ESTIA mort­gage res­cue scheme to get green light from Brus­sels

Financial Mirror (Cyprus) - - CYPRUS -

The Eu­ro­pean Com­mis­sion is ex­pected to ap­prove the gov­ern­ment’s scheme for home­own­ers who have de­faulted on their mort­gage, dubbed ESTIA (Home), with­out sig­nif­i­cant al­ter­ations in Novem­ber.

Fi­nance Min­is­ter Har­ris Ge­or­giades said that Brus­sels has given clear in­di­ca­tions, that it will ap­prove the scheme with­out any al­ter­ations to its essence and ba­sic prin­ci­ples, in­clud­ing the scheme’s in­ten­tion to cover all loan de­fault­ers who mort­gaged their first home worth up to EUR 350,000.

Pre­sent­ing the gov­ern­ment’s bud­get plan for 2019, he said that the cri­te­ria of the ESTIA scheme was ap­proved by the cabi­net but has yet to be fi­nalised.

“As the plan in­volves state aid, it has been sub­mit­ted to the com­pe­tent Direc­torate-Gen­eral for Com­pe­ti­tion, and the fi­nal draft­ing of the cri­te­ria for the pro­ject will be de­ter­mined by the Eu­ro­pean Com­mis­sion,” Ge­or­giades said.

Ac­cord­ing to Ge­or­giades, the next move de­pends on the Cypriot author­i­ties as the pre­lim­i­nary sub­mis­sion of the pro­ject has al­ready taken place with the EU and the di­a­logue be­tween the com­pe­tent Eu­ro­pean author­ity and the Cypriot author­i­ties is in progress.

The di­a­logue, he said, is ex­pected to end within the week, and then af­ter ac­quir­ing cabi­net’s fi­nal ap­proval, it will be sent back to the EU of­fi­cially, with the fi­nal ap­proval from Brus­sels ex­pected some­time in Novem­ber.

“The scheme is not per­fect and there can­not be such a thing as a per­fect scheme, with no ques­tion marks, no moral dilem­mas or moral dan­gers. But it is a nec­es­sary plan to tackle the most dif­fi­cult class of NPLs, those who have as col­lat­eral homes worth up to EUR 350,000,” said Ge­or­giades. The scheme has come un­der crit­i­cism from the op­po­si­tion par­ties and em­ploy­ers and per­ceived with scep­ti­cism by the IMF warned of the moral risk pre­sented by the high ceil­ing on in­come cri­te­ria and the value of the mort­gaged prop­erty.

As things stand, the scheme aims to fi­nance one-third of the monthly in­stal­ments of de­faulted bor­row­ers who have mort­gaged their pri­mary home, worth up to EUR 350,000 and earn an in­come of up to EUR 50,000.

Ac­cord­ing to fig­ures quoted by Ge­or­giades, the value of all loans in the bank­ing sys­tem backed by the bor­rower’s main home is EUR 13.9 bln.

The value of loans with a prin­ci­pal res­i­dence as col­lat­eral of up to EUR 350,000 is EUR 8.7 bln of which 40%, EUR 3.5 bln, are non-per­form­ing.

Ge­or­giades said that these are also the most dif­fi­cult part of non-per­form­ing loans and amount to 15,000.

The gov­ern­ment ex­pects to fund the scheme with EUR 30 mln an­nu­ally over the next 25 years.

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.