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Foreclosures bill passed

The controversial foreclosures bill, a pre-condition of Cyprus receiving the next tranche of its bailout from the Troika, was passed by 47 votes at an extraordinary session of Parliament earlier today.

Cyprus ParliamentTHE hotly-debated foreclosures bill was passed by the House of Representatives on Saturday, following yet another marathon extraordinary session, but putting an end to three weeks of bickering and intense deliberations between parliamentary parties and the government.

Along with the controversial bill, the parliament passed a number of amendments and additional bills, said to aim for the protection of borrowers against foreclosure.

The bill was passed by 47 votes – those of AKEL, DISY and DIKO.

EDEK, the Green Party and independent Zacharias Koulias – a total of seven – voted against it. EVROKO’s leader Demetris Syllouris abstained.

The plenum session was originally due to start at 9.30am but was then pushed 10.30am, 11.30am and then to 12.30pm. It finally started at 2pm.

Voting on the bills came close to being postponed until Monday, when at around 4pm, Citizens’ Alliance MP Nicos Koutsou decided that the prolonged session was making a mockery of the deputies and should be put off until then.

“We will be ridiculed if we postpone voting for Monday,” responded AKEL MP Nicos Katsourides, asking that Koutsou’s proposal be rejected. Voting finally commenced at 4.30pm.

Following a suggestion by the majority, the plenum approved a resolution making the implementation of the foreclosure bill conditional on implementation of the insolvency framework.

The resolution requires the government to bring before the plenum legislation regarding insolvency no later than January 1, 2015, when the foreclosures bill will be put in effect.

The insolvency framework, a set of bills complementary to the foreclosures legislation, will be designed to balance borrowers’ rights with their obligations to lenders, offering them protection from foreclosure under certain circumstances.

According to Cyprus’ economic adjustment programme, it is scheduled to be put to a vote by the House by the end of 2014.

Greens’ MP Giorgos Perdikis didn’t vote for the resolution, saying the insolvency legal framework was flawed, vague and that it would end up being used against the very people it claims to protect.

Passing the additional bills, along with the troika required foreclosures bill, is regarded as a face-saving manoeuvre for the MPs. The troika had already rejected these suggestions when put before them by the House, thus President Nicos Anastasiades will most likely send all the bills back to the House, with the exception of the foreclosures bill which was set as requirement by troika for Cyprus to receive the next bailout tranche. The bill was to be passed before next week’s Eurogroup meeting.

With that criterion fulfilled, Anastasiades is free to send the rest of the bills and amendments back to the House.

Then, the House majority refuses to budge, and the President refers the matter to the Supreme Court, meaning the parties’ bill has no effect until the court issues a ruling.

AKEL general-secretary Andros Kyprianou, in his speech before the House, inadvertently admitted to the face-saving stratagem, warning Anastasiades that his party would find other ways “to protect the people.”

“If president Anastasiades sends back these amendments, he will be siding with troika and put himself against the wishes of the people’s representatives,” said Kyprianou.

Linking the foreclosures bill with the insolvency framework – along with the additional bills and amendments provided DIKO and AKEL with enough political cover to side with DISY and secure the needed majority in the plenum for the foreclosures bill to pass.

DIKO, which was in the government coalition a year ago, has voted for almost every troika-related bill so far, including the equally hotly debated privatisation bill.

Nicolas Papadopoulos, the leader of DIKO, told the plenum that mass foreclosures were an unavoidable outcome, unless a way is found to stop it.

“We have to stop foreclosures. We have to protect people’s homes. But if we allow Cypriot businesses to fail, there will be no homes left to protect. By protecting homes and destroying businesses we achieve nothing,” he said.

The second bill to be passed eliminates abusive charges by banks and includes a ban on excessive loan restructuring fees and a cap on late-payment interest at 2 per cent.

A third bill regulates the sale of loan portfolios, which will be allowed only to legal persons licensed by the CBC and credit institutions or funds licensed to operate on the island.

The fourth bill expands borrowers’ right of legal assistance in court proceedings relating to foreclosures.

The fifth, and final, bill obliges the Central Bank of Cyprus to inform the House of developments in loan restructuring on a quarterly basis.

DISY leader Averof Neophytou – who acted as an intermediary during the parties’ negotiations with the government – blamed the Eurogroup and the previous administration in equal measure for the state of the economy.

“Cypriot MPs are forced to vote on the lesser evil,” said Neophytou, stressing that the foreclosures bill was a tool for the banks to go after the big borrowers and not the those who cannot make their payments due to the country’s financial state and the austerity measures.

“If the banks think they can cannibalise the public, then I will be on the side of all those that oppose them,” warned Neophytou.

Regarding the insolvency bill, Neophytou said that the government would keep its promise.

The next House session has been set for September 18.

Readers' comments

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  • demetri says:

    Have to agree with Nigel, troika has it’s eye on the fact that there is 36billion worth of deposits in Cypriot financial institutions. An example today by [details removed] , developer has made sales and gains and instead of paying off loans with those profits has stashed profit away in one say a co-operative in some village…these people have to pay because they owe and they have the means to pay.

    The mentality of “I borrow I don’t repay cos the bank wont repossess in the near future or in the distant future” has to end, goes back to the same principle of accountability and appropriate punishment for not abiding by your agreement in this case with your lender. Off topic , traffic cameras-what in gods name was wrong with these as a 100% pure revenue generating idea? you jump a red light you pay! you speed you pay!

  • Peter Davis says:

    @Nigel

    I can only say what is taking place in Spain.

    My brother had two villas, part paid for which were given back to the bank

    The properties are repossessed and sold “At any price” and the shortfall, and there is always a shortfall, is given over to UK recovery agents.

    The recovery agents chase the debt through the Country Courts including placing a ‘charge’ against the UK home. An attachment of earnings, (AOE form N336) against an occupational pension will also bring in money if the debtor has no property.

    The answer as to who will buy these repossessed villas in Cyprus?

    Well anyone when the price is ridiculously low. It’s the first step to securing some of the money owed to the bank. I don’t believe the banks bother about depressing the market, if that’s what it take to get their money back.

  • Spirit of Odd Job Bob says:

    Dear Peter,

    You’re ‘sort of’ right, but not quite there yet.

    Of course the banks aren’t going to ‘go for’ their 2nd cousins sister’s brother (and not only cos it may mean going after themselves…)

    And they can’t afford to just write off the debt (unless the people they owe money to i.e. French and German banks are willing to, which they WON’T).

    So, what some of us have had absolutely NO DOUBT whatsoever about from the beginning is they will threaten the expats who’ve bought and squeeze the ripest fruit (those with the most equity or with the juiciest un-ringfenced property in Blighty) until every last drop of ransom has been extorted.

    Then they’ll sell what remains of their loan portfolio back to their uncle’s son’s cousin (that actually IS themselves!) and all will be back in the hands of those who had it in the first place. With the only difference being the Brit who’s lost everything.

    This has all been previously described (by me!) Please pay attention!

    Repossession is a bit like the boogie-man, the threat of which is far greater than the reality. Especially with LTVs in the 300 to 400%s!

  • @Peter Davis on 2014/09/08 at 6:04 pm – The primary role of the Foreclosure’s Law is to get the delinquent borrowers, i.e. Those who can pay but who refuse to pay, to cough up or face the consequences.

    Of course the bank do not want to repossess property:

    1. The market is dead in the water, who is going to buy them?

    2. A flood of property onto the market will put further downward pressure on prices and erode the value of underlying collateral.

    3. Properties need to maintained and kept in a marketable condition. Who is going to pay – the banks? Where are they going to get the money from?

    4. Banks need money, not property.

    IMHO, the likelihood is that investors will buy up unsold developments, blocks of apartments and other ‘low hanging’ fruit.

    And don’t forget much money has been moved out of Cyprus to buy property in places such as London, Paris and New York. Delinquent borrowers who have invested their ill-gotten gains overseas will be under pressure to sell and return the money to Cyprus.

  • Peter Davis says:

    @Spirt

    So pleased to hear all that.

    So you’re telling me the banks will go after the developers and the guarantors instead?

    So they will be chasing their cousins and second cousins and leaving the expats alone?

    Or will they right off the loans as bad debts?

    I don’t think so. The banks aren’t a social institution, so caring for the fellow man isn’t on their balance sheet.

  • demetri says:

    @Spirit of Odd Job Bob, game indeed and if one looks at the IMF & world bank they ‘go into’ a country suck it dry of all it’s wealth whilst pretending they are there to help and bail you out of trouble..below link maybe a bit extreme but not the first time I have heard similar stories…anyway Cyprus will have its natural resources sucked dry for sure…

    International Monetary Fund

  • Spirit of Odd Job Bob says:

    Listen carefully as I shall say this only once (more): THE BANK DOES NOT WANT TO FORECLOSE ON YOUR PROPERTY.

    Back in the day, when I was one of the Evil Wunch (collective name for a group of bankers: old one but still funny) a repossession was a NIGHTMARE (as the costs of acquiring a non-performing asset in terms of management time, then time required to shift it and all those months of further non-payment), it just wasn’t worth the hassle (though we HAD to otherwise others would simply stop paying as well). Please read this: Foreclosure: The secret the banks don’t want you to know!.

    Now, if you couple that with the (deliberately so they could borrow more money against it) ridiculously inflated price of property in Cyprus and the very last think a bank would want is to re-inherit a worthless bit of concrete, the like of which there are TENS OF THOUSANDS all over the island.

    And someone whose house has been repossessed is someone who can be fleeced (taxes, high-priced consumables to fill his house. Oh, wait…) no more.

    So, the THREAT of repossession is so much more effective than the repossession itself.

    It’s not ineptitude on the banks’ part, just sound business sense.

    It’s not “care for our fellow man” on the politicos part, it’s posturing.

    It’s not playing the Sweeping Sword of Truth and Righteousness on the part of the Troika (as they know they’ll never get paid back anyway), it’s keeping up appearances.

    In fact, it’s just one big, fat game (with dire consequences for the people under the stairs i.e. EVERYONE but the Euro and Cypriot elite).

    Thank God I’m one of them…

  • demetri says:

    ta Nigel, either way TROIKA will say no to most of these schemes aimed at protecting ‘society’ and those unable to pay their loans etc etc….all boils down to one fact though that repossession process had to leave the fumbling hands of the land registry and govt (took anything up to 10 years) and let the banks do this express style which has got everyone concerned….and do this despite the fact that the banks in many cases were in the wrong by dishing out unsecured loans or loans to non viable people…the process has to start somewhere alas….

    I can say for a fact from ‘insider info’ at one bank that there are many who are able to service loans but will not, and these are firms that are stashing money away or sending abroad, I see no reason why these crooks should be immune from a pay now or we take foreclose approach….for too long these people have been leeching off the ineptitude of the banks to foreclose…again boils down to the there being no accountability or punishment for your actions in Cyprus….

  • @demetri on 2014/09/07 at 7:46 pm – I believe so but we’ll have to wait until the law is published in the Gazette to know for sure.

  • demetri says:

    Nigel do you know if statement below still applies?

    “According to a written statement by Cypriot government spokesman Nikos Christodoulidis late today (4 September), the Government has included seven amendments into the foreclosures bill. One of these amendments ensures the protection of property buyers who have deposited their sale contract at the Land Registry, but who have not secured the property’s Title Deed”

  • Mary says:

    More importantly, where is the next tranche of money going to go, it should go to the people and help them to pay the NPL. In other words create jobs, bring the tourists back make the people have more confidence, to make the true small person insolvent means that is the end of them how will they be able to rent, pay their electric and eat, the matter will just get worse.

    We are not Greece, we have a small amount of people here and anyone who is for Cyprus will leave, and the only people who will be left will be the banks making rules as they go along, re mortgage the NPL even at a lessor amount eg LTV with a sensible rate, the banks can do this and they will get more people paying. Cyprus is not a big country with millions of people this can be done with the next tranche of money, but hey ho it will go to the banks to line there pockets as normal.

    I find it so sad that the politicians and banks are not looking for the future of Cyprus, the last one out of Cyprus please switch off the light.

  • Mike says:

    How so very predictable. Sadly it is again reinforced that we have tiny minnows with intellects to match who have qualifications way beyond their abilities or common sense who are charged by the masses to represent them presumably because they are at least numerate, literate and drive a desk and pen (the highest accolade of achievement in Cyprus). Qualifications in medicine or law then puts you into the realms of gods.

    If only our representatives would concentrate on what is good for Cyprus as a nation the rest of the pain will be be borne by the people as they have done for centuries. The country matters more than appearing to be a legend in your own lunchtime by deluding people into thinking you are protecting their interests.

    We have joined a European wide club and have accepted their rules of membership, we didn’t have to, we weren’t forced to, therefore please have the decency to show that same club that the people of this nation are a proud, hard working, honest and lawful people. The minorities and our representatives are giving off all indicators that the opposite is the case.

  • Johnny Cyprus says:

    Byzantine manoeuvres to secure a few more months worth of spending.

  • stevie R says:

    It looks like the Cypriot Government are dancing to the troika tune again. Do as we say or we will withhold your next round of funding. Between now and January, when this bill comes into force, you will not be able to get a flight off the island due to the mass exodus of company directors fleeing Cyprus.

    Neophytou said that the government would keep its promise on the insolvency bill. Where have we heard that little nugget before.

  • Peter Davis says:

    Problem is Troika already has experience of dealing with Greece, so they know what Cyprus will do.

    I just can’t understand why our politicians made such a spectacle of taking the decision to the wire, and then beyond. Why couldn’t they make a decision in an orderly adult manner in the time frame allotted?

    Cyprus really does look stupid with dithering politicians.

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