Loan takers who will benefit from the government Estia scheme to help repay their housing loans will be under strict scrutiny and face repossession in case they don’t stick to their part of the deal, it was revealed on Tuesday.
According to the Cyprus News Agency, which obtained a draft of the agreement to be signed between the government and lenders, the MoU provides for a lift of the banking secrecy of beneficiaries and their families so that the state service overseeing the scheme will be able to confirm an applicant’s finances.
As per Estia’s provisions, the state will meet one third of the payment for those on the scheme throughout their revised payment plan on the condition that the person who took out the loan will pay the other two thirds. The state will pay this amount at the end of each year once the finance institutions confirm the rest of the payment has been met.
The state service will have the right to reassess the financial criteria of beneficiaries. In the case beneficiaries’ finances improve by 30 per cent and over they will no longer be eligible for the state aid.
The state has the right to terminate the aid and ask for the money it has paid back in the case beneficiaries do not pay their agreed installments for more than 90 days.
Beneficiaries that violate the loan restructuring agreement may see their house or other immovable property being repossessed and sold to cover the remaining loan.
The MoU is currently at the state legal service for vetting and after the green light is given it will be tabled to cabinet for approval. Then the MoU will be signed between the participating banks and the state. The scheme is expected to be up and running next month.
Estia is expected to assist the repayment of primary home loans that were not serviced at the end of September 2017. Based on initial estimates, the gross value of eligible loans is €3.4 billion, with the total cost for the state at 25 years of project life cycle €815 million or 4% of GDP.
The Bank of Cyprus, Hellenic Bank, Astrobank, Alpha Bank and the Housing Finance Corporation are expected to take part in the scheme.