values.
The government, the CNA’s sources claimed, has attempted to insert clauses offering adequate protection from these risks, but was met with resistance from the Troika. According to state radio, the Troika’s aim is for property foreclosures to be carried out within 2.5 years at the most, and home foreclosures within 1.5, sparking calls of protest from most political parties.