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3 Sep 2019
Estia scheme rewards strategic defaulters

THE controversial Estia scheme, which rewards strategic defaulters by reducing their housing loans and subsidising their loan repayments, kicked into force on Monday.

The government has invited people to submit applications, the number of which is expected to reach 15,000 even though the eligible cases are not expected to exceed 10,000. This is a significant number of loans that will have to be subsidised by the taxpayer for the simple reason that the borrower had not been making any repayments to the bank.

The scheme is one of the unfairest and most unjust pieces of policy ever formulated in the Republic, as it rewards all those who refused to honour the loan contracts they signed and enables the banks to reduce their non=performing loans through state subsidy. By contributing 30 per cent of the loan repayment to be agreed, the state is also helping the banks. Perhaps, this was done to counter the legislation preventing the foreclosure of primary residences, approved by the parties, that prevented the banks from recovering housing loans.

With the protection of the primary residence, ostensibly to protect vulnerable groups, people were encouraged not to repay their loans as they could not be evicted. And now these people, apart from having their loans reduced, will also have their repayments subsidised by the taxpayer. These are not poor householders, but people with houses valued up to €350,000 and with other assets amounting to €250,000. How socially just is it for the state to help someone with significant assets, repay a loan on a €350,000 house or flat, while he does not have to touch his other assets?

In a country with rule of law rather than rule by populist parties, such a householder would be made to sell the property he cannot afford and move into a less expensive house. Then there are people that only repaid 10 per cent of their housing loan – by what logic would the taxpayer subsidise the repayment of the remaining 90 per cent? Is someone who paid 10 or 20 per cent of the value of his house, a house owner who must be protected by the state? What will the politicians tell those honest people who made big sacrifices in order to repay their housing loans, perhaps preventing a child from going to university, foregoing holidays for 10 years or imposing austerity on their family?

Most of the political parties have picked up on the injustice of the scheme, informing us that it does not protect the really vulnerable members of society. They are right, but they are not blameless in what is happening. If they had not been so keen to protect the primary residences, preventing bank repossessions by law, the problem of non-performing housing loans would have been solved and the money now being wasted in the Estia scheme could have been used to protect truly vulnerable householders instead of strategic defaulters.

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