CYPRUS: Estia scheme for distressed homeowners to start paying out in December

A Cyprus government scheme called “Estia” is on track to assist homeowners with non-performing loans to repay their toxic debt. 

Under the scheme, the state will cover one third of the eligible borrowers’ repayment plan, while the banks will reduce the eligible loans’ outstanding amount to the value of the primary residence.  

Eligible loans are those collateralised with primary residence with a market value of €350,000 that were as of September 30, 2017 classified as non-performing.  

Income and household wealth criteria apply for applicants of the scheme. 

The government has estimated a budget of €32 mln per year for a maximum of 25 years to cover the scheme.

The eligible loans amount to €3.4 bln with the total public expenditure amounting to €815 mln for the duration of the scheme.

Finance Minister Harris Georgiades said the scheme can enter the implementation stage as the parliament has already approved the scheme and its budget.

The participating banks and asset managers will sign a memorandum of understanding with the government after which the scheme will begin.

“As a first step we will have the participating banks and asset manager agencies in July, followed by the submission of applications from every eligible borrower and the first payments will be made in December.”

Georgiades said the government will subsidise an eligible borrower’s repayment scheme provided that they stick to the payment schedule.

“We believe Estia adds to the current toolbox for tackling of this legacy (of the financial crisis), that of the serious problem of NPLs, focusing on the perhaps most sensitive borrower group, those who pledged their primary residence as collateral,” Georgiades said.

He is optimistic the scheme will assist in tackling “a problem that weighs on our economy.”

The Scheme, which involves state aid, was approved by the European Commission’s DG Competition in December.