Parliament on Monday rejected one of two presidential vetoes relating to changes to foreclosures legislation, while voting to postpone voting on the other veto.
In an extraordinary session the House plenum voted by 35-17 to reject President Nicos Anastasiades’ veto on a bill that would freeze until October repossessions on primary residences which are potentially eligible for the Estia debt relief scheme.
As such, the bill will now be referred to the supreme court for adjudication.
At the same time, parliament decided to hold off voting on the second presidential veto, which related to amendments recently made to the foreclosures legislation.
MPs decided more time was needed to discuss the specific issue. The House will be reconvening this coming Friday to vote on the second veto.
In favour of postponing a vote on the second veto were ruling party Disy, as well as opposition Diko, Edek, the Citizens Alliance and the Greens.
The two bills in question had been passed by opposition parties on July 12. The parties said they wanted to introduce additional safeguards for homeowners with mortgages they are unable to service, and to restore the negotiating balance between lenders and borrowers.
A week later President Anastasiades refused to sign off on the two items, saying they render foreclosures legislation ineffective, raising the risk of downgrades for the island’s banks and the economy.
Earlier, Central Bank governor Constantinos Herodotou told MPs that the European Single Supervisory Mechanism (SSM) expected a negative impact on bank provisions if the bill came into force.
Speaking before the House finance committee that convened to discuss the matter ahead of plenum, Herodotou said the SSM “confirmed what we saw as the national authority”.
The SSM’s message makes a clear reference to the changes made to the foreclosures legislation in 2018, which the EU took into account in approving the creation of Kedipes, the asset management company that handles the Co-op Bank’s remaining loan portfolio that did not go to Hellenic Bank after the former was shuttered, the governor said.
“It clearly states the effects on the banks and clearly states that from the moment there will be delays and uncertainty in bank timeframes ‘we expect a significant negative impact’ on bank provisions,” Herodotou said.
Cyprus’ banking system is still struggling with a high number of non-performing loans, at 32 per cent against an EU average of 3.5 per cent, and the changes made will afford more excuses to people who do not pay their dues to hide behind, the governor said.
Herodotou asked for more time to see how those who were not handled properly by banks could be protected.
Finance Minister Harris Georgiades said the amendments did not provide protection to those who needed it the most.
He added that they essentially made the process more complicated and slower.
“These changes will allow certain people who can afford to pay legal expenses to keep their case in court indefinitely.”
Georgiades said the effects will be felt on the banks and the government coffers since half the loans belonged to the state through Kedipes and the housing financing organisation (HFO).
“There will be a significant negative impact on Kedipes’ ability to collect its dues and the same will happen at the HFO, that will very likely be called to raise its provisions and capital,” the minister said.
It would probably mean an increase in the state aid the government agreed to pay Hellenic Bank as part of the co-op takeover deal.
The amendments to the main foreclosures law passed by the opposition parties would allow the defaulted borrower to obtain a court decision that stalls a foreclosure process if it is proved that a bank has not taken all necessary actions required by the central bank directive to restructure a nonperforming loan.
At the same time, the amendments clearly state the reasons a defaulted borrower can cite to challenge the auction of the property.
Amendments also included, among others, extending to 45 days from 30 days the payment due date following a notice and the auction of a property following a notice; and preventing the sale of a property at below 80 per cent of its market value for six months, from three months previously, while maintaining a floor of 50 per cent of the market value for any potential sale.
Also Monday, the House voted to accept the president’s veto on an amendment to the Aliens and Immigration Law.
Additionally, by a vote of 29-17 parliament accepted the president’s veto on a bill on the widowers’ pension. The bill sought to regulate men’s right to a widower’s pension and set beneficiaries as men who became widowers after January 1, 2018. It was vetoed by the president on the grounds that it disrupts the viability of the social insurance fund.
Lastly, the House postponed till Friday a vote on the president’s veto of a bill regarding unfair terms of business contracts.