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Foreclosures vote on Friday

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By Elias Hazou

BARRING the unexpected, the House plenum is to convene extraordinarily this Friday to vote on a contentious foreclosures bill and other related legislation, as the government again warned that failure to pass these would derail the country’s fraught path to economic recovery.

The items were finally forwarded to parliament yesterday. Friday’s plenary session starts early, at 10am, in what’s set to be a long day for lawmakers.

Government officials meantime fanned out on media outlets in an effort to drive home the gravity of the moment.

Speaking on a radio show in the morning, Finance minister Harris Georgiades said parties should set aside politics and focus on the bottom line.

“Everyone must think hard as to whether they want to provoke a crisis with the troika, or whether they want us to continue without crises and misadventures along the path to economic recovery,” he said.

Without passage of the foreclosures legislation – aimed at simplifying and speeding up repossession of mortgaged properties whose loans are not being serviced – Cyprus will not receive the next tranche of financial assistance from international lenders.

Georgiades sought to allay fears that the legislation will lead to swift and en masse foreclosures of primary homes – as the opposition claims – noting that the bill comes with several caveats.

The bill provides for about a dozen stages before a bank can initiate repossession, and mortgagors have around six months at their disposal to challenge or block such proceedings on a property, with recourse to the courts and mediation agencies available every step of the way.

Moreover, primary residences are exempt from the bill’s clauses until January 2015, and by then the government has pledged to produce by year’s end an additional safety net in the form of laws regulating personal and corporate insolvency.

Organised groups opposed to the bill are staging two protest actions this week, one outside the Presidential Palace tomorrow and another demonstration at the House on the day of the crucial vote.

The police, meanwhile, confirmed that at least two MPs have received threatening letters, where they are warned not to vote for the bill.

The DIKO party – whose votes are needed in the House if the bill is to safely pass – has maintained radio silence on the issue, keeping the government guessing.

Main opposition AKEL – outright against the legislation – issued a somewhat cryptic statement yesterday, on the one hand noting the need for political consensus but on the other slamming the bill as a tool for the “plundering of private wealth by multinational and domestic predators.”

AKEL accused the administration of deliberately putting off debate on the bill until the last hour.

Hitting back, government spokesman Nicos Christodoulides reminded AKEL that it was under their watch, in November 2012, that a provision on foreclosures was included in a provisional agreement with international creditors.

And it was AKEL that had the run the economy into the ground in the first place, added Christodoulides.

When AKEL took office in 2008, he said, the state had a debt-to GDP ratio of 48 per cent and unemployment at 3 per cent; by the end of their administration the debt-to-GDP ratio soared to 87 per cent and the jobless rate stood at 15 per cent.

“The government calls on everyone to rise to the occasion in order to avert the real dangers threatening the country’s so-far positive course, a fact recognised by everyone, especially international markets,” the spokesman’s statement read.

Also this week, the island’s largest lender Bank of Cyprus is set to endorse (or not) a €1bn capital increase, seen as vital to beefing up the bank’s capital reserves ahead of EU-wide stress tests.

Lenders’ ability to recover assets on non-performing loans (NPLs) has become the single largest challenge facing the financial sector. The foreclosures bill as well as Bank of Cyprus’ capital increase are both inextricably linked to the problem of the NPLs, which have been mounting amid the recession.

Data released by the Central Bank yesterday shows that total NPLs for all commercial banks were €21.69bn, or 45 per cent of all credits, at the end of June. This marked a deterioration from end-May, when NPLs stood at €21.45bn (or 43.3 per cent of all credits).

Overall, at end-June, commercial lenders and the cooperatives combined had €28.7bn in NPLs on their books, of which €4bn (or 14 per cent) were tied to owner-occupied housing.

Commercial banks have lent out €5.7bn for owner-occupied housing, of which 36.75 per cent are non-performing. Cooperatives posted €4.5bn in owner-occupied home loans, of which €1.99bn (or 44.25 per cent) were classed as non-performing.

The data can be found here

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