On Wednesday, April 3, Cyprus held a meeting of the Parliament, where it was decided to make some changes in the progress of the "Mortgage to Rent" program.
This was announced after the meeting by Finance Minister Makis Keravnos.
Firstly, the MPs extended the scheme until August 2024. Second, two new categories of beneficiaries were added to the program: borrowers whose loans did not participate in the Estia plan at all, as well as approved applicants of the Estia program who never benefited because they had outstanding encumbrances on their properties.
Keravnos said the move is aimed at "further supporting troubled borrowers whose loans are at risk." He emphasized that so far, 1.45 thousand people have expressed a desire to participate in the Mortgage to Rent scheme. However, the number of potential beneficiaries is estimated at around 2.5 thousand. Referring to the two main categories of beneficiaries eligible to participate in the scheme, Keravnos said that these are "welfare recipients and non-viable Estia plan applicants who had an outstanding loan secured by their primary residence."
The decision to expand the beneficiaries of the mortgage-to-rent scheme was taken after the implementation of the scheme revealing the need to make adjustments to include more people in need of assistance. Keravnos mentioned that while changes were necessary to widen the range of beneficiaries, the fundamental principles and objectives of the scheme remain unchanged, focusing on supporting vulnerable groups within the society.
As a reminder, the intake of applications from potential beneficiaries began on December 4, 2023.
The Mortgage to Rent scheme covers overdue loans secured on a main dwelling up to €250,000.
Beneficiaries are people belonging to low-income groups and pensioners, whether or not they have applied to join the ESTIA andOikiaia schemes.
The program is also open to borrowers who have defaulted on their mortgage but their application to join the ESTIA and Oikia schemes was rejected because they were classified as unviable due to low income.
A separate company, KEDIPES EED Ltd, was set up to administer the new scheme and will maintain separate accounting records, including a Fixed Asset Register. As part of the scheme, arrangements have been made to insure the properties that will come into the possession of KEDIPES. Call centers and service points have also been set up in five towns in Cyprus, staffed by qualified personnel who will be able to answer any questions the public and those interested in participating in the scheme may have.
The primary function of KEDIPES is to purchase bad debts and other high-risk assets from Cypriot financial institutions. By transferring non-performing loans to the balance sheet of a "bad bank", the Cypriot banking system will be able to get rid of toxic debt totaling €10 billion. In turn, small borrowers will be less vulnerable to the threat of foreclosure of their primary residence if they default on their loans, as they will be able to participate in the "Mortgage to Rent" program.
As envisioned, KEDIPES will purchase mortgage homes from debtors. The troubled borrowers will then have the opportunity to rent their real estate from the "bad bank" for 14 years. During this period, they will be charged rents at 65% of market averages. By the way, the rent for each property will be set individually.
At the end of the term, they will be able to get the asset back if they pay the arrears. The current property price for borrowers in arrears will be equal to the price at which KEDIPES purchased the property, less the rent paid for 14 years. If the debtor is unable to buy the property back, for example for lack of funds or in the event of death, his next of kin will be entitled to do so on the same terms. Finally, if the conditions of the scheme are not met, after 14 years KEDIPES will be able to sell the property at its discretion.
