Estia beneficiaries may have up to 50% relief, official says

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By Stelios Orphanides

A senior finance ministry official said on Wednesday that Estia, the scheme designed to help struggling borrowers repay their loans, may provide a reduction of up to 50 per cent in their debts, coming from partial debt relief and reduced rate.

The scheme was passed on Tuesday by the council of ministers amid a general anticipation by political parties seeking the opportunity to extend support to affected voter groups following the island’s third banking crisis in six years.

Estia “leads to a considerable decrease of the obligations of borrowers”, said Andreas Charalambous, head of the finance ministry’s directorate for financial stability. “We estimate 50 per cent.”

Charalambous, who was commenting in an interview to state-radio CyBC in the morning, said that the scheme “introduces proper incentives and therefore, response will be big allowing the scheme to succeed”.

The scheme allows borrowers, households or small and medium-size enterprises (SMEs), who have pledged their primary residence with a value of up to €350,000 as collateral, to have one third of their monthly payment paid by the taxpayer. Borrowers with an annual income of below €50,000 are eligible provided that the net value of their assets does not exceed to 125 per cent of the value of the home, i.e. €437,500.

According to the finance ministry official, Estia is expected to cover loans of up to €3bn.

A precondition is a loan restructuring which reduces the loan to the value of the collateral -and so burdening the bank-, Charalambous said. It also extends the repayment period up to 25 years depending on the borrower’s age and reduces the annual interest rate to 2.5 per cent plus Euribor with a maximum cap of 3.5 per cent.

Euribor is the average rate at which banks lend euros to each other.

Charalambous said that his optimism about the scheme’s success was also based on his belief that banks which participated in the “extended consultations” will also seek to benefit from the scheme.

“Everyone is contributing, bank, borrower and state,” he said. “The government has a 20 per cent contribution and because it is in the long-term, it is within what the budget can afford.”

Government spokesman Prodromos Prodromou said on Tuesday that next year’s budget will contain an item of around €30m to cover Estia. The expense will be financed by revenue from the legacy Co-op, which will initially administer €7bn in non-performing loans and come in the possession of the government following the completion of the acquisition of the healthy operations of the Cyprus Cooperative Bank by Hellenic Bank.

He also said that the government which intends to assign the implementation of Estia to the Cyprus Land Development Organisation, a state-sponsored agency tasked with constructing social housing, will help it build up its administrative capacity. In order to reduce the requirements for the latter low, the criteria of Estia were kept simple.

 

In a subsequent telephone communication, Charalambous said that existing legislation ensures that fraudulent statements by applicants can be criminally prosecuted.

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About Author

Stelios Orphanides is a journalist at CyprusBusinessMail.com. To contact Stelios Orphanides: [email protected]

  • Mint

    Doubt this will be approved by the European commission

    • A is B

      They wont do anything.

    • Neroli

      I really don’t think they give a f… toss!

    • I’ve been assured here on CM they are not involved or have given consent. I think when they specified tougher laws this wasn’t what they hoped.

      • Mint

        Then till the fat lady sings 😉

  • A is B

    Cyprus the country that rewards criminals.

    • Neroli

      Exactly! Where are all those people who pay on time and work a few jobs to pay the loan?? They should be out on the streets! Oh no they can’t cos they’re at work. Silly me! These defaulters must be laughing all the way to the bank!

      • scotontherock

        Yes totally agree. Absolutely furious and wish i had joined the band of non payers and then get all this help. I could have had nice new merc and lots of other ‘luxuries’.
        Who can honestly be encouraged to do the right thing when this happens?

      • A is B

        Any other country though and there would be people on the streets. The locals appear to be to brainwashed here to do anything, after all Cyprus does no wrong.

    • Barry White

      To be fair, A is B, many of the criminals are running the place.

      • A is B

        True, never thought of that.

  • Wanderer

    Thanks to the government for extorting those of us who pay their debts and don’t borrow what we are unlikely to be able to repay, to reward those who don’t pay their debts and make bad decisions.

    • Costas Apacket

      These can be easily split into Brits or Foreigners vs Cypriots

  • The Truth

    When it all goes Ti*s Up which it will they will as normal Cry and Moan it’s not their fault.

  • Gui Jun An

    why not give them their homes and forget the debt – ridiculous!

  • Is this an ongoing policy ? I mean does it have a cut off date for the defaulted loan ? I suspect some are considering a new loan given the great terms.

  • Bernard Smart

    so let me get this straight.
    someone who is earning nearly €4000 per month cant afford to make mortgage repayments?
    so the banks take a 25% hit on their loan value to get rid of the NPL and the government pays a third of whats left? if only i could get away with paying less than half of what i owe.
    very nice little windfall for those that cant be bothered to repay what they owe!
    only in the banana republic where votes count for everything whatever the cost to the taxpayer.

    ‘will be financed by revenue from the legacy Co-op’
    all the government is left with is the NPL’s because they are non performing and therefore generating no revenue if there was anything to be made from them Hellenic would have had them.

  • Guest

    It’s not the government that is meeting the cost, but the honest (some might say stupid) ordinary people who pay their debts and their taxes.

    • Legal_Immigrant_NYC

      *Some* might say stupid?

  • Barry White

    This really is another Sunny Isle robbery primarily to reward voters.

    “f up to €350,000 as collateral, to have one third of their monthly payment paid by the taxpayer. Borrowers with an annual income of below €50,000 are eligible provided that the net value of their assets does not exceed to 125 per cent of the value of the home, i.e. €437,500.

    From the above, this is a massive hand out to those with € 787,500 of “declared” assets and €50,000 in annual income.

    If they have €350,000 collateral with a loan usually less than that plus another €437,500 in assets then why would they be forced to sell those other assets and pay off in full the loan?

    • Neroli

      Because this is the island of luuuve

  • Douglas

    Only can happen in Fantasy Island

  • It’s so ridiculous, someone has to have some sanity, somewhere; surely ?

    • Neroli

      No not here

  • JS Gost

    I wonder why no foreign banks are interested in Cyprus, maybe they know something most here are too stupid to see,

  • Sistine301

    What a racket! Wish I had caught on sooner AND had the disposition for it. Sure money.

  • Costas Apacket

    So in other words the crooked Cypriots are getting their mortgages and loans paid by the foreigners and other idiots who have some sense of dignity and duty.
    How more racist does this crock of shit have to become before the EU wipes them out?

    • Neroli

      The EU /Germany won’t do anything they’re scared of losing their precious euro!

  • costaskarseras

    Anastasiades is an admirer of Margaret Thatcher’s neoliberal policies and has been applying them in sunny Cyprus.

    The outcome of these policies will be as catastrophic as they have proven to be in the once famous “workshop of the world”, Britain. There is not much industry now and what is left, is mostly in foreign hands.

    All publicly owned utilities have been given away. Gas, electricity, and water supplies and the railways do not function as well as in other European countries. The services are expensive, the commuters are suffering and the consumers as a whole are ripped off. The BBC has been running tv programs and informing us that “The Rip Off Britain team is ready to tackle the issues that most matter to you – from bills and bad customer services, to holidays and food.”

    The British Government has recovered all but 5 %, (£58billion) of the £1.2 trillion bailout that it provided the banks with during the credit crunch and recession, new National Audit ­Office figures show. I don’t think that Anastasiades will be more successful. All neoliberals think that is a price worth paying for saving the bankers. Of course, as we know, they always pass the bill to those who can least afford it.

    • Neroli

      Are you babbling again?

      • andyspencer

        Please do the UK a favour—come back and have to work here to survive and save the UK all the costs and benefits/perks you currently enjoy.

        • Neroli

          And what would those be??

  • SuzieQ

    Surely we ought to give them 100% and not just 50%. How mean can the finance ministry get?

    • Barry White

      The 100% solution was written as approved by Ms. C at the Central Bank on one of her yellow post-it notes but was lost. The measly 50% reduction will be rectified and returned to 100% in the morning when the MP`s spot this personal insult to the non-payers.

      • SuzieQ

        I’ll leave this in your capable hands….

  • Chris Georgiou

    Once you owe a large enough amount, you become an asset it seems.
    Cant we just put both the lenders and the parasites against a wall and have done with it?

  • 15NOV83.

    Im sure theres a catch to this

  • Douglas

    You cannot help but feel sympathy for the hard working honest families who have strived to meet their mortgage payments under difficult circumstances,only to find non payers get rewarded with 50% discount etc., they must feel they have been cheated 🙁

    • GSP

      Note: The discount is only for the poor people, those non-payers with an income of almost a thousand a week.

      • CP

        As per the article “Borrowers with an annual income of below €50,000 are eligible…”. Not so poor then.

      • Douglas

        I thought it stated €50,000 a year , but irrespective people talking out mortgages that they cannot pay back is irresponsible and you should not be rewarded for that,unless you live in fantasy Island,in the real world you have your property repossessed and sold at auction,my sympathy is with the hard working low cost ncome honest mortgagees who honor their debt to the Banks.

        • GSP

          Sorry Douglas. My maths is not as strong as it used to be. I misunderstood when I divided 50,000 by 52 and got ‘almost a thousand’

    • Jack Iacovou

      True,
      What incentive does this give anyone going to meet their financial obligations. This is a totally ridiculous principle that is being set here.