Our View: Foreclosure proposal means more of the same

It took a year and the danger of losing EU funding worth €85 million for the legislature to finally approve the two bills establishing a framework for the operation of companies that buy loans. The approval of the bills had been scheduled for December, as this was a condition for the release of the first tranche of aid from the recovery and resilience facility, but the squabbling among the deputies dragged on until Thursday, the bills were passed with the votes of Disy, Diko and the Greens.

The first bill amends the law on the purchase of loans creating a legal framework for the operation and supervision of loan-buying companies while the second bill amends the law on immovable property ownership setting the conditions for these firms accessing information regarding borrowers and loan guarantors. Such laws are in force in all EU countries, but in Cyprus the priority of the opposition parties has always been to protect people that do not repay their loans, as they are invariably viewed as victims of the greedy banks.

This priority led to a stand-off with the troika of lenders over the notorious foreclosures law which the parties have been chopping and changing for some eight years, having made the protection of the primary residence a sacred cause. More recently, the government tried to help people who could not – or would not – repay their loans on their primary residence through the Estia scheme, which would give hefty discounts, but that proved unsuccessful.

The saga of the non-performing loans, however, drags on nine years after the bailout, with parties still looking at ways of ‘protecting’ borrowers that are not repaying their loans. Banks are in a much healthier state today, having been able to sell big packages on NPLs and remove them from their balance sheets, but the parties are still playing with the foreclosures law.

On Thursday, the House plenum approved a proposal suspending the foreclosures procedures for properties until October 31. The justification for this were the adverse economic and social consequences caused by Covid-19 and the war in Ukraine. The suspension protects primary residences and farmland of a certain value. And what will happen at the end of October when the economic consequences of the war in Ukraine will be even worse than they are now? Will implementation of the law be suspended for another three, six or 12 months?

This farce has got to stop. People who have been unable to repay their bank loans, for seven or eight years now, are not going to do so now or next year. The parties need to put an end to this ‘on-off’ foreclosures law because they must accept that you cannot use the law to keep people in properties they cannot afford to pay for. This is the economic reality that parties refuse to see.