House Finance Corporation dealing with many loan requests

The Housing Finance Corporation (HFC) said on Monday it’s receiving a great deal of applications for home loans, as it can currently offer competitive rates compared to private commercial lenders, but added that non-performing loans remain a problem.

Representatives of the HFC were in parliament to discuss the organisation’s budget for fiscal 2023. The budget features a €1.7 million surplus – €17.8 million expenditures and €19.5 million projected revenues.

Officials told MPs the organisation is completely funded by own resources.

Director-general Christoforos Kaplanis said, however, that they continue to face a number of challenges – such as pending IT upgrades and staff shortages.

At the moment the HFC offers interest rates on home loans starting at 2 per cent, whereas the market in general goes higher than that.

Kaplanis added, however, that they would have to follow the market trend and raise their own rates so as to be able to cover the cost of deposits.

For her part, the HFC’s chief financial officer Vasiliki Vasileiou said their top priority remains the management of non-performing loans.

As things stand, and with the means at its disposal, the organisation is not in a position to increase its portfolio.

Acting chairman of the board Demetris Koursaris opined that the HFC can compete with other banks in a high interest rate environment. He said the HFC possesses certain advantages in this respect – such as no shareholders demanding dividends, or the fact the HFC is not classed as a systemic lender.

In comments of his own, Dipa MP Alekos Tryfonides criticised the previous government for having left the HFC ‘leaderless’ for almost two years.

Thankfully, he added, recently a new director-general was appointed, but the HFC still lacks a chairman or vice-chairman.

In a report released last October, the finance ministry had expressed alarm at the high amount of money owed to public-law organisations that give out loans to people for housing – loans which the state underwrites.

In particular, the report flagged three organisations – the HFC (the worst offender), the Central Agency for the Equitable Distribution of Burdens, and the Cyprus Land Development Corporation.

As at the end of March 2022, 61.67 per cent of loans granted via the HFC were classed as non-performing. Also, the HFC terminated contracts and/or took legal action for 112 loans with a balance of €59.7 million.

“The greatest risk of loss of moneys for the government presents in the loans granted to individuals through public-law organisations and other financing organisations…and where the monitoring of these loans by the involved organisations has not been as expected,” the report stated.

The HFC was established by the state in the early 1980s to facilitate access to mortgages, particularly to vulnerable groups. It grants loans to families to obtain their first home and to low-income groups on favourable terms.