Thousands of Cyprus property owners are living in fear of having their homes sold out from under them by banks trying to claw back bad debts and arrears.
A controversial new law aimed at stopping the banks from repossessing a borrower’s main home has stalled in the Mediterranean island’s Parliament after arguing between politicians.
The move has increased concerns that banks might take advantage of the delay by triggering a major sell-off of distressed homes.
Until the latest meeting of house legal affairs committee, the primary residence protection bill looked to be on course to become law within weeks.
But the bill was put on hold after bitter arguing before the committee.
Blocked in committee
The opposition wanted to water down the bill and add measures to reduce the amount of protection offered to home owners before Parliament voted to make the proposals law.
Now, the government fears the breakdown in the passage of the bill through parliament means banks will stop offering home mortgages and may start proceedings to repossess and sell homes to take advantage of the delay.
A government spokesman said: “What has happened to this bill in parliament is prompting needless panic among home owners about any imminent sell off of their properties. Our view is banks will not sell a primary residence and this assurance is already protected by an agreement between the government and the banks.”
Finance minister Haris Georgiades explained he felt the law was likely to promote more economic problems than it might solve.
“The government wants to protect main homes, especially for families who have no work or who are on low incomes, but what the opposition want is to change the proposal so people who can afford to pay the mortgages can hold back the money without any fear of action from the lender.”
Housing turmoil
The Cyprus housing market has been in turmoil for several years, with prices still falling and banks unwilling to lend.
The primary residence law protects main homes of expats and Cyprus nationals from repossession if they fall into financial difficulties. The proposals exclude second homes or holiday lets that expats may hold as investments.
Besides plunging prices, the Cyprus housing market has also been plagued with problems over title and developers taking out mortgages on homes without the knowledge of the owners.
In hundreds of cases, developers borrowed money against the security of a home then sold the home to a buyer with a mortgage. The developer then defaulted on the first loan leaving confusion over who owns the property and a risk that people have their homes repossessed for default on a mortgage they did not take out or even know about when they moved into the property.
