Government to launch Mortgage-to-Rent scheme on 4 December

The government will on 4 December launch a new scheme titled “Mortgage-to-Rent”, its fourth scheme aiming to assist vulnerable non-performing borrowers to keep their primary residences, after Estia, Oikia and the Central Agency for the Equal Distribution of Burden.

Under this new scheme, approved by the European Commission, eligible borrowers will transfer ownership of the house to the state-owned Asset Management Agency (KEDIPES), their loan will be written off and the state will pay their rent to KEDIPES for a period of 14 years with a right of the tenant to repurchase the house after five years.

Speaking at a recent press conference for the presentation of the scheme, Finance Minister, Makis Keravnos said the new scheme complements the government’s package for tackling of non-performing loans as well as any gaps in the current schemes with a view to assist borrowers and households.

“The Scheme’s basic aim is to protect the homes of vulnerable households with a full settlement of their loans, which is collateralised with their residences”, he said, calling all eligible borrowers to exploit the opportunity “which we believe is a good way out to the problem they are facing.”

The Finance Ministry Permanent Secretary George Panteli said the scheme’s fiscal cost is estimated at €200 million in the next two years which amounts to 0.9% of GDP.

Lambros Papadopoulos, President of KEDIPES said the scheme is extremely important for vulnerable borrowers and it is much more favourable compared with other schemes implemented by other EU member-states.

Under, the scheme, KEDIPES will acquire from banks and credit acquiring institutions that opt to participate in the scheme the primary residences worth up to €250,000 collateralising non-performing loans at 65% of the residence market value. The banks will write-off the remaining balance of the loan. Then KEDIPES will rent the house to the borrowers with the state covering the rent for a period of 14 years.

Eligible borrowers are those receiving public support allowances, as well as mortgage holders deemed not viable under the Estia and Oikia schemes with primary residences up to €350,000.

Keravnos noted that following the launching of this scheme, in combination with the previous schemes and legislative proposals tabled to the Parliament, “the government’s package is a very balanced approach addressed to all even to the vulnerable but to some described as strategic defaulters,”, borrowers who opt not to pay their loans waiting for better solutions.

Eligible borrowers for the scheme are around 2,500 but KEDIPES estimates that around one third will participate, judging from the participation rate of the previous scheme especially ESTIA.

Asked whether the scheme will pinpoint strategic defaulters, Keravnos said that the scheme combined with the legislative package tabled by the government “has the capacity to reveal strategic defaulters.”

On his part, Panteli recalled that the ESTIA scheme, which provided for a new restructuring of non-performing mortgages assisted by state subsidy, generated very small interest while eligible borrowers were around 13,000. “Therefore, theoretically the rest that were not interested in benefiting from the scheme, are deemed as strategic defaulters,” he said.

(Source: CNA)