More than 71.6 thousand borrowers in Cyprus have faced the transfer of their loans to companies that deal with purchasing and managing debt. This was reported by the president of the Association of Credit Acquisition and Servicing Companies, Anti Exadaktylou, at a meeting of the Parliamentary Finance Committee.
According to her, since the launch of the non-performing loan management system, solutions have been found for approximately 39.5 thousand borrowers. This is about 55% of the people whose loans were transferred to such companies.
The statement was made during a discussion in parliament of legislative initiatives aimed at reforming the system of property repossession for debts. At the same time, politicians discussed the possibility of temporarily suspending the procedure of housing confiscation until the end of the year.
How debtors reach agreements with credit companies
According to Exadaktylou, most debt solutions are reached by mutual agreement between the parties. About 88% of loan restructurings occurred after negotiations between borrowers and the companies managing the debts.
Sometimes an agreement is reached immediately, without serious conflicts. In other cases, an agreement is signed after the borrower receives an official notice of possible property repossession. Approximately half of such agreements were reached precisely after the enforcement procedure was initiated. Experts believe this demonstrates the effectiveness of the system. It encourages debtors to seek solutions and gradually settle their debts. However, specialists note that the problem of so-called strategic defaulters remains. These are people who can pay their loans but deliberately avoid payments.
Most people keep their homes
In many cases, agreements allow borrowers to retain ownership of their homes. That is, the debt is settled without transferring the apartment or house to the creditor. This approach helps reduce social risks and avoid loss of housing.
According to the Ministry of Finance, the total volume of loans related to this issue amounts to about 20 billion euros. Of this amount, approximately 18.5 billion euros are held by investment funds that purchased non-performing loans from banks. Another 1.5 billion euros remains on the balance sheets of banks. About 7 billion euros of this debt are managed by the state company KEDIPES, which handles assets left after the banking crisis.
Despite the scale of the problem, the situation is gradually improving. Before the financial crisis of 2013, private debt in Cyprus was about 350% of gross domestic product. Now this figure has decreased to approximately 180%.
Support for people who cannot pay their mortgages
Authorities are paying special attention to socially vulnerable people. Among them are elderly refugees and families who find it difficult to pay their mortgage for their primary residence. In such cases, companies often temporarily postpone property repossession procedures to find a solution together with government services. Confiscation is also temporarily suspended for people participating in government support programs.
Several programs operate in Cyprus to help people keep their primary residence. Among them are the Estia, Home, and Mortgage-to-Rent programs. According to authorities, thanks to these programs, assistance may be provided to 3–3.5 thousand borrowers.
A temporary suspension of housing confiscation is possible
Political parties are currently discussing the possibility of temporarily stopping property repossession. This concerns housing valued at up to 400 thousand euros. It is proposed to suspend such procedures for a period of six to eight months. This time is needed to prepare legislative changes.
At the same time, the government is preparing a bill that should strengthen the powers of the financial ombudsman and improve bankruptcy procedures. Final decisions on the new laws and the possible temporary suspension of housing confiscation are expected to be made in the coming days. These changes may significantly affect the real estate market and the lending system in Cyprus.