RATHER than face eviction, people unable to keep up with their mortgage payments will be able to continue dwelling in their home as tenants, under a scheme prepared by the government.
Essentially the state will buy from the banks houses that are up for seizure. Dubbed “Rent instead of Repossession,” the plan is targeted at low-income households.
The scheme will be implemented via the Cyprus Land Development Corporation (KOAG), a public-law corporation that is under the jurisdiction of the Interior Ministry.
Moreover, those eligible and who apply for the programme will also be given the opportunity to buy back their real estate property after five years.
KOAG will buy from the banks properties facing foreclosure at their current estimated market value. In the event this value exceeds what the property owner owes to the bank, the difference will be credited to the homeowner’s account.
Conversely, any outstanding debts after the transaction are still owed to the bank.
The scheme concerns homes of a current market value up to €200,000, and eligibility depends on a person’s or family’s gross annual income, as follows:
- Single persons, with an income up to €13,000;
- Single persons with health problems, income up to €21,500;
- Single-parent families with one child, income up to €20,000, and an additional €2,000 for every additional child;
- Married couples without children, income up to €22,000;
- Families with one or more persons with a disability, income up to €33,000.
In addition, to be eligible a person cannot own more than one house, or any other property worth over €20,000, and he or she must have exhausted all other means to have their debt restructured.
The plan provides for low (subsidised) rents, and promises to keep confidential a person’s change of status from property owner to tenant.
According to the proposal drawn up by the Finance Ministry, the project is fundable and will be managed by redistributing funds credited to existing housing schemes of the Interior Ministry.
To implement the scheme, KOAG will be topped up with an additional €60 million for three fiscal years (2013, 2014 and 2015). The Finance Ministry claims the plan can be implemented with a “neutral fiscal effect.”
Now that is what I call an all inclusive, fully compassionate and socially moral policy. I am at a loss to understand where the money might come from however and whether or not taxpayers will accept their taxes being used in that manner. It would be nice to think they would. I am struggling to understand the sense behind any excess equity being credited to the homeowner’s bank account as that could lead to all manner of fraudulent activity. Theoretically, they could use equity to buy another albeit smaller property outright assuming their outstanding loan was a small one.
The policy will of course justify keeping prices artificially high – hmmm, I wonder if the developer lobby has had a hand in proposing this policy?