Fore­clo­sures is­sue tied to

Financial Mirror (Cyprus) - - FRONT PAGE -

The govern­ment con­tin­ues to face an up­hill bat­tle to try and con­vince the po­lit­i­cal par­ties of the mer­its of the re­vised bill on fore­clo­sures that needs to be passed by par­lia­ment later this month in order to se­cure the next tranche of 453 mln eu­ros in bailout money from the Troika of in­ter­na­tional lenders in Septem­ber.

Oth­er­wise, Fi­nance Min­is­ter Har­ris Ge­orghi­ades warned that the state has funds to last un­til the end of Novem­ber.

The fore­clo­sures bill is an in­stru­ment that will al­low all lenders, in­clud­ing banks, to fore­close on un­paid mort­gages and re­duce their ex­po­sure to non-per­form­ing loans (NPLs), es­ti­mated to be worth 4 bln eu­ros, or al­most 25% of GDP.

In­te­rior Min­is­ter Socratis Hasikos, so far adamant about pass­ing the con­tro­ver­sial bill in its present form, also seems to be ready to make some mi­nor con­ces­sions, at least to get enough par­lia­men­tary sup­port to prop up his own DISY’s 20 votes with at least eight more.

All par­ties seem to be united in re­ject­ing the bill if no safe­guards are in­cluded, such as se­cur­ing the pri­mary home, es­pe­cially of low-in­come fam­i­lies, en­sur­ing that the fore­clo­sures and re­pos­ses­sions will not lead to a mar­ket crash in prop­erty prices, thus al­low­ing gi­ant port­fo­lio own­ers to sweep the mar­ket at dirt cheap prices, and that the bill must be tied to another one on in­sol­ven­cies, ex­pected to come into force on Jan­uary 1, next year.

The rul­ing DISY has sug­gested a num­ber of im­prove­ments to make it more at­trac­tive to the cen­treright DIKO, with the hope of se­cur­ing a House ma­jor­ity, in­clud­ing the sin­gle-seat Euro­pean Party (Evroko).

“To be­gin with, bor­row­ers al­ready have re­course. Cen­tral Bank reg­u­la­tions al­low bor­row­ers to try and re­struc­ture their loans, which lenders are obliged to con­sider,” Hasikos said on Tues­day, oth­er­wise, lenders and their ex­ec­u­tives face harsh fines or even jail sen­tences.

“This is how we ex­pect to dras­ti­cally re­duce the level of NPLs which has be­come a scorge for our bak­ing sec­tor,” the Min­is­ter said.

As re­gards the fore­clo­sures bill, Hasikos said that there were var­i­ous stages in the process giv­ing am­ple rights to bor­row­ers each part of the way, in­clud­ing ex­tended time to seek le­gal or me­di­a­tory re­course and to safe­guard their rights.

How­ever, he re­it­er­ated what he has been telling po­lit­i­cal party lead­ers, in­clud­ing the so­cial­ist EDEK and the Greens on Mon­day, that there is no is­sue of start­ing pro­ce­dures for the fore­clo­sure of pri­mary homes (ie. the owner is proven to be liv­ing there per­ma­nently) if the re­vised bill on in­sol­ven­cies is not passed first. In ef­fect, this means that fore­clo­sure pro­ce­dures can­not be­gin any time sooner than next Jan­uary.

EDEK and Greens party spokes­men said they still had reser­va­tions about sev­eral pro­vi­sions in the bill and warned that they would vote against it in its present form.

“The con­se­quences from pass­ing the bill will be graver than a pos­si­ble non-dis­burse­ment of the next tranche,” said EDEK MP Ni­cos Ni­co­laides.

Thou­sands of home­own­ers and pro­pri­etors of small busi­ness premises risk los­ing their prop­er­ties en masse, fur­ther feed­ing the re­ces­sion and “bru­tally im­pact­ing” the most vul­ner­a­ble groups, he added.

EDEK is also ask­ing the govern­ment and the Cen­tral Bank for de­tailed data on prob­lem­atic loans re­lat­ing to pri­mary res­i­dences and small-to-medium sized busi­nesses, loans to see the is­land’s largest lender be­come a re­pos­ses­sions com­pany, although con­sul­tants have ad­vised that a sep­a­rate com­pany ought to be set up to han­dle the port­fo­lio of NPLs, re­cov­er­ies and trou­bles mort­gages.

He told ‘Kathimerini on Sun­day’ that re­pos­sess­ing mort­gaged homes is not the bank’s pri­or­ity, nor will money reaped from home auc­tions ever be a source of profit for the bank.

“What we aim to do is pro­vide loans to those who can bring in reg­u­lar pay­ments. We’re not be­com­ing a re­pos­ses­sions com­pany,” he stressed.

In­stead, Houri­can clar­i­fied that the fore­clo­sures leg­is­la­tion af­fords the bank the op­por­tu­nity to tar­get debtors tak­ing ad­van­tage of le­gal loop­holes in the sys­tem, and who are re­fus­ing to pay.

Reit­er­at­ing his com­mit­ment to pre­vent­ing mass sell-offs, the bank’s CEO un­der­lined that pro­tect­ing vul­ner­a­ble groups is – and will re­main – a key con­cern.

Rul­ing DISY, mean­while, has sug­gested that the re­vised land reg­istry valu­a­tions, in 2013 prices, be used in­stead of the pri­vate es­ti­mates – the ra­tio­nale be­ing that prop­erty prices in early 2013 were around 10% higher than to­day, thus al­low­ing for higher auc­tion start­ing prices.

Hasikos and Ge­orghi­ades are sched­uled to con­tinue their ex­ploratory meet­ings with party lead­ers, see­ing the DIKO lead­er­ship on Wed­nes­day and Evroko’s Demetris Syl­louris on Thurs­day.

Next they will meet with diehard op­po­si­tion forces AKEL and the Cit­i­zens Al­liance.

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