The Mortgage-to-Rent scheme, the latest lifeline thrown to defaulted borrowers, is going ahead, as KEDIPES, the state-owned Asset Management Company, announced its blueprint on Tuesday.
Representing the former Coop Bank turned bad bank, Lambros Papadopoulos and Marios Papadopoulos, KEDIPES chair and general manager, respectively, unveiled the scheme.
KEDIPES will oversee the scheme after Brussels urged Cypriot authorities to create a company dedicated to managing it.
The scheme will start once Cyprus receives the final approval from Brussels, which is considered a formality, and expected to be granted in the coming days.
Mortgage-to-rent will benefit some 4,000 distressed borrowers, with the cost estimated at €400 mln.
The plan is for KEDIPES to acquire the properties tied to the mortgage at 65% of their current value.
The value of the home must not exceed €250,000.
Beneficiaries are those on social benefits or deemed unviable for the state’s previous two schemes for defaulted borrowers — Estia and Oikia.
Rent will be adjusted annually based on a formula to be decided, while borrowers have the option of state aid in case of any increases they cannot meet.
Beneficiaries will be paying rent according to the price at which KEDIPES bought the property and the timeframe of the agreement.
The mortgage-to-rent agreement will entail a minimum of 14-year payment duration, while borrowers could submit a proposal to acquire the property after five years.
Beneficiaries over 65 will not be given a specific timeframe to pay off their mortgage.
KEDIPES officials said the repurchase price would consider various parameters, such as changes in property prices, expenses and rent payments while remaining attractive for the beneficiary.
Banking institutions are crucial to the scheme’s success and have signalled that they are on board.
Last week, the House voted against another extension to a freeze on property foreclosures.
The majority of MPs rejected an AKEL proposal for a three-month extension, deciding to give the new government some time to come up with its proposals to assist distressed debtors.
The previous foreclosure halt had already lapsed at the end of January, meaning that property foreclosures have since legally resumed.