After the slow take up of the Estia mortgage relief scheme, the First Home Protection Association issued an announcement on Tuesday to try and correct the spread of misinformation.
“We have seen around 1,200 applications instead of the 12,000 anticipated by the Finance Ministry,” the announcement said.
The Estia programme was proposed in the wake of the 2013 financial meltdown to help people with non-performing loans (NPLs) retain ownership of their main residence.
The plan would also contribute to the deleverage of Cypriot banks.
“We have all read and heard the main characteristics of the programme as a ‘Robbery Plan’ as well as other various inaccuracies,” the Association said.
“For example, we’ve heard people say that the applicant has to pay huge amounts ranging from €1,000 up to €5,000, which has nothing to do with reality,” it said.
As part of the plan, borrowers would have their loan reduced by about 36 per cent of its value, with the taxpayer helping out and the bank taking a small hit.“We have also heard and read the very deliberate inaccuracy that by joining the programme, the borrower recognises the amount owed as a legal debt, which is not the case,” they added.
A previous explanation was that defaulters were wary of disclosing information about assets or income which the banks may have been unaware of or might have been subject to taxation.
“The most tragic thing we have heard is that the plan is aimed at fooling borrowers into losing their home on the pretext that if someone does not meet the repayment terms they will have to auction their property,” the association said.
It also pointed to a lack of trust in the credit institutions due to bad practices, noting that “the unchecked impunity of the banks in the past has created a serious lack of trust.
“We have also noticed in many cases that banks are discouraging borrowers from taking part in Estia. In fact, they are pressuring them to take the bank’s restructuring plan,” the Association said.
“They have even gone as far as threatening them that if they do not accept the restructuring now, and Estia rejects their applications, the bank may not offer them another plan and they will have to auction their property,” it added.
The association said the various ministries involved should have done a better job of informing people about Estia and helping with applications.
Others have pointed out that one reason borrowers may not be interested in the Estia plan is because strategic defaulters want to carry on paying nothing towards their housing loans.
Under the plan they would have to pay a monthly repayment, but at a generous 36 per cent discount.