Important Changes to the Cyprus Foreclosure Bills (NPLs)
Last week, the set of bills approved by the Cyprus Parliament has given financial institutions on the island more influence to reduce negative loans (or NPLs) from their balance sheets, speed up foreclosure proceedings and also increasing the number of borrowers entitled for to receive help from insolvency schemes.
Lenders will also be able to split a mortgage into various sections. The law in Cyprus previously held that where a bank was holding property as collateral for more than one loan they were unable to divide it.
For example, one consumer loan and one housing loan can now be split; if a bank wishes to dispose of the only consumer loan, it can contact the land registry and inform it that a certain amount relates to the consumer loan and the remainder is for the housing loan. This will then allow the lender to sell the loan and its collateral onto a respective third party.
Furthermore, the time frame when notices are posted intended for urgent and immediate settlement of outstanding loans or NPLs are shortened; and the notices will be sent by recorded mail.
Thus far, a provision within Cyprus law permitted a mistreated borrower to take recourse to a court within 30 days of receipt of a final notice from the bank, which would immediately halt foreclosure proceedings. This clause has been removed, so that foreclosure proceedings can only be stopped in case a court order has already been issued.
Electronic Auctions & Online Payments
Regarding collateral, banks had been unable to sell off loans on their books because of issues with the land registry. Previously, when a bank wished to transfer/sell a loan they had to visit the land registry in order to be able to transfer the mortgages one by one.
Moreover, buyers of loans will have full access to all documentation pertaining to a loan in order to be able to properly assess their prospective purchase. That does not require the borrower’s consent; the bank merely has an obligation to notify the affected borrower, informing them that going forward they will be dealing exclusively with the buyer of the loan.
Incentives & Stricter Rules for Defaulters
Eligible for insolvency schemes are borrowers with a house with a market value of up to €350,000 – up from €300,000 previously. This applies to non-consensual schemes – schemes that are imposed on banks.
Another change applies to both individuals and companies; borrowers are no longer protected by insolvency proceedings who have received benefits from the state in some form and still default on their repayments for three months or longer.
Eltoma Property have legal experts on hand to provide assistance with any property-related loans in Cyprus.
Contact us for more information.