The prospect of a new freeze on foreclosures has returned to the parliamentary agenda, with political parties debating a temporary suspension until the government presents a plan to protect the primary residences of borrowers.
The scenario, which has appeared in previous pre-election periods, is once again unfolding in the House of Representatives. A temporary suspension would effectively delay foreclosures until after the elections, allowing time for consultations and possible legislative interventions. However, it has also raised concerns about unequal treatment among borrowers, potentially favouring those who systematically avoid meeting their obligations.
The Democratic Rally (DISY) called for the suspension of all foreclosures involving primary residences valued up to €400,000 for at least six months, citing the current geopolitical situation in the region.
“During this period, the state should examine a plan for the protection of primary residences. It is the role of the state to fulfil its social responsibility,” DISY said in a statement.
AKEL, however, called for the proposed laws to be put to a vote.
“Our position is that, before Parliament dissolves itself, every member of parliament and every political force in the House should be called upon to take a position,” said AKEL MP Aristos Damianou.
New bill under preparation
During Monday’s meeting of the House Finance Committee, which included discussion of 26 legislative proposals concerning foreclosures, the Ministry of Finance announced that it is preparing a bill to strengthen the powers of the Unified Financial Dispute Resolution Body, commonly known as the Financial Ombudsman, as well as the Insolvency Service.
The representative of the Ministry of Finance, Avgi Chrysostomou-Lapathioti, said the ministry is preparing legislation that would introduce binding decisions by the Financial Ombudsman, with the aim of accelerating decision-making and reducing the backlog in the courts.
Regarding the insolvency framework, and particularly the preparation of personal repayment plans, the ministry is examining ways to link these procedures with the Financial Ombudsman in order to confirm the outstanding debt amount.
It is recalled that legislative changes introduced in 2023 already gave borrowers the right to apply to the Financial Ombudsman to confirm the amount of their debt.
“Unfortunately, this tool has not been fully utilised,” Chrysostomou-Lapathioti said, adding that the ministry remains open to discussing targeted and institutionally resilient solutions.
A representative of the Insolvency Service stressed the need to strengthen the personal repayment plan, noting that it appears to be the only mechanism capable of addressing foreclosures while maintaining a balance between guarantors, debtors and creditors.
According to Chrysostomou-Lapathioti, the relevant bill is still under preparation and will not be ready to be submitted to the plenary before Parliament suspends its work ahead of the elections.
“Horizontal solutions do not resolve the problem. They merely postpone it, and the issue returns more intensely while sending the wrong signal to the market,” she said.
Position of the Financial Ombudsman
Financial Ombudsman Valentina Georgiadou also called on lawmakers to consider introducing a provision allowing repayment arrangements after a court decision determines the outstanding loan balance.
She also highlighted the need for the state to re-examine the “Rent-Instead-of-Installment” scheme.
Regarding repayment arrangements, Georgiadou explained that most non-performing loans currently held by credit-acquiring companies are terminated loans that do not fall under the Central Bank of Cyprus directive on arrears management.
As a result, the framework for resolving these cases is largely left to the discretion of creditors.
She added that many of these companies operate with a limited time horizon in Cyprus, which means long-term restructuring agreements are rarely concluded, with the exception of the state-owned asset management company KEDIPES.
Georgiadou noted that even borrowers who have sufficient income to agree on a repayment arrangement in order to keep their primary residence often fail to reach a settlement, as the final decision rests entirely with creditors.