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Banks to target big borrowers first

Banks in Cyprus will not foreclose on homes belonging to vulnerable groups, the bank association said on Monday, as it sought to allay concerns ahead of a vote on a foreclosures bill at the end of this week.

Bank-of-Cyprus-HQSPEAKING after a meeting with President Nicos Anastasiades on Monday morning, chairman of the bank association Giorgos Georgiou said they will convene in the afternoon to decide on certain issues relating to the bill that will be positive for bank customers.

“Commercial banks have no intention to foreclose on the homes of vulnerable groups. There should not be such a concern,” Georgiou told reporters.

Anastasiades saw the chairmen and CEOs of commercial banks and co-operatives in the presence of the ministers of finance and interior.

Georgiou was echoed by Bank of Cyprus chairman Christis Hassapis who described the bill as an exceptionally useful and effective legal framework.

“All countries in the world must have effective legislation. There are many borrowers who strategically do not pay,” he said. “The legislation will force them to come and pay.”

Current legislation makes it next to impossible for banks to repossess mortgaged properties.

Procedures are way too slow often taking over 10 years. The proposed legislation speeds up the process mainly by removing the land registry from the picture and allowing private auctions.

This has raised concerns among opposition parties who warned they will reject the bill if it was not improved.

Hassapis said his bank’s priority would be to restructure all viable loans.

“Rest assured that Bank of Cyprus will only move to foreclose only after exhausting all means at its disposal,” he told reporters.

He said it was logical that lenders would go after large borrowers first before moving onto smaller ones.

“BoC’s intention is to look at large borrowers first. Small borrowers have nothing to fear,” he added. “We will start with the millionaires and work our way down.”

The bank has already announced various schemes for small borrowers and more were expected on Monday or Tuesday, Hassapis said.

BoC has a scheme for unemployed individuals that allows them to pay five euros per month for three years.

Businesses who saw their turnover reduced by over 25 per cent can also apply for help.

Readers' comments

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  • demetri says:

    Going back to Mike S and comments,on a similar note there is the case of a well known developer on the east of the island who sold the same properties to more than one person…for a LONG time he was still able to trade and the ill-gotten gains from these fraudulent sales I guess were initially kept in a local bank, plus his close ties to the political elite made him immune from prosecution and made it impossible for the bank or employees to whistleblow….it’s stories like these that disgust everyone…

  • Mike S says:

    Is there, under Cypriot law, any provision which allows an individual or a corporate body to borrow money against an asset which the borrower is fully aware is already has already been pledged, and therefore has no value? The obvious answer is no. You know that. I know that. But, in time honoured fashion, our Cypriot friends will argue black is blue if they fall foul of a Law which does not benefit them. Cannot they see what everyone sees as blatantly obvious? Is it just me, or do Mediterranean minds not work in quite the same logical manner as other Europeans?

    Therefore the second loan has several features which renders this loan agreement null and void. Firstly the “asset” has no value. Secondly the lender advanced the loan without making any checks at all: had they done so, they would have ascertained this fact. Therefore the granting of a second loan can only be attributed to a total failure by that lender. Therefore the lender has no choice but to seek repayment of his loan directly from the borrower through separate court action.

    If therefore logically follows that there are two easily defined NPLs……those loans which were granted against the collateral of property, and which can properly be pursued through legal channels, and those loans that were granted against collateral that it transpired had no value, and therefore said loans were obtained by deception.

  • Janner says:

    Two statements;

    1. There are those who paid in good faith for a property they thought they owned. Who in their right mind would purchase a property if they had been clearly told that a title deed was not available and that the property had been used as collateral for another’s loan. It is clear that government, lawyers, banks etc colluded to bring about this mess. I am no lawyer but there must be a legal case of mis-selling? If this is not contrary to EU banking standards and the law then I don’t really know what to think!

    2. Then there are those who are further behind the curve, the ones with the housing loans (not mortgages). They thought they had taken out a mortgage and in time, after paying off the mortgage, they thought they would own the property. This is the accepted process in the modern world. These ‘purchasers’ are now faced with the issue of what are they paying for? Should they continue to pay to only end up in the position of those purchasers in point 1 above? Again, there is clearly a case of mis-selling. How many people can get it so wrong. I strongly believe there is a legal case in both these examples.

    I’ve had a number of houses in the UK over the years and I have never been aware that my house was used as collateral for someone else’s loan. In terms of the banks selling off their NPLs. Who will buy them? It is one thing buying a debt but who wants to buy a debt that is so cross-collateralised (if that’s even a word) with so many claims/memo’s to its name that it becomes too toxic to try and recover it. The minute the banks seizes the homes of those buyers in point 1 they will instigate legal proceedings saying they were defrauded. Those in point 2 will also say they have been defrauded and the loan is nil and void as it was mis-sold.

    All the news and noise coming from the troika and Cypriot government is all about who is going to pay for this mess. It is all about the money and nothing else. It is not about right and wrong or justice for that matter. It is about hard cash! The system cannot afford to do the right thing. Instead they will protect their elite mates and hound innocent purchasers to their grave! The time for pussy-footing around is quickly coming to an end……watch this space.

  • Mike S says:

    1. Enact legislation allowing the banks to seize all assets held in the name of the borrower.

    2. If those properties and/or the land on which they stand has more than one loan secured against them, then only the first loan can be said to be legitimate: all others loans raised against those assets cannot be said to be legally enforceable as it was secured against assets which had no value as they were already being held as collateral: unless one can raise a loan using the same collateral twice….

    Well, actually you can: all it takes is a financial institution that does not apply due diligence (or call it what you will) to all its financial transactions. If the banks find themselves with two (or more) loans secured against the same asset, then the problem is of no-one else’s making but their own, and they must bear the loss.

    In Europe, the principle is blindingly simple: if you as a lender lend money without making adequate checks, against collateral that has already been mortgaged to the hilt, then you are guilty of a whole raft of breaches of banking and corporate regulations: just take a long look at the fines handed out in the UK and USA….

    The Cypriot Government must stop hesitating and do what everyone but themselves know must be done……..foreclose and/or seize all the assets of the major debtors. If they don’t, then no ordinary man in the street will have any belief in my government again…

  • Steve says:

    The Troika have realised that the first MOU is fatally flawed due to large amounts of NPLs being secured on the land to which the developer had title when taking out the loan. The owner of the land owns the buildings on it until title is transferred. This makes the title deeds provision in the original MOU a block on recovering any of the loan.

  • Pete says:

    Courtesy of Wikipedia.

    Embezzlement is the act of dishonestly withholding assets for the purpose of conversion (theft) of such assets by one or more individuals to whom such assets have been entrusted, to be held and/or used for other purposes.[1]

    For those who’ve bought and paid the developer for their properties but have been denied title due to said developer withholding funds due to the lender. This includes a developer who takes further loans using sold properties as collateral. Come on Cyprus, or are you going to decriminalise this along with fraud? Answers on a pinhead to . . . . . . . . .

  • richard says:

    The real problem is the one Janner stated. These unscrupulous developers ‘ring-fenced’ all of their most valuable assets by placing them ‘out of reach’ – no doubt in various ‘shell companies’ in the Cayman Isles, Belize and even in the offshore parts of G.B!

    Wasn’t it also rumoured that at the time of the fall of Catastrofias – senior government mandarins were calling up all of their buddies telling them to get their assets off the island?

    To be frank – if anyone (Troika or anyone) wants to be taken seriously – they need to employ a huge team of fiscal detectives to comb all of the offshore assets of these ‘developers’ – and that could take years and several super-computers to find them all (before you even instigate proceedings against them).

    About the only way to speed up that process is to pass laws in the Republic allowing these individuals to be arrested and placed in detention centres that are not as comfortable as the lifestyles they are used to (but make sure you close all the airports and sea ports first)!

  • Mike says:

    “BoC’s intention is to look at large borrowers first. Small borrowers have nothing to fear,” he added. “We will start with the millionaires and work our way down.” – Really! and do these collective sherlocks not think that these so called ‘millionaires’ have not got the sense to ensure they have protected their millions? ‘Nothing to fear eh’- why does that not convince me I wonder.

    As for “BoC has a scheme for unemployed individuals that allows them to pay five euros per month for three years”.- Well, if we are in trouble anyway lets ensure we are protected, get fired and only pay €5 per month for the next 3 years. We can carry on earning but as ‘self employed’. Forgive me but it’s not April 1st is it?

    If anyone believes that smaller borrowers will not be the ones paying dearly then a reality check is overdue. Then we have the added problem of whether or not the Troika will accept any such proposals.

    Is it just me or does anyone else feel that all these announcements and platitudes are what one would expect to be addressed to children in kindergarten. Perhaps I’m just an old cynic!

  • Stuart says:

    The scenario outlined by Janner below is probably the best description of why targeting the biggest borrowers first sounds logical in theory but will probably never work in practice.

    The lunatics out there who are seemingly not bothered about securing their Title Deeds are maybe waiting in hope that a 50% Property Transfer Fee discount will soon be announced but at the same time clearly enjoy a rather reckless attitude to risk.

    It is also difficult to understand how the government plans to introduce a foreclosures bill that does not comply with clause 1.30 of the fifth and very latest revision of the Cyprus MoU which states that the authorities have pledged not to introduce any further obstacles to the Troika’s intent of commencing robust repossession procedures (which include primary residences) forthwith.

    Scruffy has certainly put his finger on the spot by once again reiterating the not-so-hidden agenda of the EU-driven Troika of sustaining the Eurozone concept at any price, thus avoiding the embarrassment of a bankrupt member having to exit Ms Reding’s dream of her United States of Europe “Eutopia”.

  • hani chehaiber says:

    Banks Look For Profit Don’t Be Fooled By Big Or Small They Will Eat Every Body.

  • Scruffy says:

    It is incredible that many do not take their deeds when it is now widely known how vulnerable it leaves you.

    I agree with John too that the Troika are self serving and have no real desire to help anyone, vulnerable or otherwise. The hidden agenda is not difficult to uncover however.

    It is to balance the books of banks at any cost in order to continue the myth that the Eurozone concept works and can recover as long as everyone submits to their ridiculous austerity policies.

    Keep your eye on France. Things about to turn nasty as they are turning against austerity Their Prime Minister resigned today citing this as the reason.

    It is good that the bank say they will target big borrowers but the reality is that they have no longer have personal assets to seize. That leaves the assets that were sold and that is what will be targeted eventually. I believe that is why the Troika originally demanded that there should be “no right of appeal” on anything the bank chose to foreclose on. Does this sound like an organisation that understands how untrustworthy banks are here.

  • John Morgan says:

    Cypriot property Title Deeds (updated)

    The answer is for Civil Society to hold the Troika to their own MOU. The title deeds backlog must be cleared BEFORE the Foreclosures Bill can be enacted. This is indeed a necessary condition, otherwise the Foreclosure Bill will be open to challenge in the courts by its victims.

    I suggest Cypriot unions and property owners put this question to the Troika: Why are you not enforcing the Title Deeds provision in the original memorandum signed by the Troika and Cypriot Government?

    A legal challenge should be mounted via the Supreme Court of Cyprus or the European Court of Justice to force the Troika to enforce its own memorandum in all respects, not just selectively, as suits the IMF and Wall Street.

    The Troika is clearly pushing a hidden agenda which needs to be exposed. Equally, the Cypriot Government is trying to squirm its way out of responsibility for the entire Title Deeds fiasco. When is the Cypriot government going to be charged in the criminal and civil courts for nonfeasance?

  • @Janner on 2014/08/25 at 3:27 pm – To answer your question about ownership, until a purchaser pays the Property Transfer Fees to have the property registered in their name (thereby securing ownership), the property remains in the ownership of the vendor (developer).

    This is why I do not understand the lunatics out there who say they don’t want their deeds!

  • Janner says:

    The question is will the big borrowers have any assets to seize? Let’s say that ‘Andros the developer’ (despite selling hundreds or properties) didn’t pay back any of the millions he borrowed to fund his development. Instead he used the properties (property he sold) as collateral for more millions. Now the bank calls in the debt but poor old Andros cannot pay. The bank suggests he use the collateral staked to pay back his loan but Andros has sold it. The bank is outraged (despite lending the money to the purchaser knowing full well this was the case).

    The ‘buyers’ are now twitchy because they thought they had bought a property but don’t have the title deed so they will they lose their property so Andros can pay back his loan? If not, how will Andros pay back his loan? To further complicate matters who is the legal owner if a property does not have title deeds? Once the bank seizes the properties who is going to buy them without title deeds? What if title deeds cannot be issued because the property has been used as cross collateral and has numerous memos/claims lodged against it?

    Buyers will say they’ve been duped and will stop paying their loans as they thought they would own a property at the end of it but it seems like their property was used as collateral for another loan without their knowledge and they will flood the legal system with claims of mis-selling (but the bank and politicians knew this time would come). The bank may ask what Andros did with the millions paid to him by unsuspecting buyers but Andros just shrugs knowing full well it is safely abroad. The question is, and always has been, who is going to pay for this mess? You’ve guessed it folks……. you, me and the EU taxpayer!……..but not Andros!

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