Cash-rich banks are stockpiling properties as they turn to buy real estate linked to mortgages of defaulted borrowers as banking institutions dominate the property market.
The Bank of Cyprus and the Hellenic Bank will sell non-performing loans (NPLs) worth €4 billion by the end of February enabling them to dispose of more than 10% of their problematic loans.
Applications for the Estia programme, which aims to assist home owners with non-performing mortgages by providing government support, have been submitted by more than 50 percent of those eligible.
The first online auction of foreclosed properties will be held Wednesday morning kicking off at 10:00 and continuing for two hours unless a one-hour extension is granted when 16 properties will go under the hammer.
The Bank of Cyprus (BoC) will repossess properties if their owners do not apply for protection under the Estia scheme; it's only received 487 applications from an estimated 2,500 eligible owners.
An online auctions platform has been launched designed to increase the sale of mortgaged properties whose owners have defaulted on their loan agreement and before a foreclosure has taken place.
With only 3% of loan defaulters applying for the government's ESTIA debt relief scheme, economics professor Stavros Zenios from the University of Cyprus, tweeted the scheme is "failing BIG time."
Non-performing loans (NPLs) rose for a second consecutive month in May amounting to €8.05 billion with non-performing exposures (NPEs) dropping by €11 million to €10.13 billion, or some 30.8% of total loans.
The government backed Estia scheme enables those who have deliberately defaulted on their housing loans, i.e. strategic defaulters, to apply for mortgage relief but such flagrant fraud ought to warrant criminal investigation.
The Cyprus banks have the second highest Non-Performing Loan (NPL) ratio in the European Union after Greece, according to the European Banking Authority (EBA) 'Risk Dashboard'.
Banks in Cyprus have acquired more than 14,000 properties from households and businesses through foreclosures and debt-to-assets swaps according to a report in the Phileleftheros.
The Bank of Cyprus has sold non-performing loans (NPLs) amounting to some €34 million to APS, part of the APS Holdings group, which is also handling the Hellenic Bank’s portfolio of bad debts.
Although recent changes to the law have been made in efforts aimed at helping the Cyprus banking system to reduce high levels of NPLs, house repossessions are still at a low ebb according to Central Bank data..
The International Monetary Fund (IMF) noted that Cyprus had made little progress on resolving non-performing loans in its mission's concluding statement following its recent official visit.
