The Council of Ministers gave the go ahead to a government scheme titled “Estia” aiming to assist borrowers with non-performing loans collateralised with primary residences to repay their loans.
“As of today, the Estia scheme is on track for implementation,” Finance Minister Harris Georgiades said speaking to the press following a Council of Ministers meeting.
Under the scheme, the state will cover one third of the eligible borrowers’ repayment plan, while the banks will reduce the eligible loans’ outstanding amount to the value of the primary residence. Eligible loans are those collateralised with primary residence with a market value of €350,000 that were on September 30 2017 classified as non-performing. Furthermore, income and household wealth criteria apply.
The government has estimated a budget of €32 million EUR per year for a maximum of 25 years. The eligible loans amount to a total of up to €EUR 3.4 billion with the total public expenditure amounting to up to €815 million for the duration of the scheme.
Georgiades said the scheme can enter the implementation stage as the Parliament has already approved the scheme and its budget and the Ministry of Labour which will oversee the scheme’s execution has made the preparatory work.
The participating banks and asset managers will sign a memorandum of understanding with the government after which the scheme will begin.
“As a first step we will have the participating banks and asset manager agencies in July, followed by the submission of applications from every eligible borrower and the first payments will be made in December” he added, stressing that the government will subsidise an eligible borrowers repayment scheme provided that he or she meets its payment schedule.
“We believe Estia scheme adds to the current toolbox for tackling of these legacy (of the financial crisis), that of the serious problem of NPLs, focusing on the perhaps most sensitive borrower group, those who pledged their primary residence as collateral,” Georgiades said, adding the Ministry will monitor the scheme’s implementation.
Concluding he expressed optimism that the scheme will in general assist in tackling “a problem that weighs on our economy.”
The Scheme, which involves state aid has been approved by the European Commission’s DG Competition last December.