The President of the Republic, Nicos Anastasiades, referred the "Law on the Transfer and Mortgage of Real Estate (Amendment) (No.4) Law of 2022" concerning the suspension of the mortgage sale process until 31 January.
The law was passed by the Parliament on 10 December and reinstates the suspension of the mortgage sale process until 31 January 2023, due to the ongoing and intensifying economic and social impact of the COVID-19 pandemic, as well as the war in Ukraine.
The law was passed by the Parliament on 10 December and reinstates the suspension of the mortgage sale process until 31 January 2023, due to the ongoing and intensifying economic and social impact of the COVID-19 pandemic and the war in Ukraine.
The proposed suspension concerns the debtor's main residence, the estimated value of which does not exceed €350.000, the debtor's business premises with an annual turnover not exceeding €750,000, the debtor's parcel of land, the estimated value of which does not exceed €100,000.
In a letter to the President of the House of Representatives, Anita Demetriou, President Anastasiades refers to the reasons for the referral and explains that the regulation as enacted is essentially a universal suspension of divestments, without targeting since it suspends divestments involving a commercial property, regardless of the value and amount of the loan. As noted, the reference in the law to businesses with a turnover of up to €750,000 covers more than 85% of Cypriot businesses. Also, as mentioned, the law excludes the majority of agricultural land, since a maximum value of €100,000 is set, regardless of income and loan amount.
It is also noted that both the Ministry of Finance and the Central Bank of Cyprus disagree with the suspension of divestments for the fifth consecutive time. Particularly, as stated given the unprecedented efforts of those involved, including the Association of Credit Purchase Companies & Credit Facilities Managers that they will not proceed with first home sales up to €350,000 for cases of borrowers who truly belong to the vulnerable groups of the population.
It is also noted that at a time when deposits in the economy are showing an increase, divestments without income criteria are suspended, mainly rewarding defaulters and burdening consistent citizens. It also notes the existence of government plans such as the Estia and Oikia schemes to protect non-viable borrowers, up to the implementation of the "rent versus payment" scheme.
At the same time, it is stated that Cyprus' credibility abroad is being damaged, while discomfort is being created at home, in a very difficult period for the economy, and the positive path for further upgrading the Cyprus economy's credit rating is being questioned. It is stated that there is a risk of increasing the cost of borrowing for the Republic.
It is also stated that the continued suspension of divestments marginalises and indirectly unfairly penalises consistent borrowers. At the same time, it is noted that the wrong message is being given to society that there is no obligation to repay loans, posing the risk of an increase in non-performing loans (NPLs). At the same time, it is stated that thousands of guarantors are being put at increased risk.
In addition, it is said to raise concerns about the effectiveness of the Recovery and Resilience Plan milestone on improving the MFI environment, the achievement of which is currently being assessed by the European Commission.
The President also states that failure to implement an effective divestment framework will lead the banking system to a tighter lending policy.
It is also noted that the continued suspension of the legislative framework for divestments will lead to an increase in provisions and losses on the loans of the former SCB transferred to the Hellenic Bank and covered by the Guarantee Scheme, with a consequent increase in the compensation claims of the Hellenic Bank from the CEDIPES.
In conclusion, it is stated that the aforementioned consequences may also affect the State budget, since the direct impact on the financial system has adverse consequences on State policy.
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