Foreclosures suspended until the end of October (Updated)

Foreclosures have been suspended until the end of October, while a special judicial procedure will be created to deal with non-performing loans (NPLs), cabinet decided on Wednesday.

Primary properties valued up to €350,000 will be exempt from any foreclosures up until October 31.

The government will be formally informing parliament over the series of proposals adopted by the cabinet to tackle foreclosures, Finance Minister Makis Keravnos said after the meeting.

“I believe banks and everyone else recognise the risks if a proper way out is not found, that protects vulnerable borrowers but at the same time ensures the stability of the foreclosure system.”

The proposals will be submitted during Thursday’s plenary session to be put to the vote. They detail a clause allowing borrowers the right to go to court to secure an order suspending foreclosures.

Suspending the foreclosures will give government time to prepare a comprehensive package of measures, which also includes amending the conditions of the Estia scheme, to encompass a more targeted approach for borrowers, Keravnos specified.

It will also give the government a window to have the ‘mortgage to rent’ scheme formally approved, and also strengthen the financial ombudsman’s powers.

“The government’s intention is to submit a comprehensive package tackling NPLs and foreclosures,” Keravnos told reporters.

Parliament was expected to be briefed on the matter by the end of the day.

Akel nonetheless decried the decision as an indication of the government’s weakness to uphold its own commitments pledged during the presidential campaign. The opposition party’s MP Aristos Damianou questioned how banks would be at risk “if a small amount of NPLs remained in the banking system”.

“This tactic of dumping legal bills aimed at protecting family homes from foreclosures just before plenum was one well known in the previous administration,” he said.

“The events of the last few hours confirm that the (Nikos) Christodoulides government is following the same tactics. Unfortunately for the citizens, it is following the path of its predecessors.”

Keravnos said constructive meetings had taken place on Tuesday with the Cyprus Banks Association as well as the association of credit acquisition companies.

He specified the bill creating a judicial procedure at district courts to examine borrowers’ issues aims to speed up decision-making over such matters.

Asked if there had been a memorandum of understanding with the banks, Keravnos said there was not, but rather a mutual understanding.

The finance minister also said the government was still exploring the matter of the financial ombudsman, whose term officially ended on June 30.

Keravnos announced a change in the government’s plan on subsidising interest rates on housing and business loans, so as to continue to subsidise loans that have been restructured due to high interest rates.

The amendment relates to a provision regarding the definition of restructuring and was made “to facilitate the process of differentiating the terms of these loans, so that with the increase in interest rates they can remain in the existing repayment plans”.

“That is, the interest rates and margins will be maintained despite the continuous increase in interest rates,” he said.