News Column

Troika rejects foreclosure amendment suggestions

August 11, 2014



By George Psyllides INTERNATIONAL lenders have rejected all amendments to the foreclosures bill that political parties have proposed so far, it was announced on Monday. Parties wanted to put a limit to the number of foreclosures in a bid to prevent a collapse of property prices, but lenders said restricting repossessions defeated the purpose of the bill. Intervention from government services was one of the main obstacles in the effective implementation of the foreclosures procedure in the past with the land registry being the only body authorised to carry out forced sales of mortgaged property. One of the provisions of the bill is that auctions would be conducted by the creditors, without the involvement of the land registry. International lenders said banks were not expected to foreclose properties en masse because such an act would have negative effects on their balance sheets. The troika also rejected a proposal to write off the balance of the debt after the foreclosure as this would constitute significant intervention to the rights of the creditors and possible be unconstitutional. "The prospect of writing off debts without proper assessment of their viability may act as a counter-incentive to the repayment of loans by the borrowers who may choose not to pay," the troika's response said. Similar was their response on waiving the obligations of the guarantors, which they saw as an intervention in the contractual agreement between bank and guarantor. Parties also suggested that foreclosure should only go ahead if restructuring was agreed, but not observed by the borrower. Setting this as a condition would undermine the rights of the creditors since the borrower can prevent foreclosure by not entering a restructuring agreement or delay negotiations, the international lenders said. Lenders also rejected a proposal to enshrine in law the bank code of conduct. Including such a provision would not be in line with the government's pledge not to introduce further obstacles to the foreclosure process, the troika said. The code is a set of tools and it was the obligation of the regulator to see they are implemented. The troika reiterated that the foreclosures bill must have immediate effect, apart from provisions concerning primary residences, which will kick in on January 1 with the adoption of the insolvency framework. Parties had also proposed taking into consideration the property values set by the land registry for tax purposes but that was also rejected. According to international practice, the tax value was not used in foreclosures and it did not correctly reflect the market value of the property, the troika said. Property values were already lower than those used for tax purposes, they said, but it could be used as an indicator in the valuations ahead of the foreclosure.

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Source: Cyprus Mail


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