Cyprus Mail
Cyprus

Foreclosures bill: ‘We will explain, not negotiate’

By Elias Hazou

The administration on Thursday pushed back against criticism of its foreclosures bill, which unless enacted by the end of August could put at risk the next tranche of bailout money, as the island’s lenders have made abundantly clear.

And finance minister Harris Georgiades is to begin discussions next week with all the political parties in a bid to address opposition concerns that the legislation will lead to mass foreclosures of properties by banks, leaving thousands homeless.

The minister’s task will be to explain the bill’s provisions, not negotiate them, the Cyprus Mail understands. The legislation is the outcome of stiff negotiations with international lenders during their recent review mission here. At the end of those talks, the troika drew a line in the sand; the lenders will not stand for a further watering down of the bill that would make it harder still for banks to recover mortgaged properties.

Following the President’s televised speech on Wednesday, main opposition AKEL proceeded to trash the bill – but seemed to miss the mark on several points.

Calling the proposed legislation “a disaster,” party spokesman Stavros Evagorou said AKEL would show it the thumbs-down when it comes before the plenum.

He claimed the bill provides for en masse foreclosures of mortgaged properties and their auctioning at “humiliating prices”, at less than 50 per cent of going market rates.

In this way, borrowers would not only lose their homes, Evagorou claimed, they would also end up owing the banks at the end of the day.

“The bill’s philosophy calls for a mass, hasty and violent transfer of wealth from the many to the few,” he said.

And the legislation contains no safety net for vulnerable households against losing their primary residence, AKEL claimed – perhaps ignoring that the majority of these safeguards will feature in a subsequent, insolvency law, as the government has promised.

DIKO said it would reserve judgment while their people studied the bill, while EDEK will only support it only if their own amendments – which they are working on – are included. The smaller parties, the Alliance of Citizens and the European Party, said they would never consent to the selling off of people’s properties.

Through its spokesman, the government addressed AKEL’s critique point by point. Viktoras Papadopoulos said the bill avoids “fast-track foreclosures” since borrowers reserve the right to challenge and temporarily block foreclosure proceedings by taking to the courts or resorting to mediation agencies for loan restructuring. As long as a case is in court or the mediation process is ongoing, no foreclosures are possible, Papadopoulos said.

And by law, it will be forbidden to auction off any property at less than 50 per cent its market price, he asserted.

The chief change introduced by the foreclosures bill relates to private auctions, instead of auctions being carried out by the land registry, saving 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 at least 80 per cent of the evaluation and will remain so for three months.

Should the property remain 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 spokesman accused AKEL of rejecting the bill without even first assessing it.

Weighing in, the Finance minister brushed aside allegations that people would lose their homes or business premises at the drop of a hat. Property owners would have ample time to take measures against foreclosure proceedings.

Where a person seeks legal recourse and the auction is at hand, the property initially cannot be sold at below 80 per cent of its value. And bidders will not know the original price, the current valuation price or the reserve price, Georgiades said.

The minister reiterated that the foreclosures bill does not apply to ‘primary’ residences, to be covered by the insolvency law to be passed by year’s end. That law will contain certain protections for debtors based on certain criteria, such as whether they are cooperating with the banks.

Ruling DISY, meanwhile, proposed a number of tweaks, for instance, borrowers must be free of any obligations to the bank once the property has been sold, and property values must be defined as those on which the state imposes taxes.

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