Finance Minister Makis Keravnos is set to present a government package of seven proposals aimed at addressing the issue of foreclosures. The package was submitted on Thursday to counter a bill put forward by the opposition left-wing party AKEL, which was co-signed by the Greens, and members of the government coalition parties DIPA and DIKO.

The opposition bill seeks to grant non-performing borrowers the right to appeal to the Court, seeking a suspension of planned foreclosures in order to dispute the outstanding loan amount and any excessive charges.

Expressing concerns, the Finance Ministry, the Central Bank of Cyprus, and the Association of Cyprus Banks argue that such a law would impede efforts to reduce non-performing loans, which in turn could adversely impact the country's credit ratings.

Last Thursday, the Parliament Plenary decided to postpone the vote for one week and refer the proposal back to the Finance Committee.

The Finance Committee, in conjunction with the Legal Affairs Committee, will hold a joint meeting to examine a government bill that proposes the establishment of a special jurisdiction in District Courts. This jurisdiction would handle financial disputes between borrowers and loan contract holders (banks and credit acquiring companies) specifically related to loans secured by primary residences with a value of up to €350,000.

Furthermore, the Finance Committee will discuss a legislative proposal submitted last Thursday that grants the right to homeowners, subject to specific conditions, to appeal to the Court and obtain an order postponing a scheduled auction. This proposal, which introduces a mechanism initially suggested by the Central Bank of Cyprus, also applies to loans secured by primary residences with a value of up to €350,000.

In addition to the establishment of a special jurisdiction in District Courts, the government package includes various other provisions. These include a voluntary suspension of foreclosures on primary residences up to €350,000, agreed upon by both banks and credit acquiring companies until the end of October. The package also entails strengthening the Financial Ombudsman, implementing a revised ESTIA scheme for struggling borrowers that expands eligibility to more homeowners, and introducing a new mortgage-to-rent program designed to assist vulnerable non-performing homeowners. The latter program provides state subsidies to protect them from losing their homes.

Government Spokesperson Konstantinos Letymbiotis spoke to the press on Sunday, expressing confidence that the government package can effectively address the foreclosure issue while assisting vulnerable borrowers and preventing strategic defaulters from exploiting the system. He urged political parties to carefully consider the consequences of their decisions and rise to the occasion, emphasizing that a hasty decision to suspend foreclosures across the board would have severe negative repercussions on the entire economy.

According to data from the Central Bank of Cyprus, non-performing loans have significantly decreased from €20.6 billion at the end of 2017 to €2.2 billion as of March 2023. However, a substantial portion of these delinquent loans has been transferred to credit acquiring companies, continuing to pose a burden on the economy.