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First steps taken in Estia debt relief scheme

The first steps have been taken to roll out the Estia debt relief scheme, although applications for the programme will not start until early September.

According to the Cyprus News Agency (CNA), the finance ministry has asked banks to express an interest in participating in the scheme.

The banks have been given 15 days to state whether or not they wish to enter into a memorandum of understanding with the state.

The calls for expression of interest are directed at commercial banks as well as non-banking asset management corporations like the state-owned Kedipes.

Once a memorandum has been signed, the second preparatory phase kicks in – a period of informing potentially eligible debtors about the scheme.

September 1 is the date earmarked for debtors to begin applying.

The banks expected to join the scheme are Bank of Cyprus, Hellenic Bank, Alpha Bank, the Housing Finance Corporation, and Kedipes, CNA said.

The stated purpose of Estia is to assist, support and protect vulnerable households who have mortgaged their houses for their loans.

To be eligible, a household must have a declared gross income of €50,000, and their primary house, which is mortgaged, must have a maximum market value of €350,000.

The loans will be written down to the market value of the primary residence and then the borrower will have to pay two-thirds of the rescheduled loan every month while the taxpayer (the state) will subsidise one-third of the monthly instalments on that rescheduled loan.

It applies to loans (mortgages) that were classed as non-performing as at September 30, 2017. Loans designated as non-performing after that date are not eligible.

With the Estia scheme about to kick off, parliamentarians have been tinkering with foreclosure laws which they say are heavily slanted in the banks’ favour.

However data just released by the Central Bank of Cyprus show that, to date, primary residences rank very low in the type of properties banks go after.

Between 2015 and the first quarter of this year, banks overall sold off via auction 444 properties, only two of which were primary residences.

During the same period, 9,221 foreclosure notices were sent out. Of these properties, 444 were actually sold, or 4.8 per cent.

However the pace of auctions picked up considerably in Q1 2019, when out of 602 notices, 100 ended up in auction sales, or 16.6 per cent.

The number of foreclosure notices sent out on primary homes during 2018 were: 35 in the first quarter; 41 in the second quarter; 28 in the third quarter; and 61 in the fourth quarter.

During the first quarter of 2019 – the latest data available – 39 notices were sent out on primary residences.

In the last quarter 2018 there were a total of 187 notices on houses and flats (non-primary). And in Q1 2019, 140 notices were sent out for this category of property.


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