The government of Cyprus has sent its proposed foreclosure legislation back to the Finance Ministry for revision, following concerns raised during discussions at the House Finance Committee.
Lawmakers identified gaps in the proposed framework, particularly regarding procedural deadlines before property auctions, prompting a temporary withdrawal of the bills for further refinement.
Focus on Targeted Reform, Not a Freeze
The proposed legislation is part of a broader government strategy to strengthen foreclosure procedures without imposing a blanket freeze. Authorities remain cautious about introducing wide-ranging suspensions, citing pressure from international institutions and rating agencies.
Makis Keravnos emphasized that Cyprus must maintain financial credibility:
“We are being monitored by rating agencies and the European Union… broad foreclosure freezes should not be discussed at this time.”
Stronger Role for the Financial Commissioner
A central feature of the reform is the expanded role of the Financial Commissioner, aimed at improving dispute resolution between borrowers and financial institutions.
Key proposed changes include:
- Introduction of a debt verification mechanism
- Option for loan restructuring through the commissioner
- Binding decisions for disputes up to €20,000
- Earlier access for borrowers, starting from the initial notification stage
According to Valentina Georgiadou, the goal is to provide borrowers with practical tools while maintaining institutional balance.
New Timelines and Protections for Borrowers
The framework introduces a 30-day suspension of foreclosure procedures, giving borrowers time to explore solutions.
During this period:
- Borrowers and lenders have 15 days to agree on restructuring terms
- If no agreement is reached, an insolvency practitioner steps in
- The practitioner evaluates financial conditions and proposes solutions such as repayment plans or settlements
If no resolution is achieved, foreclosure proceedings resume unless protected by a court-approved plan.
The measures specifically apply to primary residences valued up to €350,000, targeting vulnerable homeowners without disrupting the broader market.
Debate Over Legal and Practical Challenges
The proposals have sparked debate among stakeholders:
- Banks raised concerns about the binding nature of decisions, warning of potential constitutional issues
- Credit-acquiring companies argued that involving insolvency procedures could complicate the system
- Insolvency practitioners called for longer timelines (45–60 days instead of 30)
Additionally, lawmakers successfully pushed to extend the complaint submission period from 21 to 30 days, offering borrowers more time to act.
What’s Next?
With parliamentary timelines tightening ahead of dissolution, extraordinary plenary sessions may be scheduled in April to fast-track the revised legislation.
The bills are expected to return to parliament once adjustments are made, as the government continues efforts to balance borrower protection with financial stability.
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