The Parliament of Cyprus is considering the possibility of extending the suspension of sales of mortgaged real estate until the end of July 2021.
As you may know the previous moratorium on the sale of mortgaged real estate in Cyprus ended on March 31, 2021.
The moratorium was on sales of property that is used as the main place of residence and which value does not exceed 350 thousand euros, as well as commercial premises owned by small companies with fewer than ten employees and whose annual turnover does not exceed 2 million euros.
During the discussions in the parliamentary finance committee, the Ministry of Finance supported the idea of a possible short-term and targeted suspension of sales of real estate used as the main residence and commercial premises of small companies. The representative of the Central Bank said that these may be acceptable mechanisms for the targeted inhibition of divestiture for main housing or commercial premises until July 31, 2021.
At the same time, about thirteen other bills, which mainly relate to changes in law of sales of collateral, left in limbo.
So the bill providing for the creation of courts of special jurisdiction to consider financial disputes between borrowers - banks within 60 days, will be presented to the plenary session at its last meeting on April 22. The amendments make significant changes, allowing borrowers to go to court to suspend the sales process. Opposition MPs stress that without the amendments, the bill would further speed up explicit asset sale procedures.
The Finance Committee said it was ready to reinstate the bill to amend in the context of asset stripping should the executive decide to withdraw the Courts bill to prevent it from being passed with amendments that opposition parties want.
In the meantime, ratings agency Moody's said that any changes to the legal framework regarding the sale of secured housing would hinder the banks' efforts to reduce the volume of non-performing loans.
Paying particular attention to the proposals being discussed in parliament, Moody's noted that they pose the risk of weakening and delaying the sale process and reducing returns, posing a threat of additional reserves from banks.
Moody's stressed that if the proposals are approved, they will make the possible sale of NPLs less attractive to investors. By the way, the risks indicated by Moody's are proportional to the warnings made earlier to the Finance Committee, the Ministry of Finance, the Central Bank and the Association of Banks during the discussion of the amendments in the context of the sale of collateralized assets.