Estia scheme kicks in for eligible borrowers

The Estia plan aimed at boosting borrowers’ ability to repay their defaulted loans went into effect on Monday, as the Cypriot government embarks on a scheme to subsidize repayments of restructured loans.

According to Cyprus News Agency, Finance Minister Harris Georgiades has called on all eligible delinquent mortgage lenders to apply for the ESTIA government subsidy scheme aiming to assist defaulted borrowers who used their primary residence as collateral to repay their loans.

The Labour Ministry will run the scheme and start taking applications on Monday, with submission deadlines running through November 15.

Eligible borrowers are those who on end-September 2017 had non-performing loans with their primary residences pledged as collateral. The government will subsidize the approved borrowers with one third of their revised repayment plan. The Ministry of Labour estimates that total applications will not exceed 15,000 while approved applications will not exceed 10,000.

ESTIA scheme was promoted by the government as an additional tool to assist non-performing mortgage borrowers, as part of the efforts to reduce high Non-performing loans in the Cyprus banking system. Georgiades has described mortgage NPLs as the most difficult group to resolve.

“Indeed, (the ESTIA scheme) kicks in and I would like to call on affected fellow citizens to submit their applications for review, because in this way, I believe, a more tangible assistance will be given to our fellow citizens in need,” Georgiades said on Sunday in Larnaca.

Estia has been controversial from the beginning but if it proves successful, the plan will help banks turn non-performing loans totaling €3.5 billion out of the red.

Cypriot banks still own just over €10 billion worth of non-performing loans, which surfaced during the 2013 economic and banking crisis on the island.