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CBC governor urges MPs not to tamper with foreclosures framework

Central Bank Governor Constantinos Herodotou

Central Bank governor Constantinos Herodotou on Friday urged MPs not to tamper with the foreclosures legal framework but to focus on how courts can more quickly deal with financial disputes between borrowers and banks.

“If someone’s arteries are closed, you carry out a bypass, not cut off the foot,” he told the House Legal Affairs Committee in response to suggestions that foreclosures are suspended pending the outcome of court hearings.

The committee has started an article-by-article examination of a revised bill submitted by the justice ministry to create special judicial procedures with six additional judges who will hear financial disputes between borrowers and bankers.

The new system, part of a compromise hammered out by the government and smaller parties to secure passage of the 2021 budget, will also cover abusive clauses and overcharging.

Finance ministry permanent secretary Louis Panayi said the revised bill aims to cover vulnerable groups of the population who are either borrowers or guarantors as well as bond holders. The bill provides for training of the judges who will be assigned to these cases. But it does not set out a specific time frame for disputes to be heard, saying only it should be within a ‘reasonable time’.

Panayi said the government believed that approval of the bill will give impetus to trials on financial disputes to the benefit of those affected.

Vulnerable groups are some 35,000 people who qualify for the electricity authority’s discounted rate that includes low-income large families, recipients of the minimum guaranteed income and people with medical conditions such as multiple sclerosis, the finance ministry’s Dionysis Dionysiou told the committee.

However, MPs from Edek, Solidarity and the Greens also supported amendments to the mortgage law so as to freeze foreclosures until the court rules on a financial dispute between a borrower and a bank.

Also discussed was the issuing of a temporary order suspending a foreclosure, whereas reservations were heard on whether the definition of vulnerable groups covered enough people.

The central bank governor responded that given that the diagnosis was correct – that is the delay in the administration of justice – speeding up cases would give protection to the vulnerable.

“If we tamper with the issue of foreclosures, we will have adventures and I want to be clear. If a patient has a closed artery you do a bypass, you don’t cut off his foot.”

Herodotou said any change to the foreclosures’ framework would endanger deposits. The European Central Bank would need to be informed and banks may require capital because of new provisions.

“The problem is the speed (in trying the cases). Let us not change other laws which will bring Europe on us,” he said.

Disy president Averof Neophytou also urged caution. “The aim is to achieve getting a court decision before the foreclosure. But if we stop the foreclosure, Frankfurt will pull the plug,” he said.

Speaking to reporters after the meeting, committee chairman Giorgos Georgiou said the bill aimed at giving vulnerable groups immediate access to the justice system and to protect them from foreclosure proceedings.

“The aim is to give legal and judicial assistance to this section of the population, the most vulnerable.”

Akel MP Andreas Pasiortides said the bill does not protect a few thousand borrowers who need protection and have put up their primary home and their professional premises as collateral for loans.

Edek MP Costis Efstathiou said that protection should not be restricted to vulnerable groups but also borrowers who must protect their primary home or small professional roof. The court must acquire substantial jurisdiction and have the authority to suspend foreclosures. He said that an amendment will be submitted so that the court can issue a temporary stay on foreclosures.

Michalis Georgallas of Solidarity said that the revised bill was clearly improved, adding that the party wanted to protect borrowers from the arbitrariness and unbridled greed of banks and asset purchasing companies.

He added that there should be safeguards that foreclosures will not proceed as long as a case is being tried.

Greens MP Giorgos Perdikis echoed the view that the new regime would be an empty gesture unless foreclosures are suspended.

 

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