Distressed buyers.. Mortgage to rent scheme

Potentially 4,000 households will benefit from the Mortgage to Rent scheme, the government’s latest lifeline for distressed borrowers to help them keep their homes, according to a Finance Ministry official.

In comments to state radio CyBC, the Finance Ministry’s permanent secretary George Panteli said that 3,000 to 4,000 distressed borrowers would be included in the new government scheme.

He said that the scheme is currently under the microscope of the Directorate-General for Competition (GDA) of the European Commission and will be tabled before the House before the end of the year.

Panteli said the process in Brussels is almost done with its evaluation, with “GDA technocrats mostly asking technical questions related to the value of homes and asset to debt swap agreements between banking institutions and borrowers.

“The government’s goal is to include as many vulnerable households as possible.”

Beneficiaries will be people from low-income groups and pensioners, regardless of whether they have applied to the ESTIA scheme.

The program will also include borrowers who have defaulted on their mortgage but saw their application for ESTIA or other schemes rejected, as they were classified as unviable due to their low income.

The plan is for KEDIPES, the state-owned Asset Management Company, the former Coop Bank turned bad bank, to acquire the properties tied to the mortgage at 50% to 60% of their current value.

This way, the debtors would maintain occupancy of the property but not its ownership.

In exchange, the outstanding debt would be written off.

Borrowers will then be given the option to stay on the property, paying rent equal to 2% or 3% of its market value.

Rent will be adjusted annually based on a formula to be decided, while borrowers will have the option of state aid in case of any increases they cannot meet.

It will entail a 15-year payment duration, while borrowers could submit a proposal to acquire the property after five years.

The value of the home must not exceed €250,000.

Initially, Nicosia had been preparing a mortgage-to-rent scheme to cover non-performing loans collateralised by primary residences and SME premises, with a value of up to €350,000.

However, Brussels shot it down in June, demanding that the scheme only cover borrowers with homes worth under €250,000.

The GDA has also rejected the government’s plans to expand the scheme to cover loans collateralised by primary businesses.

According to its initial design, the scheme has a contractual value of €3 billion