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Cyprus

‘Primary homes are fully secured’

President Anastasiades should be back home before Christmas

By George Psyllides

THE rights of vulnerable groups were fully secured by a bill on foreclosures approved by the cabinet, President Nicos Anastasiades said yesterday, and he announced additional measures to protect primary residences.

“Because we fully understand the concerns among vulnerable groups and entrepreneurs who cannot meet their obligations due to the crisis, I want to make it clear that along with the banks’ capability (to recover its loan) the rights of borrowers in the above categories are also fully secured,” Anastasiades said in a live television address.

The government bill seeks to put an end to lengthy procedures of foreclosing mortgaged properties, which could reach 20 years under the current system.

People fear that the bill will open the way for mass foreclosures mainly targeting ordinary people who are the hardest hit by the downturn, and is being opposed by the political parties, which is likely to delay proceedings at parliament before it can be entered into law.

“I would like to believe that in the coming days, we will be able to have a calm and sensible dialogue, that these provisions will be understood and that through our decisions, collectively, we shall ensure that the effort to finally exit this difficult situation will continue,” Anastasiades said.

Anastasiades outlined the safeguards included in the legislation, as well as other measures that have been put in place.

The main change is the introduction of private auctions, instead of them being carried out by the land registry, which would save considerable time.

There will be two evaluations – one by the borrower and one by the lender. If they disagree, there will be a third independent final evaluation.

The reserve price will be set at least 80 per cent of the evaluation and will remain so for three months.

If the property remains unsold, the reserve price will drop to at least 50 per cent of the valuation and will stay there for nine months. Failure to sell means a new valuation and a repeat of the procedure.

The foreclosures bill affords borrowers the right to seek legal recourse at every step of the procedure.

The government also announced additional schemes to protect primary residences, which have been spared until January 1, 2015.

Anastasiades said the cabinet approved two schemes, which constitute a final safety net for vulnerable groups of the population.

The schemes will also kick in at the beginning of 2015, depending on the needs.

They basically allow eligible individuals to apply for inclusion in the plans offered by the Land Development Organisation (KOAG)

Under the first scheme, KOAG will purchase the home and lease it to the former owner who retains the right to buy it back within a set timeframe.

The second scheme provides that KOAG will pay or subsidise part of the loan’s interest rate to eliminate the danger of foreclosure.

Another backstop is the solvency framework, which gives incentives to borrowers and lenders to reach a viable solution that will be of mutual benefit, Anastasiades said.

Anastasiades warned however that the special treatment afforded to people who objectively face temporary difficulties to fully respond to reasonable obligations they have assumed.

“They do not concern, I want to be clear on this, non-cooperative debtors who think they can exploit the savings of other fellow citizens or those who are consistent or even future borrowers who also want to be able to have access to funding,” Anastasiades said.

The solvency framework also provides incentives for rescuing and restoring companies through debt restructuring in a bid to give the chance to viable entities to maintain jobs and maximise their value to benefit creditors.

The president stressed that the bill was mandated by the terms of the island’s bailout. Its approval by parliament by September 1 was also necessary before international lenders disbursed the next tranche of assistance.

The bill, he said, corrected distortions which have been in place for decades, but also fully secured the borrowers’ best interests.

“The right to legal recourse is fully secured, as is access to mediation and restructuring. A fair and reliable way to set the value is also ensured and a reserve price is maintained indefinitely,” Anastasiades said.

Most importantly, he added, the bill secured the full exemption of primary residences until the solvency framework was completed and enacted.

“In combination with the other schemes, they fully secure the primary residence of vulnerable groups.”

 



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