StockWatch reporters received information from several high-ranking officials of the Ministry of Finance and the Ministry of Labor and Social Insurance, that parliament will approve the Estia 2 mortgage borrower support program, only if banks write off loans.
Political parties, ahead of the parliamentary elections scheduled for May 2021, promise the electorate to provide legal protection to borrowers whose mortgage loans are secured by their only residence.
In particular, they want to help those borrowers whose current income does not allow to pay mortgage payments even if their loans are restructured. Thus, the parties hope to get more votes in the elections.
In general, about 6,000 borrowers have already applied for participation in the new program. According to the available data, about 600 of them were declared insolvent. Data processing has not yet been completed. Most likely, the number of insolvent persons will exceed 1000 (about 20% of the total number of applications).
As you may know, the ESTIA program started in Cyprus in September 2019, the application deadline ended on November 15, 2019.
Since there was no big interest of the borrowers at the first time, the deadline for applications was extended until the end of 2019. By December 27 of last year, only 3,000 borrowers had submitted applications, instead of the expected 10,000. For this reason, the program was extended until July 31 of last year, and then until the end of 2020. Borrowers, whose loans as of September 30, 2019, were recognized as non-performing, were eligible to participate in the program.
Loans were provided against the security of the borrower's main housing, the cost of which was not to exceed 350 thousand euros. Also, the applicants had to meet the criteria for income of a family, it should be from 20 thousand euros to 60 thousand euros per year. The loan amount should be reduced to the actual cost of the apartment or house, after which the borrower gradually pays 2/3 of this amount, and the government pays the rest 1/3.
The goal of the program is to support citizens who took out mortgage loans secured by their only home and subsequently could not pay them off, risking losing their only home.
Also, the ESTIA program is aimed at reducing the burden on the banking system of Cyprus, since after the restructuring of loans from insolvent borrowers, the level of NPLs on the balance sheets of Cypriot banks decreases.