‘Mortgage to rent’ scheme nearing completion

The government will soon roll out its  ‘Mortgage to Rent’ scheme after getting the green light from the European Commission, a senior official briefed MPs on Monday.

Giorgos Panteli, permanent secretary at the finance ministry, said they have in hand the formal response of the European Commission’s Directorate-General for Competition.

Panteli told lawmakers that the European Commission, having reviewed the Mortgage to Rent (MtR) scheme, is aligned with the government’s own position that the scheme has a “social character” and does not appear to provide any financial advantage to participating banks or credit acquiring companies.

Later this month the EC will issue a decision stating that MtR is compatible with the rules governing state aid, okaying the transformation of asset management entity Kedipes into an agency implementing MtR.

Kedipes is the successor entity to the state-run cooperative bank, shuttered in 2018.

What now remains, said Panteli, is for the cabinet to approve some formalities and after that the finance ministry will call for expressions of interest from banks and credit acquiring companies.

“The participation of all banks and credit acquiring companies will help make the scheme a success, as no potential beneficiary will be excluded,” the official said.

But he also warned that “any significant weakening of the foreclosures framework would decrease the incentives for borrowers to participate in the scheme.”

MtR was first approved by the cabinet on February 8 this year.

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.

Those eligible for MtR are: recipients of social benefits who held non-performing loans at December 31, 2021, the loans remaining non-performing at December 31, 2022, for mortgages on primary residences valued up to €350,000; all those applying for the Estia debt relief scheme for homeowners and who were deemed eligible for Estia but not sustainable debtors, again regarding mortgages on primary residences valued up to €350,000.

Also eligible for MtR are individuals enrolled in the Estia scheme and who were later struck off due to failure to meet the terms.

MtR stipulates that applicants meeting the basic criteria – provided they have a title deed – will transfer title to Kedipes, which at the same time will sign a 14-year rental contract with the individual concerned.

Kedipes will pay the creditors a fee for the primary residence, and the loan where the primary residence served as collateral will be written off from the creditor and will cease being payable.

In addition, the state will fully cover the rent on behalf of the individual, who will be afforded the opportunity to buy back the property after a period of five years.