House Finance committee discusses protection of vulnerable homeowners

The government on Monday slammed the door shut on a slew of legislative proposals aimed at regulating home repossessions, while revealing that its own ‘mortgage-to-rent’ scheme may not get the nod from Brussels anytime soon.

A lively debate took place at the House finance committee on the issue of protecting vulnerable homeowners, where MPs from various parties had drafted no fewer than 19 bills.

Some of the bills were eventually withdrawn by the MPs themselves, whereas on others the finance ministry made it clear they were a non-starter.

The ministry was willing to consider just two of the legislative proposals.

One was drafted by Disy MP Harris Georgiades. It involves amending the Immovable Property (Transfer and Mortgage) Law so that, whenever a lender sends out a notice to a borrower regarding loan arrears on a mortgage, the lender must also send a standardised letter informing borrowers, guarantors and collateral providers of their obligations.

This information would boost transparency in relation to the demands of banks, as well as limit problems down the line, such as the submission of objections by debtors.

The second bill the finance ministry agreed to consider, came from Akel. It provides that in the event a debtor chooses to swap their mortgaged property for their debt, and where the property is a primary residence or a business premise, the swap value is set as the market value arising from an ongoing valuation.

Avgi Chrysostomou-Lapathioti, a senior official with the finance ministry, told MPs the government plans to proceed with the ‘mortgage-to-rent’ scheme.

But she cautioned that it might be difficult to persuade EU authorities about the scheme’s “social character.”

Although the government did get some positive feedback from Brussels, they do not know when the European Commission will green light the proposal.

The ‘mortgage-to-rent’ scheme intends to help homeowners at risk of losing their property due to mortgage arrears; allowing a person to voluntarily surrender ownership of their home to their lender. An entity buys the home from the lender and becomes the landlord. The borrower no longer owns their home but will continue living there as a tenant.

The scheme was seen as the previous administration’s lifeline to some 4,000 distressed borrowers, after the lack of success with the ‘Estia’ debt relief scheme.

Another action mulled by the government involves creating courts specialising in home repossessions. Chrysostomou-Lapathioti said the administration is currently preparing legislation on this.

But it could get tricky, as in the past a similar idea for such courts had been deemed unconstitutional.

Debate on the matter has resumed because last month parliament voted against extending a freeze on home repossessions – effectively allowing banks to resume the practice.

Some MPs at the time warned of a coming ‘tsunami’ in home repos if borrowers were left unshielded.

The last pause on repos had lapsed at the end of January.

A series of temporary foreclosures freezes had been implemented since 2021, usually for a span of a few months.

The freeze concerned primary residences whose estimated value did not exceed €350,000, business premises hosting companies whose annual turnover does not exceed €750,000, and agricultural plots with an estimated value not exceeding €100,000.