Cyprus Mail
Cyprus

New bills aim to protect homeowners from eviction

By Poly Pantelides

PARLIAMENT’S legal affairs committee yesterday discussed two bills aimed at protecting home owners and smaller businesses from repossessions as laid out in the terms of the Memorandum of Understanding (MoU) Cyprus has signed with its lenders as part of a €10 billion bailout.

The bills, submitted by EDEK, aim to stop banks from seizing primary residences as collateral for non-performing loans of up to €300,000, as well as protecting property belonging small to medium sized enterprises (SMEs), as long as the business is considered viable on “objective criteria,” EDEK MP Nicos Nicolaides said.

Another bill aims to protect loans’ guarantors or debtors from bankruptcy, under certain conditions.

“We cannot bear it to think that the MoU terms will result in families geting evicted from their homes. We cannot conceive of it to see homeless people in Cyprus,” Nicolaides said.

“We will start seeing SMEs shut down because they cannot afford to pay their loans because of the financial crisis, for which they are not responsible,” he added.

Nicolaides said that the content of the bills was still under discussion and was bound to change so they could stand up to legal scrutiny. But he said the question was whether the state had the backbone to stand against “destructive” MoU terms.

As part of the MoU, authorities are expected to expedite and streamline procedures for non-performing loans. This is in part to protect banks’ capital buffers but also to minimise “the incentives for strategic defaults by borrowers,” such as property developers who would default on debts while an overheating market pushed up the value of their property. This enabled banks to sell the collateral property that was worth much more by the time procedures were completed. Banks would regain their funds, while developers would get the remainder at no extra trouble.

Instead, the MoU states that banks must classify loans as non-performing if payments are in arrears for more than 90 days, and seize assets up to one and a half years “from the initiation of legal or administrative proceedings”. In the case of primary residences the time-span may be extended to two and a half years. All this needs to be implemented by the end of 2014, and voted by parliament by mid-2014.

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