Mortgage to rent scheme for distressed borrowers moves ahead

The mortgage to rent scheme is moving forward as state-owned asset management agency Kedipes, the finance ministry, banks and the EU are finalising the details, reports said on Monday.

The ‘Mortgage to Rent’ scheme was discussed at the recent visit of EU officials, ECB officials, and IMF officials to Cyprus for the 13th post-bail-out evaluation.

The scheme will cover all non-viable households who have applied for the ‘Estia’ plan but whose income is insufficient to keep up with payments.

Under the envisioned ‘mortgage to rent’ scheme, households will pay a low rent for five years, after which they have the right to buy their residence.

Under a mortgage-to-rent scheme, intended to help homeowners at risk of losing their property due to mortgage arrears, a person voluntarily surrenders ownership of their home for five years to their lender. An entity buys the home from the lender and becomes the landlord. During that time, the borrower no longer owns their home but will continue living in it as a tenant.

According to daily Politis, Kedipes is set to take under its ownership 1,250 houses with a total value of over €100 million.

The scheme is expected to be announced in coming weeks by the finance ministry, in hopes of being able to start it in early 2023.

Politis reported that the scheme will be made available to 948 cases on non-viable debtors under the ‘Estia’ plan and individuals receiving state aid. The plan will also be available for all non-viable debtors.

The price of the primary home should also not surpass the amount of €250,000 and Kedipes will buy the property at 60 per cent of its value from the banks.

In July, the scheme seemed to be under threat as parliament voted to extend a freeze on property foreclosures.

The bill – amending the laws governing the transfer and mortgage of immovable property – extends to October 31 a moratorium on repossessions.

Despite prior and repeated warnings that a further extension would disrupt banks’ ability to reduce the stock of non-performing loans (NPLs) on their books, the majority of MPs voted in favour – arguing they wanted to protect homeowners amid the ongoing economic slump.

Finance Minister Constantinos Petrides said he could not see the rationale behind MPs’ insistence on the foreclosures freeze, given that the government has rolled out various schemes aimed at affording protection to financially distressed homeowners.

“Suspending foreclosures at this crucial period also endangers the rollout of the much-anticipated ‘Mortgage to Rent’ scheme – a scheme worth €400 million which protects the residence of vulnerable households including the non-viable debtors under the ‘Estia’ programme, since the EU’s approval of it will depend on the effectiveness of the foreclosures framework.”