News Column

Race for foreclosures bill off to a poor start

August 5, 2014



By Elias Hazou

THE administration's first attempts on Monday to get the opposition on board with a controversial foreclosures bill did not go so well, with both the socialist EDEK and the Greens reiterating they will oppose the legislation if it goes to the plenum in its present form.

Following a meeting with the ministers of finance and of interior, Harris Georgiades and Socrates Hasikos, EDEK MP Nicos Nicolaides said his party remains unconvinced that international lenders will refuse to release the next tranche of bailout money unless the bill is enacted.

"The consequences from passing the bill will be graver than a possible non-disbursement of the next tranche," Nicolaides said.

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

However the item exempts so-called primary residences, which will be covered by a subsequent insolvency law.

EDEK feels the government did not push hard enough during its negotiations with the troika of lenders. The government insists it can extract no more, and has warned that its international creditors will recommend not releasing the next instalment (some 400m) when euro-area finance ministers discuss Cyprus' economic adjustment programme next month.

The socialists are proposing a number of amendments to the bill if they are to get behind it. They want tangible assurances that mass foreclosures of mortgaged properties will be avoided; safeguards against a sudden plunge in real estate prices once auctions get underway; and, additional legally sanctioned measures shielding vulnerable groups, to be passed before the foreclosures bill comes up for a vote.

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 developers, loans granted without adequate security, mortgage values, and banks' exposure to bad debt.

This data, said EDEK, would make it possible to distinguish between viable and non-viable borrowers, in contrast to the government's proposed legislation which "indiscriminately" lumps all debtors in the same basket.

For their part, the Greens called for an overhaul of the foreclosures bill and that it be put to a vote on the same day as a law governing insolvencies, instead of the latter going to the plenum separately five months down the road.

Cyprus needs to pass the foreclosures bill within August, as the Eurogroup's working group is scheduled to meet on September 4, while the Eurogroup proper convenes on September 12. The government legislation goes before the House finance committee here likely next week.

The Alliance of Citizens with a single seat in parliament repeated on Monday their total disagreement, even expressing the desire that the bill is defeated when put to a vote.

That would call the troika's bluff, asserted party leader Giorgos Lillikas.

The main change under the bill is the introduction of private auctions, instead of them being carried out by the land registry, which would save considerable time.

There will be two valuations one by the borrower and one by the lender. If they disagree, there will be a third independent final valuation.

The land registry's valuations are typically on the higher end.

Lillikas said the bill adopts double standards, since for taxation purposes the land registry's estimate is considered, whereas for property auctions it will be the private valuations that count.

To keep things on an even keel, he said, the private valuations should also be taken into account when calculating property tax lessening the tax burden on property owners. This would be one of the amendments to be tabled by his party.

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 per cent higher than today, thus allowing for higher auction starting prices.

The bill needs a simple majority in the House. An endorsement from all of DISY's and DIKO's MPs, plus the one vote from the European Party (29 votes out of 56) ensures its passage.

DIKO's stance is key. But party leader Nicholas Papadopoulos has a delicate balancing act to perform. On the one hand, sources said, he fully appreciates the importance of passing the bill; on the other, that would seriously jeopardise the 'anti-memorandum front', a pact formed between DIKO and AKEL with a view to the next presidential elections.

The same sources denied media reports that DISY and DIKO are working on a joint amendment to the foreclosures bill, but did not entirely rule out the possibility in the days to come.

on Wednesday, the two ministers are scheduled to meet with DIKO, and on Thursday with the European Party. Meetings with main opposition AKEL and the Alliance of Citizens are also on the cards, though a date has yet to be fixed. Geogiades and Hasikos met with DISY last Friday.

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Source: Cyprus Mail


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