Finance Minister Makis Keravnos will present to legislators on Monday a government package of seven proposals to address the issue of foreclosures.

The package was submitted on Thursday in a bid to avert the approval of bill tabled by opposition left-wing party AKEL, co-signed by ELAM, the Greens, and members of government coalition parties DIPA and DIKO, providing for the right of a non-performing borrower to appeal to the Court requesting a suspension of a planned foreclosure in a bid to dispute the outstanding value of the loan as well possible excessive charges.

The Finance Ministry, the Central Bank of Cyprus and the Association of Cyprus Banks expressed concerns that such a law would obstruct efforts to reduce non-performing loans and subsequently weigh on the state’s credit ratings.

Last Thursday, the Parliament Plenary decided to postpone the vote for one week and to refer the proposal back to the Finance Committee, along with another proposal tabled by Social Democrats, providing that a collateral should be auctioned on the basis of the estimated value when the loan contract was signed as opposed to the reserved value.

Furthermore, the Finance Committee will hold a joint meeting with the Legal Affairs Committee to examine a government bill providing for the creation of a special jurisdiction in District Courts, to examine financial disputes between borrowers and the holders of the loan contract (banks and credit acquiring companies) concerning loans collateralised with primary residences with a value up to €350,000.

Moreover, the Finance Committee will also discuss a legislative proposal submitted last Thursday which grants the right to home owners, under certain conditions, to appeal to the Court and obtain an order postponing a planned auction. The proposal, which essentially introduces a mechanism initially proposed by the CBC, also concerns loans collateralised by primary residences with a value up to €350,000.

Apart from the special jurisdiction in District Courts, the government package, among other provisions, features a voluntary suspension of foreclosures of primary residences up to €350,000 agreed by both banks and credit acquiring companies until the end of October, the strengthening of the Financial Ombudsman, a new ESTIA scheme for borrowers in trouble with revised criteria with a view to include more home-owners, as well as a new scheme called mortgage-to-rent aiming to support vulnerable non-performing home-owners with a state subsidy and protect them from losing their homes.

Speaking to the press on Sunday, Government Spokesperson, Konstantinos Letymbiotis said the government package could effectively and comprehensively address the issue of foreclosures, while assisting vulnerable borrowers and averting strategic defaulters to exploit the procedures.

“We trust the responsibility of the political parties that they will evaluate the consequences of their decisions, they will rise to the occasion and will understand that a wrong decision over a horizontal suspension of foreclosures will yield very negative results to the whole of the economy,” he added.

According to CBC data, non-performing loans declined significantly from €20.6 billion in end-2017 to €2.2 billion in March 2023. However, a large part of these delinquent loans have been transferred to credit acquiring companies and continue to weigh on the economy.