Asset management company KEDIPES announced on Friday 28 June that it has paid another €40m in repayment of state aid received by the former Cooperative Bank.
It is worth noting that this is one of the largest quarterly payments since the authority began operations in 2018, and is mainly due to the recent completion of the sale of the Bank of Cyprus loan portfolio with a total book value of €58.4m. KEDIPES' state aid payments thus reached a total of €1.76bn. At the same time, the authority said it plans to disburse a further €100m by the end of this year.
While this year's good results have been positively affected by the stability of the legal framework for foreclosures, any negative changes to that framework, as well as to other existing or proposed laws relating to Kedipes and credit or asset management companies in general, would significantly affect the company's ability to fulfil its business plan, as well as its ability to fully repay the state aid due,’ the authority said.
At the same time, KEDIPES continues to maintain an €80m cash reserve to fund the Mortgage to Rent scheme of which it is the executive body. As a reminder, KEPIDES now acts as a ‘bad bank’ in the scheme.
Its main function is to buy up bad debts and other high-risk assets from Cypriot financial institutions. By transferring non-performing loans to the balance sheet of the ‘bad bank’, the Cypriot banking system should get rid of toxic debt totalling €10 billion.
In turn, small borrowers will become 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 programme. KEDIPES buys mortgage homes from debtors. Troubled borrowers are then given the opportunity to rent their property from a ‘bad bank’ for 14 years. During this period, they will be charged a rent of 65% of the market average. By the way, the rent for each property is set individually.
At the end of this period, borrowers can take back the asset if they pay the arrears. The current property price for borrowers in arrears is equal to the price at which KEDIPES purchased the property, less the 14 years of rent paid. In case the debtor is unable to buy the property back, for example for lack of funds or in case of death, his next of kin gets the right to do so under the same conditions. Finally, if the conditions of the scheme are not met, after 14 years KEDIPES can sell the property at its discretion.