AN International Monetary Fund (IMF) team of experts is in Cyprus to scrutinise the island’s solvency law, reports said yesterday.
The Cyprus News Agency said the experts arrived here on Monday and would be meeting all stakeholders during week-long contacts, in a bid to examine the solvency law and make recommendations for amendments.
The team’s visit comes in the wake of the second review of Nicosia’s economic adjustment programme by international lenders.
Amid the continued economic slump, a key concern in the fragile banking sector is the rise of the non-performing loans, estimated at 30 per cent of total loans by March 2013.
Recent data released by the Central Bank estimated that overall NPLs stand at around €15.5bn.
Troika officials during their second review indicated they are not in favour of mass-scale seizures of primary residences.
The Bank of Cyprus has warned it will go after those who can pay their mortgage but use the economic crisis as an excuse not to do so.
At the same time the troika believes that legal obstacles to the seizure of property pledged as collateral should be limited to encourage viable borrowers to pay their loans and avert “strategic defaults.”
The updated Memorandum of Understanding (MoU) notes that “strong efforts should be made to maximise bank recovery rates for non-performing loans, while minimising the incentives for strategic defaults by borrowers.”
It moreover stipulates removing administrative hurdles currently constraining the seizure and sale of loan collateral so that property pledged as collateral can be seized within a maximum of 2.5 years, the MOU states.
“The necessary legislative changes are to be submitted to parliament by end of February 2014 and implemented by end-2014, macroeconomic conditions permitting. The authorities commit not to introduce any further impediments to the seizure of assets pledged as collateral.”
@ Curmudgen. I have a few contact details for some of the Troika members presently working specifically on Cyprus. If you or indeed anyone else wants them perhaps the best idea would be to send me a message through the forum/login section.
@Steve.R – those involved only have the hope that at some point in the future – there will be a retrospective consultation and arbitration process organised at top level in the E.U for families (victims) to get closure and justice on the massive mis-selling scandals 1998-2008.
Given that it may be headed up by someone like David Lidington however – that wouldn’t be much consolation for many!
Best advice is for those nice people to tattoo across their grandchildren’s foreheads “caveat emptor” – and write some books to put up on the internet about their experiences!
The only crumb of comfort for everyone is people ARE NOW waking up more than ever to corruption and opacity in government and commerce like never before. There is only so long now before things have to change – we’ve all been taken for a ride for far too long.
@Nigel it’s the “not privy to discussions” that is the issue. Most of this disastrous property bubble only happened because so many of the people involved in it were in closed-door discussions.
Those who were brave/foolish enough to stump up money for off-plan property overseas in the E.U only realised what a corrupt mess it was when it was all sadly too late. You have no more rights really buying in Cyprus than if you’d bought in a banana republic. In fact you’d have been better off buying in a banana republic as the E.U would not be helping them!
I agree with some of the comments on this thread about Troika ‘consultation’. It’s 99.999% going to be another one-sided consultation isn’t it? Who is representing the interests of ordinary people with dodgy bank loans or waiting for title deeds?
Hmmm – thought not………
The only way out for Cyprus regarding developers loans, and to save the remaining Cypriot banks, is for Cyprus to leave the euro and sort it out, if they can, by themselves. The developers and their lawyers own this island, they are all in the government. There is no chance of recovering all the loans the developers took out, the money is now in the Cayman Islands or somewhere similar, and the developers will just declare themselves bankrupt if any international monetary organisation tries to recover it.
Maybe the answer is for the Cyprus government to grant free legal title to the land for those innocent buyers who have paid for the property but have no TDs and just let the loans wither on the vine over the years. What a mess.
@Johnny Cyprus. I’m not saying borrowers should default. I’m saying what is the incentive to pay off the entire loan? There isn’t one. You just place yourself more at risk of losing your property. What a ridiculous system!
After 5 years the light at the end of the tunnel is still only a pinprick and has not got any bigger. I am still no nearer to getting my title deeds. I will copy and paste this comment in another year. The only way out is to conclude that you are never going to be able to pass your property on to your loved ones and to just enjoy it until you curl your toes up or the bank takes it back and sell it to the developers cousin for peanuts.
Several very nice people I have met in Cyprus have made themselves really ill with worry over this. It will not be sorted out in your lifetime so enjoy it whilst you are well enough to do so.
@All – I can assure everyone that the troika is aware of the issues re developers’ mortgages and the problems faced by those who have bought property built on land that they’ve mortgaged. But as I’m not privy to their discussions, I cannot comment on any negotiations that may have taken place on this matter.
One of the objectives of the MoU is to help reinvigorate the island’s economy – if mass property repossessions take place because of these developers’ ‘hidden’ mortgages – one of the mainstays of the economy (i.e. the property market) will NEVER recover.
I hope to bring you news of developments/progress in the next couple of weeks.
Janner: A borrower with no title deeds and a property that forms part of the collateral for a developer loan might indeed be tempted to refrain from paying off his mortgage or to even default.
After all the Developer probably had to guarantee his mortgage in order to get the ‘sale’ financed.
However, it would seem very risky to default.
If the property ultimately became the subject of a forced sale, it is unlikely that the proceeds would go anywhere near paying off the original developer loan, let alone the mortgage loan.
Some time in the future the ‘buyer’s’ lender could still pursue him for payment of outstanding capital and interest.
In such circumstances he would have lost the property entirely and still face the original liability that he took on.
It seems from recent news that as much as half of the restructured banks’ assets may be loans in default.
The troika are fully aware of that issue Pippa. My belief is that it’s in the too difficult box and with the resistance from the Cypriot ‘old guard’ it is very difficult to resolve. A figure I would like to see is the total amount of loans secured against land on which there are properties which also have mortgages. I would also like to see a figure for the total of NPL’s for properties that do have title deeds.
How does one make contact with the Trokia? If this was made available @Janner and I’m sure many hundreds in the same boat would be able to enlighten them.
‘It moreover stipulates removing administrative hurdles currently constraining the seizure and sale of loan collateral so that property pledged as collateral can be seized within a maximum of 2.5 years,’
Please could some explain to the Troika that many of these properties have been paid for in full by unsuspecting buyers and it is the developer that has the NPL. Why should they (the buyers) be made to pay the developers debt or have the threat of loosing their only home hanging over them?
I love that line ‘avert strategic defaults’. Mmmmmmm, let me think about that one. Currently I don’t own my property as there are no title deeds and the developer has a load of his loans secured against my property (and others). What I’m about to say may shock some readers but my selfish attitude resents the fact that my property was used as collateral for the developers loan with no title deeds in sight. So, currently I have a mortgage and I don’t own my property. Lets say that I pay my mortgage off tomorrow and the result is…..you’ve guessed it….. I still don’t own my property and I would have the added disadvantage that now my property would be more attractive for the bank to take and sell to recover losses from the developers loan. Why would I do that? What the troika and IMF (does that stand for the ‘imaginary money foundation’ and is it similar to the money from the ELC) don’t mention is that people are choosing not to pay their loans or pay off their loans because they don’t bloody own it and never will at this rate. Tell it how it is…… For those still trying to work out what ELC stands for it the ‘early learning centre’ where the toy money is. It’s similar to the new Cyprus pound but worth more!