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Bills to protect homeowners from eviction discussed

Two bills designed to prevent banks seizing primary residences used as collateral for non-performing loans below 300,000 Euro have been discussed by parliament’s legal affairs committee.

PARLIAMENT’S legal affairs committee yesterday discussed two bills aimed at protecting home owners and smaller businesses from repossessions as laid out in the terms of the Memorandum of Understanding (MoU) Cyprus has signed with its lenders as part of a €10 billion bailout.

The bills, submitted by EDEK, aim to stop banks from seizing primary residences as collateral for non-performing loans of up to €300,000, as well as protecting property belonging small to medium sized enterprises (SMEs), as long as the business is considered viable on “objective criteria,” EDEK MP Nicos Nicolaides said.

Another bill aims to protect loans’ guarantors or debtors from bankruptcy, under certain conditions.

“We cannot bear it to think that the MoU terms will result in families getting evicted from their homes. We cannot conceive of it to see homeless people in Cyprus,” Nicolaides said.

“We will start seeing SMEs shut down because they cannot afford to pay their loans because of the financial crisis, for which they are not responsible,” he added.

Nicolaides said that the content of the bills was still under discussion and was bound to change so they could stand up to legal scrutiny. But he said the question was whether the state had the backbone to stand against “destructive” MoU terms.

As part of the MoU, authorities are expected to expedite and streamline procedures for non-performing loans. This is in part to protect banks’ capital buffers but also to minimise “the incentives for strategic defaults by borrowers,” such as property developers who would default on debts while an overheating market pushed up the value of their property. This enabled banks to sell the collateral property that was worth much more by the time procedures were completed. Banks would regain their funds, while developers would get the remainder at no extra trouble.

Instead, the MoU states that banks must classify loans as non-performing if payments are in arrears for more than 90 days, and seize assets up to one and a half years “from the initiation of legal or administrative proceedings”. In the case of primary residences the time-span may be extended to two and a half years. All this needs to be implemented by the end of 2014, and voted by parliament by mid-2014.

Bills to protect homeowners from eviction discussed

Readers' comments

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  • andyp says:

    Not sure they are lending anyway Nigel.

    Who would buy when the basics of protecting buyers has never been resolved, just more, proposed, legislation benefiting the guilty at the expense of the victims?

  • @All – If this bill does become law, can you envisage any bank being prepared to loan less than €300,000 for the purchase of a primary residence?

    A bank would have no way of recovering the underlying collateral (the property) if the borrower defaulted.

  • andyp says:

    Surely this is discrimination and against the very essence of EU ethos?

    Everything except trying to sort the fraud (illegal occupation of completed but not approved homes and convicting people who sold you same as per Cyprus law, developer mortgage’s and corruption in Cyprus) seems to be under the microscope.

    As Paul Carr said ” what a bag of shi..”

  • Costas Apacket says:

    So if a purchaser has a loan of €100K secured against their property, but their Developer has also borrowed €250K, secured against the same property which is non-performing, does this mean that the property will be repossessed even though the purchaser’s loan is not in arrears and it is well below the proposed €300K threshold?

    In other words, what constitutes the proposed €300K and what is proposed in the new bills under debate to protect the purchaser in these circumstances?

    That is if the MP’s will even admit to the possibility of such circumstances existing!

  • Steve says:

    The evidence is mounting that the voters of Cyprus have swapped one political monster for another. The situation is much more dire now than it appeared to be under much if the duration of the previous communist regime, so now should be the time for real solutions that put the onus on the perpetrators of the problems to implement -and pay the cost of- fixing them. But no, we just have more of the same old stuff, bleeding the buyers dry -mortgage defaults, Immovable Property Tax hikes, Planning Amnesty penalties, sham specific performance and no title deeds. There are no signs that anything is going to change for the better, despite the fact that property sales continue to sink to lower and lower levels.

    By the way, which party came second in the elections – was it not the communists (AKEL) with 42.5% of the vote? Democracy is a dangerous thing when a party that got so much wrong can get ready to for power again, come the next election.

  • daisyannah says:

    If this applies to debts under €300,000 I am wondering how it helps people like me who live in an apartment complex where the Developer’s Mortgage is 3 times that amount?

    Or perhaps they would divide the amount up into individual units?

    At least they have recognised this abhorrent situation needs addressing, so I suppose it is a start.

  • Jim says:

    I cannot see how dreaming up laws to circumvent the carrying out of MoU agreements made with the Troika, are going to be worth the paper they are written on.

  • Peter Davis says:

    Easy solution is once a property is sold issue title deeds. That property is then taken off the list of assets of the developer.

    Even if they are ‘parked’ in a suspense account at the Land Registry.

    But then the banks will come after the developer, his villa and Merc cars and his assets, and we can never allow that can we.

    On a better note it will make the banks a little more responsible to whom they issue loans and the security they require.

  • kufrahdog says:

    There is insufficient substance and fact in this report for one to make a decent comment. However, the very fact that bills of this sort are being discussed by the parliament’s legal affairs committee illustrates yet again how vested interests operate and how unfit the overall property framework is for purpose. If it wasn’t all so very serious, one might characterise this as pantomime.

  • Pippa says:

    ‘The bills, submitted by EDEK, aim to stop banks from seizing primary residences as collateral for non-performing loans of up to €300,000’

    How does this protect buyers, where it is the developers loans that are non performing and will usually be well above the €300,000? I would suspect that the number of NPL under this amount are small in comparison to the millions of Euros owed by the unscrupulous smug developers who know their personal property is safe. The MoU terms are not to blame for this mess it is the banking system and the lack of corporate governance and good banking practice that is endemic in Cyprus.

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