Cyprus’ ESTIA scheme subsidising borrowers with toxic mortgages is off to a shaky start as only one-fifth of applications submitted are expected to be approved as the large majority were filed incomplete.
The scheme’s failure further diminishes banks’ expectations of reducing red loans from their balance sheets.
The homeowner rescue scheme backed by the Ministry of Finance to help loans repayments was struggling from the get-go as only 3% of the expected 12,000 applications were submitted.
Things picked up towards the end of the year with banking institutions pushing borrowers to sign up for the scheme, raising the number to 5,648, still less than 50% of what was expected.
ESTIA was launched in September in an attempt to reduce Cyprus’ bad debt mountain.
It sees the state subsidising one-third of toxic borrowers’ monthly instalments after a loan restructure agreed between the borrower and the lender.
ESTIA covers borrowers that had non-performing loans up until September 30, 2017.
The plan only covers vulnerable borrowers whose market value of their home does not exceed €350,000.
Incomplete applications will remain mothballed until authorities decide what they are to do with applications of borrowers who have exhibited interest to cooperate with banks to pay off their loans but are currently in financial trouble.
Based on updated data collected from stakeholders and presented by Stockwatch, the number of fully-completed applications, accompanied by all the required supporting documents is 1,204.
The value of these loans is estimated to be around €290 mln.
The value of loans involved in the 5,648 applications submitted stands at €1.5 bln.
According to the online news site, just 300 applications have been screened by banking institutions and sent to the Ministry of Finance for final approval.
Banks are urging borrowers to send in any missing documentation, so they are able to screen more applications.
Michalis Kronides, the manager of the Cyprus Banks Association urged borrowers to submit their documents before April, when the extension given by the government to borrowers with incomplete applications ends.
The Finance Ministry has until the end of July to evaluate applications that have been submitted with all supporting documents.
It will first evaluate if applicants fall within the criteria set, and then if they are able to pay off their loans with the help of the scheme.
Reportedly, the Ministry is to also file all incomplete applications so as to have a clearer picture of vulnerable borrowers.
After it had become clear ESTIA was not going to produce desired results, the government is contemplating a second social coherence scheme to help out toxic borrowers willing to cooperate.
