Cyprus Mail
Property

Government says it respects court decision on disputed foreclosure bills

The government said Thursday it fully respected the supreme court decisions on three bills referred to it by the president, including one that has an impact on the foreclosure framework and could cause problems to banks.

Government spokesman Kyriacos Koushos said it was known that the government respected the supreme court decisions, and in general all court decisions.

“Therefore, the supreme court decision on the particular issue is fully respected.”

The supreme court full bench on Wednesday ruled that two bills passed relating to foreclosures were constitutional while a third on bank contract clauses was not, around a year after opposition parties passed them against the government’s advice.

President Nicos Anastasiades had vetoed the bills and referred them to the court to decide on their constitutionality.

He must now sign them into law.

One of the three, allows a debtor to set aside a repossession notice by filing a complaint to the financial ombudsman.

Should the latter determine that the lender breached central bank guidelines on loan restructurings, the debtor would be able to take recourse with a court, which in turn would immediately issue an injunction, stopping the repossession (of a primary home or business premises) in its tracks.

The contentious bill also featured extending to 45 days from 30 days the payment due date following a notice and the auction of a property following notice.

It is feared that the provisions would cause delays in the process, considering that Cypriot courts are notoriously slow. The foreclosures framework had been overhauled as part of the island’s bailout agreement to speed up procedures that previously took many years to complete.

The two big banks, Bank of Cyprus and Hellenic, did not immediately have a response regarding the decision on Thursday. Sources at the two lenders said the supreme court decision was being studied to assess its potential impact.

The decision was welcomed by the movement against foreclosures.

“Every element that helps a borrower is positive,” member Eugenia Moiseos said. “But a lot more must still be done. Laws must change to help people keep their property.”

Opposition parties passed the bill last year despite warnings from the EU and the IMF that it could have far-reaching effects.

“Given still-high NPLs, recent efforts to undo key reform initiatives are undermining the hard-won gains in restoring macro-financial stability,” the IMF said.

The law on foreclosures was amended in the summer of 2018 to make it more effective, some four years after it was passed by parliament with changes that essentially rendered it ineffective and unable to help banks reduce non-performing loans.

Up until then, the IMF, the European Commission and the European Central Bank (ECB), the troika of international creditors which supervised Cyprus’ 2013 bailout, had been calling for an amendment to the law to make it more effective.

Procedures took between seven and 12 years, rendering the framework ineffective.

Banks suggested at the time the amendments would essentially afford protection to strategic defaulters and possibly increase their numbers since foreclosure procedures would slow down or be weakened.

They fear that fresh capital would be needed because there will be changes in the valuation of collateral, as well as possible bank downgrades by rating agencies.

 



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