On Thursday, January 25, the Cypriot Parliament approved amendments to the Law on the sale of mortgaged properties.
In particular, the deputies allowed debtors to keep their homes if they applied for participation in the state scheme "Mortgage for Rent".
The innovations will affect the objects that are used as primary residences the cost of which does not exceed 350 thousand euros. If all the necessary conditions are met by the owners, such properties will no longer be put up for auction.
It should be noted that under the new rules, the owners of mortgaged property, who have previously applied for participation in the program "Mortgage for Rent", but were rejected, will also have a chance. They will be able to appeal this decision in court. While the appeal is pending, their property will be protected from being sold under the hammer.
The "Mortgage for Rent" scheme was approved in July 2023. It allows loan defaulters to remain in a property purchased with a mortgage as tenants.
Under the government program, the Cyprus Asset Management Company (KEPIDES), which acts as a "bad bank", was allowed to buy up troubled loans from financial institutions. By transferring non-performing loans to the balance sheet of the bad bank, the Cypriot banking system is expected to be able to get rid of debt totaling €10 billion.
In other words, KEDIPES buys the mortgage housing from debtors. The troubled borrowers are then allowed to rent their properties from the "bad bank" for 14 years. During this period, they are charged rents at 65% of market averages. The amount of rent for each property is assigned on a case-by-case basis.
At the end of this term, they 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 is entitled to do so on the same terms. Finally, if the conditions of the scheme are not met, after 14 years KEDIPES can sell the property at its discretion.
It should be mentioned that particularly vulnerable borrowers are fully covered by the government for the required amount of rent. Subsidies to this category of citizens are paid for five years, after which they have the opportunity to buy the property at a price below market value.
The lists of beneficiaries of the new scheme include three categories of citizens:
1) Recipients of social benefits if their loans were unserviced on December 31, 2021, and remained in this status until December 31, 2022 (provided that the market value of the houses and apartments in which they live is less than 250 thousand euros).
2) All applicants under the Estia and Oikia programs who have been assessed as eligible but at high risk (the market value of their homes must not exceed 350 thousand euros).
3) All applicants under the Estia and Oikia programs who were initially approved for inclusion in these plans, but whose participation in the schemes was subsequently terminated.