By Angelos Anastasiou
DISCUSSIONS last night between the Cypriot authorities and the Troika, mainly on the thorny issue of foreclosures legislation were set to continue this morning following a meeting with President Nicos Anastasiades at the presidential palace.
The new meeting was scheduled for 8am at the finance ministry.
Talks between the Troika’s Cyprus mission and the Cyprus government to finalise the fifth update of the country’s economic adjustment programme entered the final stretch yesterday but the pending foreclosures bill loomed over discussions.
With regard to the controversial bill, disagreements on its provisions between the government and the Troika have yet to be bridged. After the plan to have the bill ready for approval by the Council of Ministers last Wednesday fell through, the aim was moved to have it finalised and approved during the Council’s next session on Monday.
But the government’s assertive stance on the foreclosures bill has done little to ease opposition concerns. Accusations against the government of succumbing to Troika’s demands unquestioningly, as well as cries of a disastrous wave of mass foreclosures to come, show no sign of slowing down. Even ruling DISY’s leader Averof Neophytou criticised the effort to paint effectively unregulated foreclosures as the answer to banks’ woes.
“Banking institutions in Cyprus function not as banks but as loan-collection agencies,” he said in a news conference on Thursday. “A banking system receives deposits, grants loans, extends credit, offers reasonable interest rates, and sets efficient repayment timeframes. The Cypriot banking system exhibits almost none of these characteristics right now.”
“Therefore,” he added, “the populist approach that the high numbers of non-performing loans have come about due to a lack in foreclosures legislation is just part of the problem.”
Meanwhile, local press reported that in the face of the Troika’s insistence on the bill’s provisions, the government has found itself out of options with regard to getting its way on the point of allowing defaulting borrowers to avail themselves of the justice system to challenge foreclosure proceedings. The Troika was unyielding in keeping foreclosure proceedings private.
Daily Politis reported yesterday that as a result of the Troika’s refusal to accept court involvement in private foreclosure proceedings, the government focused on engineering more effective loan restructuring mechanisms in order to mitigate the risk of mass foreclosures.
But the thorniest remaining point of disagreement, the paper reported, was the Troika’s refusal to agree to a provision that the final selling price of foreclosed properties cannot be set below half of its appraised value, insisting that market forces should be left to determine selling prices.
According to Politis, the bill has been shaped to reflect the Troika’s demands and provides for a six-stage foreclosure process.
Initially, lender and borrower will be required to come to the table in order to negotiate the restructuring of the loan.
Failing the first step, the two parties must agree on an appraised price for the mortgaged property, and if still no agreement can be reached, the issue will be referred to an arbitrating body.
After a selling price has been determined for the property, a public auction will be carried out by the lender. The minimum selling price will be set at 80 per cent of the property’s appraised value, and bidding will remain open for three months.
At the end of the three-month window, price restrictions will be lifted completely and the property will be auctioned off in the free market to the highest bidder.
However, it has been agreed that primary residences are exempted from the provisions of the bill. These will be included in the legal framework governing insolvency, which is expected to be finalised by year end.