Cyprus’ government on Thursday approved a supplementary scheme designed to help people who cannot repay their housing loans to save their mortgaged primary dwelling from bank foreclosure, an official statement said.
The new scheme will supplement the so-called Estia plan, under which debtors were able to restructure their loans considered non-performing at the end of December 2019, a legacy of the 2013 financial crisis that forced Cyprus into bailout.
The statement said that around 1,850 households, either with very low income or without any immovable property, had been identified as eligible to apply for the scheme.
It added that the scheme will require 165 million euros (198 million U.S. dollars) to implement.
The scheme will enable borrowers to settle the balances either by restructuring the remaining principal and agree to repay in instalments or fully repay the remaining principal immediately and have the interest rate and other charges written off.
To be eligible, prospective participants must have a loan secured by a house worth no more than 350,000 euros.
The scheme is subject to approval by the European Commission, which approved the Estia plan in the aftermath of the 2013 bailout.
Cyprus had to accept harsh conditions from the Eurogroup and the International Monetary Fund for a low-interest loan totaling ten billion euros, about half of the country’s current gross domestic product.
The Estia plan aimed to help about 10,000 distressed debtors to repay their loans, thus reducing by about three billion euros non-performing loans held by banks.
Eligible debtors would have their housing loans reduced by one-third, while the state would pay one-third of their monthly instalments.
To date, just over six thousand loan holders have applied to join the scheme, of whom only 3,287 have submitted all required documents.
An official said the applications represent 1.9 billion euros in non-performing loans.