10.10.2022
A mortgage-to-rent scheme for troubled borrowers is evolving as state asset management agency KEPIDES, the finance ministry, banks and the EU complete the detailing, reports said on Monday.
The Mortgage for Rent scheme was discussed during the recent visit of EU officials, representatives of the ECB and the IMF to Cyprus for the 13th assessment after the bailout. The scheme will cover all non-viable households that have applied for the Estia plan, but whose income is insufficient to pay the payments.
Under the proposed “mortgage-to-rent” scheme, households will pay low rent for five years, after which they are eligible to buy their own home.
Under a “mortgage-for-rent” scheme designed to help homeowners who are at risk of losing their property due to a delinquent mortgage, a person voluntarily transfers ownership of their home to their lender for five years. A business buys a house from a lender and becomes a landlord. During this time, the borrower no longer owns their home, but will continue to live in it as a tenant.
According to the daily newspaper Politis, KEPIDES is going to acquire 1,250 houses worth more than 100 million euros. The Treasury Department is expected to announce the scheme in the coming weeks in hopes of launching it in early 2023.
Politis said that the scheme will be available for 948 cases of insolvent debtors under the Estia plan and persons receiving public assistance. The plan will also be available to all non-viable debtors. The price of the main house must also not exceed the amount of 250,000 euros, and Kedips will buy the property for 60 percent of its value from banks. In July, the scheme appeared to be in jeopardy as Parliament voted to extend the moratorium on divestitures.
The bill, which amends the laws governing the transfer and pledge of real estate, extends the moratorium on the seizure of property until October 31.
Despite previous and repeated warnings that a further extension would deprive banks of the ability to reduce non-performing loans (NPLs) on their books, a majority of MPs voted in favor, arguing they want to protect homeowners amid the ongoing economic downturn.
Finance Minister Konstantinos Petrides said he sees no reason MPs are pushing for a buyout freeze, given that the government has rolled out various schemes to protect financially struggling homeowners.
“The suspension of foreclosure during this critical period also jeopardizes the rollout of the long-awaited Rental Mortgage Scheme, a €400 million scheme that protects housing for vulnerable households, including non-viable Estia debtors, as its EU approval will depend on the effectiveness foreclosure systems.
