THE GOVERNMENT is considering how to best deal with the aftermath of the decision by Parliament to delay the implementation of the foreclosures law until the end of January.
Government spokesman Nikos Christodoulides said the Troika of international lenders may postpone its arrival in Cyprus to review progress on the implementation of the bailout adjustment programme.
The Eurogroup has expressed its displeasure at the delay in implementing the law, saying that repossessions are necessary to enable banks to deal with non-performing loans.
In August chairman of the Bank Association Giorgos Georgiou said that “Commercial banks have no intention to foreclose on the homes of vulnerable groups. 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.”
At the same time, Christis Hassapis the (then) Chairman of the Bank of Cyprus said “BoC’s intention is to look at large borrowers first. Small borrowers have nothing to fear. We will start with the millionaires and work our way down.”
As it stood in September the Foreclosures Bill forbade foreclosing on a property that had been sold but which was burdened by a mortgage, providing that the purchaser had paid at least 80% of its purchase price.
When you consider that only three foreclosures have ever taken place in Cyprus and that the foreclosure law forbade the repossession of a property under certain circumstances and that the banks have assured President Anastasiades that they will not target vulnerable groups, you really have to wonder who opposition MPs are trying to protect.
@Martyn G
OK – apologies if I misinterpreted what you said. It wasn’t clear if you were advocating or postulating the slim likelihood of these large debtors being pursued.
The whole thing is a complex and tricky balance. Funding is important for the Republic. If the Republic crashes – then we have all effectively lost everything anyway. That said – opposition to the ‘status quo’ is vital. You may be nearer to what is ‘helpful’ vs ‘unhelpful’ opposition – but clear messages must be sent that many are far from happy.
The President will have to rebuild the trust of both the nation and the overseas investors if he wants cooperation over resistance and cynicism. That won’t be easy. His predecessors richly saw to that.
The most radical change needed in the Republic is a change in their national modus operandi. This is a ‘Nelson Mandela’ level of change (proving it can actually be done) but you need a person of equivalent stature to drive it.
I would say we not only need one in the Cyprus government – we also need one in the Cyprus Central Bank – some disciples in the local banks – and finally – a figurehead in the overseas investor community.
‘A few good people’. Finding and linking them would be a stupendously good start to 2015.
Further to Martyn G’s comment about Developer Loans being backed by Directors’ guarantees; that’s exactly what happened in our case. The bank knew the developer was in financial trouble yet still gave one of the directors a €1 million private loan and used what was left of the company as guarantor. After the company ceased trading, the liquidator (who is also the banks’ receiver) refused to go after the various directors who were also the loan guarantors.
We feel the dealings at the bank are being protected by keeping things quiet but the whole things stinks and one of these guarantors has become suddenly wealthy and even the local CID seem reluctant to investigate so it looks like it’s going to be a trip to Nicosia to speak with someone in authority.
@Richard: I am certainly NOT advocating that the Developers are let off the hook, quite the opposite.
As Nigel H has suggested below there are ways and means for the banks to start recovering the massive amounts they are owed by Developers without interfering with the 1,000s of private buyers and the properties they have either paid for or are still paying for – and remain exposed as they do not have Title Deeds.
So I’m all FOR the very toughest action against those who owe the most – and that where Developer Loans are backed by Directors’ guarantees, those guarantors should be chased mercilessly, and liens and ultimately possession taken on their personal assets if and as necessary. Like most things in this country all this will take time, probably LOTS of time, to action/execute but Yes, the processes and any enabling legislation should start and proceed in earnest during 2015. We can therefore only hope that the Cyprus President includes all this within his new-found determination and ‘readiness for radical changes’.
@Martyn G – I think more than sufficient ‘attention’ has already been shone on corrupt practices in the R.o.C.
As for effectively letting the largest debtors off the hook – that is absurd. If an ordinary person commits a crime – they get punished and/or imprisoned.
Across the globe – the largest crimes from the wealthiest people (with the highest amount of ensuing collateral damage to ordinary people) have thus far gone UNPUNISHED.
Across the globe – people are waking up to this fact and becoming (quite rightly) more critical and vocal about preserving this abominable ‘status quo’.
If you want to endorse no action against 20 organisations who (between them) are alleged to owe €2.5bn in debt – that is your decision.
Many of us however (and a growing number) believe it’s time a better mousetrap was built. ‘Propping up’ such fiscal practices associated with neo-liberalism / ‘trickle down economics’ is a form of heroin addiction. Get the patients clean. Take the tough option – not the easy one.
If you want an example of how trickle-down economics ‘works’ – remember QE in the UK after the 2008 crash? Of all the money pumped in – just a paltry 8% ended up back in the mainstream UK economy. 92% remained in the global money markets – benefiting only the upper echelons of the super-rich. I’d be very interested to see how ordinary Cypriots / UK ex-pats on the ground benefit from this bail-out (or the previous one). I shouldn’t imagine getting hold of the data will be very easy mind…
This whole property scam was a clever and dastardly way of emptying the savings accounts of middle-class hard working folks and syphoning the funds into the pockets of the wealthy via deception and corruption.
We know it
They know it
Soon – everyone will know it.
Let’s make 2015 a step in the right direction – rather than the wrong one.
And despite the frequent differences of opinion on this forum – I wish every decent person on it a Merry Christmas and (hopefully) a more prosperous New Year.
Janine: I understand your concerns but reckon it is highly unlikely they will ‘go after’ properties where there are clearly Developer mortgages involved. FAR too high profile and likely simply to bring greater attention to the corrupt practices that put so many in such perceived weak positions. Not at all good for the future either of Cyprus as, primarily, a holiday and retirement location. In my view any such action would kill the Cyprus property markets Stone Dead.
I agree, with Stuart, that it is the primary objective of Oppositions to Oppose but the action taken last week is, in my view, ludicrous in the extreme. Effectively they are cutting off the next tranches of essential Troika funding, needed still, quite simply, to keep RoC afloat, thus further exposing, if they succeed, the country, it’s populations, to yet further and longer pain in trying to remedy the massive mistakes and actions of the past. At least, and at LAST, the new President is pledging to tackle some of the obviously bad, nay rotten, practices that went on for far too long in this country – and, hopefully that will include eventually coming up with plans and provisions to protect those RoC property buyers who have been badly advised, conned, swindled – whatever they choose to call it – and left them for so long in such totally unacceptable positions.
@MartynG – on 2014/12/24 at 3:07 pm – I agree. If banks started foreclosing on properties that had been paid for, Cyprus’ property market would never recover.
As the unsold assets of most developers are greater than their loans, the banks are more likely to move their loans onto unsold properties – and then seize and sell those properties to recover the developer’s debt. (And I cannot see a bank trying to repossess a property where a purchaser is maintaining their home loan or mortgage repayment).
This would also allow Title Deeds of their sold properties to be transferred to their purchaser (assuming they’ve been issued). This would keep the purchasers happy and help to restore some credibility to the island’s property market.
Spot on Janine!
You are 100% correct – and I’m extremely interested to hook up with people like yourself. I will approach Nigel Howarth and ask if it is possible for him to seek permission from you to release your contact details.
I have been consistently and persistently lobbying our MP here in the UK now for nearly three years – and we are slowly winning support.
UK government cannot intervene in the Republic’s governmental affairs – but it does have some influence (if not control) over both banking legislation and E.U regulatory processes. It’s time it did – the corrupt practices of world banks is now well and truly in the public domain. It will take large de-regulated banks a very long time to rebuild the public’s trust (if indeed – they ever do).
It’s important now we have a united front – devoid of cynicism – and supported by practical, pragmatic actions that are just, fair and affordable. Like you – I think re-possessions are a nonsense.
That list of defaulting developers (shared earlier this year after being leaked by disaffected Russian investors) is the meatiest part of the NPL bone – and €2.5bn debt recovered from 20 organisations (many of whom I am pretty convinced can afford to settle it far more easily than little people like us) is a good start on repairing the economy. And yes – they DID cause this mess – so they SHOULD have the tin cup shoved under their noses first!
Hear Hear Janine,
“As victims, we do not need repossessions thank you very much, only repossessions of assets owned by those who have ripped us off!”
EXACTLY!! Why don’t the Banks go after the people that took out the loans but didn’t pay the Bank back. How immoral and outrageous to go after the victims that bought in good faith and paid in full. It is not our debt, it is the developers debt, they should be pursuing them not us who cant afford to pay a penny more than we have, or indeed should, have done.
I consulted an out of area independent solicitor when purchasing but might just as well have consulted the lady on the till at Lidl!!
I don’t get it – how can repossessions help the victims? Once the property has gone, there is no chance of victims ever recovering their losses. I fully support the ‘opposition’ MPs intervention.
Why? I see no legislation being proposed forcing the banks to only go after ‘the big fish’. They will go after the easiest targets – with impunity, no matter how much grief to individuals.
What we need, is legislation to force banks to compensate the victims for their corrupt/incompetent/negligent policies. The EU taxpayer’s money should not ever be used to compensate banks for their failures – destroying the lives of others, but to directly support the victims. For example, by making their repayments affordable, and to ensure the property they originally agreed to is properly delivered with affordable title deeds.
As victims, we do not need repossessions thank you very much, only repossessions of assets owned by those who have ripped us off!
Are opposition MPs really trying to protect anyone or is this just opposition for opposition’s sake? What is their historical record of trying to protect ‘vulnerable groups’ previously and what, in fact, is the definition of a ‘vulnerable group’?
Political opposition parties are naturally out to win votes and therefore align themselves with perceived social ills in order to capitalise on the emotional issues of the day which they feel will best get them support from the electorate.
Banks will obviously target the largest borrowers first since these are seen as the most likely to cough up. Then those who strategically do not pay will be forced to do so as they will not want to lose their cherished homes and have made huge savings from their wilful refusal to pay.
So it will take years before those with sub-prime mortgages are affected by foreclosure legislation but when they are, there is always the alternative of renting the property either directly back from the bank or from a registered social landlord or from the local authority as happens all over the world.
Chairman Giorgos Georgiou is absolutely correct in stating that all countries must have effective legislation to tackle NPLs and tax evasion. Cyprus, however, seems determined to be the exception.
Who are they trying to protect? Themselves and their buddies of course, those of them who haven’t made loan Repayments, in many cases not even serviced the Interest, possibly not even paid their Taxes – and, worst of all, probably because nobody ever asked them!
Now, in efforts to protect themselves and their buddies, either that or through sheer ‘bloody-mindedness’, the ‘opposition’ parties have, quite deliberately it seems, offended the Troika, shown RoC in its true colours, further trashing the country’s standing and reputation across Europe, around the globe.
It seems tho’ that the current President has used his recent time in Hospital to review his party’s first 22 months in government, think, hopefully deeply, about the mess his country is in and is vowing his intentions of putting things right. We can only wish him Good Health and Good Luck, he and his government have many cesspits to inspect, many irregularities to identify, many mountains to climb.
A significant number do not pay their housing loans because they have since found out that they do not (and probably never will) own the property they believed they had bought. Who in their right mind would throw good money after bad.
We all know it was a scam between politicians with vested interests, developers, lawyers and the banks. If a pension company sold you a pension and you paid into it only to find out that it wasn’t really yours but belonged to someone else would you continue to pay into they pension?
The banks and lawyers have been crooked beyond belief and the system endorsed by politicians. That is the reason for the high NPL’s.’
I hate to repeat myself but my comment of yesterday seems more in line with Nigel’s article today.
I genuinely wonder just how many people in Cyprus are Not repaying loans at the moment simply because they think they may lose some benefit by doing so. There seems to be a mentality that says ‘why pay if you are not forced to’. If this is the case, how many NPLs would become performing again if the threat of action against them seemed real? The refusal to bring in foreclosure rules seems to encourage some not to pay! I would also be interested to see some statistics on the actual people the politicians claim they are protecting ie. the ones that will be made homeless. I wonder if it is a possibility that the NPLs belong to those that took a loan to buy their ‘Showhouse’ and accompanying Car? Possibly many of the same people that brought about our problems in the first place!
My personal feeling are that bringing in the foreclosure rules will not see a flood of homeless people, but we might see some having to live within their means and become accountable for their actions. I don’t give credibility to the idiotic statements of politicians that appear to support non payment of debts and Tax Evasion whilst thinking they are fooling us all as to their motives! Start accepting responsibility, start paying your taxes, get rid of the thieves in positions of power and perhaps Cyprus will become what it should be – a very wealthy Country. The alternative is, just keep doing what you always did, you’ll get the same results again.
No intention to foreclose on the homes of vulnerable groups
Be aware on this one. Suddenly the banks are becoming sympathetic towards these groups. They were not bothered when they raided their accounts not so long ago. Who can you trust on this island.
If repossessions due to developer loans begin to take place, one wonders if the details of how those loans were gained will be made public.
Could it be that by refusing to implement the law, politicians are protecting their banking buddies by avoiding embarrassing and incriminating questions?