In the Ministry today the proposal but with asterisks – The Rent Against Installment Scheme is also promoted
Questions about how they will handle in the parliament the proposal of a law of deputies that amends the Transfer and Mortgage of Real Estate Law and thus the process that has been launched will be stopped.
By Panagiotis Rougalas
The government's proposal to the Council of Ministers for the creation of a special court of special jurisdiction to deal with the sale of a first home is very close, but the character of the suspension of the sale will be missing. As “K” is informed, although the special court will proceed, a measure which will help the operation of the sale framework, however the government will not have a law in the proposal – which will go through the Cabinet and then be given to the parliament – the provision of suspension of the procedure until the amount is ascertained.
It is thought that the Rent Against Installment Scheme will cover around 2,000 homes, plus the 800 rejected ESTIA borrowers who will be able to join without criteria.
Of course, the House of Representatives will probably want to “fill” this gap and “button” the proposal of the parties to suspend the sale until the case for the final debt is heard. It is the now well-known proposal of a law by deputies which amends the Law on the Transfer and Mortgage of Real Estate, which will ensure the right of the mortgage debtor and other interested parties to apply to a competent court for the suspension of real estate sale procedures, in specific cases, which are determined and include disputing the amount owed and invoking the existence of abusive clauses in loan or mortgage contracts.
With or without asterisks, the creation of a special court, even after many years, is taking shape. It is one of the two measures which are calculated to strengthen the framework of sales for both sides, i.e. for the borrowers, but also for the credit acquisition companies and banks. The second measure concerns the implementation of the Rent for Rent Plan, for which the European Commission has given the green light, even verbally – as informed by the general director of the Ministry of Finance, Giorgos Pantelis. As for the special court, we expect more information on how it will act, and whether it will satisfy the MPs. However, the Ministry of Finance had announced that it was ready and would submit it on Wednesday, June 14 to the Council of Ministers.
The disagreements
The Association of Banks, however, for its part, has expressed the position that the promoted Law Proposal, which aims to refer to the already burdened Cypriot Courts with the long time it takes to adjudicate cases to ascertain the amount owed by the borrower, will cause major and permanent involvement both in the banks, and more broadly in the Judicial System, but also in the economy. By extension – according to the banks – it will bring about potential effects on the country's ratings, financial stability and the country's prospects in a period of great challenges.
The Association of Credit Acquisition Companies for its part – a position it had expressed in one of the sessions of the Finance Committee – estimates that the amendment to the law that will allow the borrower to stop the sale process until the amount owed is ascertained, will strengthen the strategic defaulters. According to the Association, mortgage debtors or interested parties will now be able to stop the process of debt recovery through foreclosure, simply by registering any procedural step at their disposal, but without necessarily having the basis for a procedural step. Thus, the Association estimates that with the current state of the Courts and the serious delays observed due to their heavy schedule, we will be led to an abuse of the Court Procedures, which will be registered with the sole purpose of delaying the sale.
Capacity of 2,000 – 3,000 loans
The Rent Against Installment Scheme is a step before its implementation, since the green light has been given even verbally to the Ministry of Finance. Essentially, the State will subsidize the installment of the borrower who will have the right to repurchase for 14 years and KEDIPES the right to sell after 5 years. It is considered that the Plan will concern approximately 2,000 residences, plus the 800 borrowers of ESTIA who were rejected and who will have the possibility to join without criteria of the Plan Rent for Installment. We should keep a small basket for the success of the plan, because out of a total of 10,000 borrowers who would enter ESTIA, in the end about 6,000 applied to enter, the correctly completed applications were 3,000 and 800 of them were judged as non-viable to participate.
KEDIPES will be the implementing body of the Plan and the performance of KEDIPES' role requires changes to the List of Commitments to firstly allow the purchase and management of the main residences outside the KEDIPES portfolio, and secondly to allow the suspension of the payment of state aid (one to two installments depending on the participation in the Plan to pay off the main residences and expenses of the Plan.
The provisions of the plan
The basic parameters of the Plan upon approval by the Board of Directors of KEDIPES are the following:
1. The Plan concerns Unserviced Loans secured by a Main Residence with a Market Value of up to 250 thousand.
2. Beneficiaries are natural persons receiving specific benefits. Also eligible are the eligible but unsustainable borrowers for inclusion in the Home Plan and the Home Plan.
3. A technical suitability check and assessment of the property's value is carried out.
4. KEDIPES acquires the main residence and pays the Participant (Bank or Credit Acquisition Company) about 65% of the market value.
5. The Participant cancels the credit facility that remains after deducting the purchase price of the property to the extent that it is not covered by other collateral.
6. It precedes the elimination of burdens on the Main Residence within predetermined percentages.
7. The Republic of Cyprus pays rent to KEDIPES amounting to 65% of the market tenant.
8. The owner becomes a tenant and the rental period is equal to 14 years or for life, where the tenant is over 65 years old.
9. The tenant has the right to repurchase the residence after 5 years and before the end of 14 years at a predetermined price which is stated in the rental agreement. The repurchase price takes into account various parameters (including changes in property prices, expenses and rent payments) and remains attractive.
