Opposition MPs on Monday panned the administration over the public’s meager interest in a state-backed mortgage debt relief scheme, and warned that thousands of distressed borrowers may end up having their homes repossessed unless the government quickly comes up with alternatives.
In parliament, head of the banking association Michalis Kronides said that to date, of the 5600 applications filed for Estia – as the debt relief scheme is called – some 500 have been processed.
Of these 500 applicants, 250 are deemed to be viable borrowers and thus eligible for the scheme.
Meantime 4500 incomplete applications have been filed, with just 8 per cent of those applicants following through to complete the missing data. March 31 is the deadline for submitting missing information.
As for those who’ll be deemed ineligible for the plan, a finance ministry official said the government hasn’t yet come up with a concrete alternative arrangement but it is “examining various scenarios.”
The same official added, however, that the rules have been relaxed: those deemed ineligible for Estia at first sight will not see their applications denied outright; rather, they will be referred to the finance ministry for further guidance.
It emerged that in certain isolated cases a bank had moved to foreclose on properties, even though the home owner had applied for Estia.
The ministry official said they contacted the bank in question and “put a stop to this.”
The rules explicitly state that lenders must suspend a foreclosure process once a borrower has filed for the debt relief scheme.
But Stavros Papadouris, chairman of the association for the protection of primary residences, told legislators he has seen documents proving that banks are disregarding this constraint.
He cited one case where an application for Estia was filed on December 24 last year, yet the borrower received court papers relating to repossession on January 18.
And according to Papadouris, a bank auction on a €220,000 primary residence is being scheduled for March 19.
Stefanos Stefanou, an MP with opposition Akel, said Monday’s briefing confirmed that Estia, which the government touted as a cure-all for the problem of non-performing loans, has fallen well short of expectations.
The scheme was proposed in the wake of the 2013 financial meltdown to help people with non-performing loans retain ownership of their primary residence.
Borrowers would have their loan reduced by about 36 per cent of its value, with the taxpayer helping out and the bank taking a small hit.
The plan would also contribute to the deleveraging of Cypriot banks.
