Cyprus Mail
Business Cyprus

Banks increasingly resort to foreclosures as auctions remain ineffecitve

Cypriot banks are piling the pressure on uncooperative borrowers and resorted to an increased number of foreclosures in the second quarter of this year even though auctions of foreclosed properties remain unsuccessful, official data show.

Plagued with a mountain of non-performing loans in excess of €23.bn and accounting for roughly half their loan portfolio, Cypriot lenders initiated 477 foreclosures in April to June, compared to 369 the quarter before, a Central Bank of Cyprus document submitted to the Parliament said. Still, the market value of the properties foreclosed in the second quarter is €94.5m against €129.4m in January to March.

In the second quarter of the year, banks resorted to foreclosing an increased number of primary residences – a step considered taboo in Cypriot society – by setting a date for the first auction, the report marked as classified said.

The total number of primary homes foreclosed in the second quarter rose to 16 from 3 in the quarter before. In addition, banks went ahead with the foreclosure of 70 other residential properties, 52 commercial properties, 98 plots and 238 parcels of land in the second quarter.

In the first three months of the year, they foreclosed 30 other residential properties, 33 commercial properties such as shops, offices, factories and animal breeding units, 47 plots, and 248 parcels of land, the report said.

According to the foreclosure law, modernised as part of Cyprus’s adjustment programme, banks can auction a foreclosed property first at 80 per cent of its estimated value, before they can put it up for auction without a mandatory minimum reserve price.

In the second quarter, banks informed 791 borrowers about their intention to foreclosure collateral of non-performing loans worth €229.5m, compared to 389 cases in the quarter before worth €103.2m, the central bank report said.

However, demand at auctions was limited in the first half of the year. Banks managed to sell only 31 properties at the first auction attempt in the second quarter compared to six cases in the first quarter. These included 33 parcels of land, one plot, one commercial property and two other residential properties other than primary homes, the data show. The second auction attempt produced more disappointing results. Banks were successful in selling only four parcels of lands and a plot in the first quarter and sold nothing in the second quarter.

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