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Cyprus mortgage scam

A question on the Cyprus mortgage scam has been raised in the European Parliament by Jonathan Arnott MEP, for the North East England region for the United Kingdom Independence Party.

Cyprus mortgage scam

Jonathan Arnott MEP

ONCE again a question has been raised in the European Parliament relating to the many property issues in Cyprus. This one concerns what its author, Jonathan Arnott MEP, refers to as the ‘Cyprus mortgage scam’.

Question for written answer P-007065-14
to the Commission
Rule 130
Jonathan Arnott (EFDD)

Subject: Cyprus mortgage scam

Could the Commission please provide information on what action it intends to take, or has already taken, in relation to Cypriot banks selling mortgages dishonestly(1)?

(1) See ‘UK homeowners hope EC laws will help in case against Alpha Bank’, Cyprus Mail, 21.7.2013.

Answer given by Mr Katainen on behalf of the Commission

The pending national court procedures will show whether the Cypriot banks have infringed potential duties to inform about certain risks of a loan contract, in particular with regard to loans in a foreign currency.

The Commission is aware that real estate purchasers in Cyprus, for various reasons, did not always receive the property title immediately after payment of the purchase price. Since 2011 such purchase agreements can be registered with the Cypriot Land Registry in order to increase legal certainty for the purchaser.

In order to work towards a sustainable solution, the Cypriot authorities committed, as part of the economic adjustment programme, to establish a task force that will develop recommendations in order to address this issue.

Readers' comments

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  • @Dunn Good on 2014/11/02 at 7:58 pm – I don’t know what makes you believe the banks were only pushing CHF loans to foreign investors? EVERYONE who needed a loan to purchase a property was advised to take loans in CHFs – regardless of nationality, religion, creed or skin colour.

    Foreign buyers (of all nationalities) only account for about a third of of those buying property – the rest are purchased by Cypriots.

  • Dunn Good says:

    Well my wife and I were never warned of the danger of borrowing in a different currency than we earned in or the £CY, currency at the time of our loan.

    We had an e-mail from Alpha Bank showing all the different currencies we could use. It stated that the CHF was the most favourable at that time. HOWEVER should we wish to borrow in another currency they would re-quote us, implying that they had already calculated our loan in that currency. It was the most favourable interest rate at that time, and we were encouraged to take it. I believe now that they were pushing the CHF to beat other Banks in getting the most business from foreign investors, notably U.K. buyers. Our loan went to over £1000 per month, impossible to keep up with. We now have a 2nd charge on our U.K. property for more than 3 times the amount borrowed with daily interest being added.

  • dimitri says:

    Well another well thought out bank scam is the way they passed the stress tests…why? well if the troikas recipe for repossessions forced/ re-sales had kicked in there is no way they would have passed the tests …but cunning delays and moves by MPs have seen this not happening yet…but they can’t hold back the inevitable….they just hope that in the meantime some knight in shining armour is going to come save their butts

  • dimitri says:

    @Nicholas and Mr.Xenos….i reckon the truth lies in the middle, alas a lot of the banks get away with murder and get out of jail card clauses are all in the small print….so customers not being given the terms and conditions is criminal….guess the only way to challenge the banks would have been to get a written guarantee that what people where signing up for/buying were 100% safe…but as everyone says alas only taxes and death are certainties….

    I stand by my statements that banks are legalised loan sharks, politicians who voted to make the banks this way are legalised criminals…

  • richard says:

    @Nicholas

    The story is indeed not a big joke. As I’ve never seen you on the forum before Nicholas – if you are an individual in any way connected to a Cypriot bank, a bank caught up in offering CHF loans on Cypriot property or otherwise have a vested interest in the Cypriot banking system providing CHF loans – I propose you identify yourself transparently on this forum as such.

    I’ll be transparent and state with 100% certainty the risks of a CHF loan were never explained to us – or to the vast majority of people who took them out (and that would be EVERYBODY I’ve spoken to over a six year period) – and on top – the banks did NOT provide copies of terms and conditions of the loans.

    There is a tsunami of evidence supporting this viewpoint and we will all continue to robustly challenge the assertion we were properly advised and the loans were set up properly in accordance with both E.U regulatory fiscal standards and proper codes of ethical professional legal conduct.

    If you know of these “95%” Nicholas – would they also like to identify themselves on this forum perhaps?

  • Brian McSkimming says:

    Sorry Nicholas this story is not a big joke!! Myself and other family members are some of the “people” who were unaware of the Swiss Francs scandal at no time during the buying process were we made aware of the risks. The whole buying process in Cyprus is corrupt evidence of this is the high level of NPLs.

    I believe this is a well organised scandal from banks, lawyers and government designed to extort as much money as possible.

  • Peter Davis says:

    @ Janine,

    What you say is quite right.

    In the UK, companies try to put no more than 20% of their business with any one company, because if it fails there may be a knock-on effect and it will take your company down with it.

    Here the bank can afford to write off 50% of their debt (in NPL) without being insolvent.

    That can only be achieved through creative accountancy or overcharging existing customers to make up the shortfall.

  • Nicholas Xenos says:

    This story is becoming a big joke. The truth of the matter is that 95% of the people that were borrowing Swiss Francs were very well aware of what they were doing. The poor excuse that they were given the wrong information should not work.

  • Janine says:

    The response was no answer at all, as if everything is fine – no doubt from a highly paid euro bureaucrat – clearly totally out of touch with the situation! With over 50% of loans non performing, it seems glaringly obvious that the banks are at fault, and need to be thoroughly investigated – not by muppets in Nicosia, but by independent EU banking experts fully conversant with the problems (assuming they exist).

    This to cover not only FX loans, but the unilateral 200-300% increase in margins; the 90/95% LTV loans; grossly inflated bank valuations; inappropriate payments to developers for shoddy and incomplete work; 15yr loans with 5yrs capital grace periods, leaving 10 years of unaffordable repayments – yet still leave 50% capital due and outstanding; lack of title deeds; lack of security in view of developer loans, underhand ‘bonuses’ for managers, zero customer care etc. etc.

  • John Pyrokkas says:

    The property scam by Cypriot Banks is not the only one.

    They also mislead people, including British citizens and subjects, to place their funds in toxic and high risk bonds, between 2008 and 2011, which vanished.

    In fact, the two banks specially Popular Bank and Bank of Cyprus, were found guilty by the regulator which is the Central Bank of Cyprus, for breaking the Law in this instance.

    The European Commission, however, contends that the Courts will determine whether the two Banks acted dishonestly, in effect disregarding the Central Bank’s findings, whilst at the same time the Commission promotes (?) a high level of consumer protection and redress by means of Directives such as MiFID etc etc.

    This is the answer received in writing by the Commission in answer to John Pyrokkas’ Petition 0255/2013.

    In all, circa 1.4 billion was caused, by the illegal action of the two banks, to be wiped out virtually overnight. Most of that money belonged to hard working people who now are left with nothing, not even State Aid to live on.

    The writer, myself, am one of those people who has lived in the UK for 30 years and found myself in Cyprus for early retirement due to ill health and divorce.

    It is absurd, how the Cypriot Authorities and the European Commission dealt with the issue. They seem to be so sure that a public outcry and social unrest may not break out, but they may be proved wrong eventually.

    Just to show how the Cypriot Authorities including the Political Parties and House of Parliament care not for the people, just look at the Law N.84(1)2010 on the establishment of the Financial Ombudsman of Cyprus.

    In full knowledge of the Authorities regarding the regulations about the independence of the Ombudsman, they, stated in the Law [part IV,(b)(ii)(iii)(iv)], that the three organisations (banks, insurers & investment firms) against whom the Ombudsman shall be called to deal with complaints against, are three of the five members of the Controlling Committee.

    Just one simple example of the hold which the banks have on Governing the State of Cyprus.

    Very very sad, is it not? Sad for the people and Democracy.

    I would call this Financial Dictatorship.

    I hope that any British Euro-MP would pick up on this and, for the sake of the love and respect many Cypriots have for the British people and the Crown, take the issue to the European Parliament, because no Cypriot MP will do it, for obvious reasons.

    Believe me, such action shall strengthen the respect of many Cypriots towards UK.

    I can be contacted, with pleasure, by email at or by phone 00357 99714370 for further discussion and or clarification.

    Sincerely

    John Pyrokkas

  • Mike says:

    I am really finding it hard to believe that those charged with offices of authority can appear to be so ignorant of facts. Mr Katainen’s answer is reported as stating “Since 2011 such purchase agreements can be registered with the Cypriot Land Registry in order to increase legal certainty for the purchaser”. That is simply not the case.

    If there are yet to be paid sellers fees/Taxes/dues (that you are unaware of) on the property whose contract of sale you wish to register at Land Registry for specific performance, it will not be accepted for registration. Therefore all you hold is a worthless piece of paper upon which is written a contract of sale which no one but you and the seller is aware of therefore legal certainty is still (in this case) a dream in the case of the seller or nightmare in the case of the buyer.

    The fundamental problem still remains and therefore nothing has changed, any naive claims to the contrary are simply untrue.

    As for “a task force that will develop recommendations in order to address this issue”- perhaps. One that will develop recommendations to address the issue – possible, one whose recommendations will be implemented and adopted into law – Dream on!

  • stevie R says:

    He raised the question about mortgage scams and received a reply relating to title deeds ???????. The Cypriot authorities are not going to establish a task force to prosecute their own bankers now are they.

  • Costas Afortune says:

    The BBC have already had a programme on TV and which they entitled “The 500 million pound property fraud/scam”! This was regarding a Paphos developer, Paphos based Greek lawyers, and a Paphos bank. I think you might be able to watch it on YouTube .

  • Denton Mackrell says:

    Task force? Presumably it’s another of those innumerable virtual Cyprus entities with important sounding names that, with great pride, litter the byways of Cyprus’s journey towards an inevitable destruction.

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