* MPs drag their feet - DIKO may have change of heart with foreclosures bill *
A delay in passing the controversial foreclosures bill in parliament could delay or even cancel payment by the Troika of international lenders next month of the sixth tranche of the island’s bailout money, estimated at EUR 453 mln.
Finance Minister Harris Georghiades warned MPs on Tuesday that delaying the matter further in order to revise the legislation, which the Troika clearly said it doesn’t want altered, would create difficulties for public finances, having earlier stated that Cyprus has enough funds only until November.
The Troika (IMF, EC and ECB) wants the bill approved before the next Eurogroup meeting in mid September, in order to disburse the next bailout tranche, but parliamentary parties, except the ruling Democratic Rally (DISY), have said that the foreclosures legislation could not pass as it is, asking the government to renegotiate with the lenders.
Georghiades told a second session of the joint parliamentary committees for Finance and Internal Affairs, that had been adjourned from Monday, that if the next tranche is not disbursed in time, “we will face difficulties and consequences beyond our control and planning”.
Finance Committee Chairman and ex-coalition DIKO leader Nicolas Papadopoulos then called for the meeting to continue behind closed doors, where the Finance Minister also elaborated on comments that a senior Russian investor at the Bank of Cyprus wanted the foreclosures bill to go ahead as initially planned. This raised concerns that passage of the bill would pave the way for a massive expropriation exercise that would see low-income families who can’t repay their loans, lose their homes.
However, it seems that major funds and investors are keen to grab on the cheap the portfolios of major developers who have been refusing to repay their loans, even though they could afford to, and not individual small properties. Some of the targeted companies are members of the newly formed association of developers of major projects.
Papadopoulos reportedly then asked Georghiades how an expropriation would actually take place if the owner refuses to leave the mortgaged house. “Would they bring in goons?” he asked.
However, the DIKO leader was later reportedly in intensive negotiations with DISY leader Averoff Neophytou to see if there was any ground to rethink the whole bill in time for the next Eurogroup meeting.
Papadopoulos was prepared to back down from his adamant rejection of the bill, as long as there were provisions that would safeguard home owners’ rights, such as the related insolvency bill and the need to restructure troubled loans.
Meanwhile, Central Bank Governor Chrystalla Georghadjisaid that if the bill on the foreclosures on mortgaged properties is not approved, the value of these non-performing loans held by systemic banks would not be considered during the EU-wide stress tests in October.
She said that once the stress tests are concluded, the Central Bank will focus on restructuring and interest rates.
Georghadji explained to the House that before the definition of non-performing loans was changed a year ago, there were no NPLs because they had sufficient collateral.
She also said that loans totaled 52.5 bln euros, explaining that 10 bln have properties as collateral, of which 4 bln are not served.
The Governor said the non-performing accounts restructured in the first quarter of 2014 stood at 6,789, corresponding to 1.2 bln euros.
During Monday’s joint session of the House Finance and Internal Affairs committees, Interior Minister Socratis Hasikos presented the Troika’s negative reply to the amendments proposed by the parliamentary parties.
The Finance Minister had said that foreclosures should proceed not only for villas, but also for apartments for which the debtor has not paid a single instalment.
“Foreclosures should not proceed only for villas. They should proceed also for an apartment for which the borrower has not paid a single bank instalment since it was bought”, the Minister noted, adding that “tolerance is unfair” to the depositors, but also to those borrowers that pay their dues.
Georgiades said that “the key to addressing the accumulated debt is the restructuring of loans”, adding that the Cabinet has approved an outline of amendments to existing laws, that is the insolvency framework, referring to the restructuring of loans, aimed at giving a second chance to borrowers that are struggling to pay their debts.
In any case, this framework must contain the tools needed for the banks to recover loans from debtors that do not cooperate or debtors with unsustainable loans, he noted.
Hasikos said that the foreclosures legislation is not aimed at massive foreclosures on mortgaged properties, but at correcting the current law.
The bill aims at exerting pressure on both the debtor and the bank to negotiate and find ways to restructure a loan, he noted.
Hasikos said that the Government has drafted a scheme under which the state, through the Cyprus Land Development Corporation, will help those who cannot pay and have exhausted all available options, to keep their primary residence, either by buying their home or by paying the interest on their loan, which the debtor later would have to pay back to the state.
Attorney General Costas Clerides noted that under the legislation the debtor has the right to participate in the foreclosure process by appointing an appraiser.
Central Bank chief Georghadji added that NPLs remained the biggest problem of the four banks that will undergo the stress tests carried out by the European Banking Authority.
Georghadji said that there are borrowers who cannot pay their bank instalments and others who “naively believe that they punish the banks by not paying”.
Get all the latest news and videos in your inbox. Register FREE