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Our View: Home-owners can only be offered so much protection

IT WAS inevitable that some political parties would find big weaknesses in the fifth insolvency bill that is scheduled to be discussed at House committee on Wednesday. The final draft of the bill was ready on Friday and on Monday morning representatives of at least two parties – AKEL and EDEK – declared it unsatisfactory, claiming it did not offer protection to ‘vulnerable’ home-owners and those who could not repay their loans.

This should complicate matters as the parties had made the approval of the insolvency framework a condition for ending the suspension of the foreclosures law which has put the government’s adjustment programme at risk and delayed the release of funds by international lenders. Parties had demanded that all five insolvency bills were approved, before the foreclosures law could be implemented as these would offer protection to home-owners that had fallen on hard times and were in danger of losing their homes.

Now they are claiming that the insolvency bills would not offer ‘absolute’ protection to all vulnerable home-owners, as if this were realistic possibility. In fact an AKEL spokesman on Monday morning also complained because the bill did not cover small farms, while an EDEK deputy insisted that ‘small’ business premises should also have been protected.

In reality, the parties want laws that would prevent the banks repossessing any primary residence or small business premise, something that is clearly not possible. What incentive would any borrower have to repay his house loan to the bank if he knew that law would give him the type of protection these parties were talking about? And why would a bank give another house loan to first-time buyers if it did not have the legal tools to repossess a property when the borrower defaulted on his payments?

The truth is that there is only so much protection that society can offer home-owners through legislation. It certainly cannot prevent house repossessions, because this would make mockery of any concept of rule of law. What it could do is put in some checks and controls, including an arbitration service that would resolve disputes over loan restructuring, as the state has done. But it cannot legally protect people who refuse to, or objectively cannot, honour their loan contracts. In a country with the rule of law, we cannot have laws that annul loan contracts.

Is it so difficult for political parties to understand that there cannot be ‘absolute and comprehensive protection’ of home-owners? Or are they using this as an excuse to derail the adjustment programmes? Wednesday’s House committee meeting will provide the answers.

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