House passes foreclosures amendments, delays controversial bills (Updated)

By Nick Theodoulou and Elias Hazou

The House on Thursday passed two of four legislative proposals amending the foreclosures framework, but decided to postpone voting on the controversial bill that would have allowed debtors to set aside repossessions proceedings with a court order.

MPs decided to sit on the contentious bill for a week, giving the government some time to better explain its own plan to tackle the issue of non-performing loans.

Voting on the other difficult bill – Edek’s proposal for the sale of property at the value it had at the time of signing the credit facility agreement – was likewise postponed.

Lawmakers did vote through Akel’s bill providing for the exchange of property for debt at the market value of the property, rather than the price of a forced sale.

And the joint Disy-Diko legislative proposal – obliging banks to provide more information to debtors facing repossession on their primary residence – passed unanimously.

On the House floor, Diko leader and MP Nicholas Papadopoulos said parliament should hold back on the two contentious bills, as the finance minister has promised to explain in detail how the government intends to deal “holistically” with the issue of repossessions.

His proposal for suspending voting for a week got the backing of the pro-government parties and opposition Disy.

The move came a day after the government asked MPs for some breathing space and also after the announcement that the government and the banks had reached a ‘gentleman’s agreement’ that lenders would desist from home repossessions until the end of October. This concerns primary residences valued up to €350,000.

In the lead-up to Thursday, the cabinet also decided on a special judicial procedure to be created to deal with non-performing loans (NPLs).

Getting the banks to agree to pause on repossessions for four months gives the government time to roll out a comprehensive package of measures, which also includes amending the conditions of the Estia debt relief scheme, to encompass a more targeted approach for borrowers.

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

During the day, details of the government package – dubbed a ‘safety net’ for vulnerable borrowers – were leaked to the Cyprus News Agency. The news agency obtained the letter that Keravnos had sent to parliament on Wednesday.

The government proposals build on Akel’s idea on debt-for property swaps at the market value of the property, rather than the price of a forced sale. The finance ministry proposes how to overcome potential complications in terms of the constitution, and it advises that these swaps do not apply to cases coming under the mooted rent-to-mortgage scheme.

On the Disy-Diko joint proposal that repossession notices must cite the outstanding debt balance, the finance ministry adds that banks should also cite the dates of any and all notices sent to a debtor.

Regarding the mortgage-to-rent scheme, Keravnos informs parliament that it has got the green light from the European Commission, and that it is set to be approved at the next cabinet session. Further, the scheme will be communicated to banks and credit-acquiring companies (CACs), who have until September to join the scheme.

The government package also includes the intention to let the financial ombudsman hire more staff.

“What matters is that we all become convinced about what constitutes the greater good, and that a channel is created that deals with the problem of non-performing loans,” Keravnos told journalists.

He said the government package is geared at safeguarding the economy as a whole, but also the stability of the financial system.

The finance czar dismissed the notion that the government had deliberately waited until the last moment to ‘dump’ its package on parliament just hours before Thursday’s House plenum in an ostensible bid to short-circuit MPs.

Asked how the administration might handle if MPs did pass the bill allowing the suspension of foreclosures, Keravnos demurred: “Depending on what comes up, the government will study it with seriousness and we will engage with the involved parties to find a way out…that is best for our country.