60+ I TA L I A N S A N D R E V E R S E M O R T G A G E S : C O M PA R I N G N E W O P P O R T U N I T I E S

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1 60+ I TA L I A N S A N D R E V E R S E M O R T G A G E S : C O M PA R I N G N E W O P P O R T U N I T I E S

2 THE UNDERLYING CONCEPT REVERSE MORTGAGE LOANS LOOK LIKE THE OPPOSITE OF CONVENTIONAL MORTGAGES: THE LENDER PAYS THE HOMEOWNER RATHER THAN THE LATTER MAKING PAYMENTS TO THE FORMER.

3 FEATURES MINIMUM AGE OF THE BORROWER (60 Y.O.) AMOUNT LINKED TO THE MARKET VALUE OF THE RESIDENTIAL PROPERTY INTEREST RATE (FIXED/VARIABLE, EV. CAPPED) GRADUAL REPAYMENT (ACCORDING TO CUSTOMIZED CLAUSES, IF INCLUDED)

4 PRIMARY GOALS REVERSE MORTGAGES ARE LINES OF CREDIT THAT ALLOW OLD PEOPLE TO USE THE EQUITY IN THEIR HOMES IN ORDER TO COVER THEIR LIVING AND OTHER EXPENSES. AS SUCH, THESE LOANS MAY ALLEVIATE POVERTY THAT AFFECTS MANY HOMEOWNERS IN THE LAST STAGES OF THEIR LIFE CYCLE AND HENCE MAY HELP TO IMPROVE SOCIAL INCLUSION

5 THE FRAMEWORK THE COMBINATION OF AN AGEING POPULATION AND LOW BIRTH RATES THE (UN)SUSTAINABILITY OF TODAY S PENSION SCHEMES THE NEED FOR LIFETIME INCOME PLANNING TOOLS AND FOR REMEDIES AGAINST POOR CONSUMPTION

6 FINANCIAL VS REAL ASSETS? NO THANKS! * DUE TO THE TREND TOWARDS INCREASING GLOBALIZATION, THAT HAS MADE TRADITIONAL KEYS OF CLASSIFICATION OBSOLETE * MORI M. (2016), Financial versus Real Assets? No, Thanks! Focusing on Reverse Mortgages in Journal of Global Economics, Management and Business Research, 7(4):

7 THEREFORE TOTAL WEALTH MANAGEMENT SHOULD BE FOCUSED ON, RATHER THAN PAYING AS MUCH ATTENTION AS IN THE PAST TO PORTFOLIOS CONSISTING OF SECURITIES ALONE

8 AND HOMEOWNERS SHOULD BETTER RECONSIDER THEIR RESIDENTIAL PROPERTY AS A WAY NOT ONLY TO SATISFY THEIR HOUSING NEEDS, BUT ALSO TO ACHIEVE HIGHER STANDARDS OF LIVING, ESPECIALLY AFTER RETIREMENT

9 REVERSE MORTGAGES HAVE BEEN REPORTEDLY INTRODUCED IN THE UNITED STATES IN 1961 CONSIST OF A FULL RANGE OF OPPORTUNITIES IN THAT COUNTRY ARE STILL IN THEIR INFANCY IN MANY OTHER FINANCIAL MARKETS, INCLUDING ITALY

10 NEW RULES LAW DECREE 203 SEPTEMBER 30, 2005 LAW 248 DECEMBER 2, 2005 LAW 44 APRIL 2, 2015 DECREE 226 (MINISTRY OF ECONOMIC DEVELOPMENT) DECEMBER 22, 2015 (IN FORCE SINCE MARCH 2, 2016)

11 HOWEVER MAIN POTENTIAL BENEFICIARIES HAVE BEEN IDENTIFIED WITH WOMEN, ELDERLY AND «HOUSE RICH-CASH POOR» INDIVIDUALS, WHO OFTEN LACK ADEQUATE FINANCIAL LITERACY TO EXPRESS A GENUINE INTEREST IN THIS TYPE OF LOANS

12 NO SURPRISE THAT REVERSE MORTGAGES ARE MOSTLY PERCEIVED AS A REMEDY AGAINST POOR CONSUMPTION RATHER THAN AS AN ORDINARY INSTRUMENT TO ACHIEVE A BETTER STANDARD OF LIVING, EVEN WITHIN AN ESTATE PLANNING FRAMEWORK

13 T Y P E S O F R E V E R S E M O RTG A G E S I N I TA LY PATRIMONIOCASA (DEUTSCHE BANK S.P.A.) PERTE (INTESA SANPAOLO S.P.A.) PRESTISENIOR (MONTE DEI PASCHI DI SIENA S.P.A.) PRESTITO IPOTECARIO VITALIZIO (BANCA POPOLARE DI SONDRIO) VALORE CASA (UNICREDIT S.P.A.)

14 CLAUSES & CHOICES (1/5) TYPES OF ELIGIBLE REAL ESTATE INTESA SANPAOLO S.P.A. REQUIRES THAT AN ELIGIBLE RESIDENTIAL PROPERTY MUST BE LOCATED IN MUNICIPALITIES THAT ARE INHABITED BY MORE THAN 30,000 PEOPLE

15 CLAUSES & CHOICES (2/5) INTEREST PAYMENTS ONLY UNICREDIT S.P.A. REQUESTS A FIXED RATE AND MAKES THE POTENTIAL BORROWER AWARE OF THE IMPLIED RISK (AN INCREASE OF THE RELEVANT PARAMETER BEYOND EXPECTATIONS). BY CONTRAST, MONTE DEI PASCHI DI SIENA S.P.A. CALLS FOR ATTENTION, AS THE BORROWER CANNOT BENEFIT FROM A FALL IN MARKET INTEREST RATES.

16 CLAUSES & CHOICES (3/5) AGE BETWEEN 65 AND 85 (UNICREDIT S.P.A.) BETWEEN 65 AND 95 (DEUTSCHE BANK S.P.A.) BETWEEN 60 AND 90 (INTESA SANPAOLO S.P.A.) AT LEAST 60 (MONTE DEI PASCHI DI SIENA S.P.A.) AT LEAST 65 (BANCA POPOLARE DI SONDRIO)

17 CLAUSES & CHOICES (4/5) PAYMENT SCHEMES: 2 OPTIONS INTEREST AND EXPENSES MUST BE PAID ON A MONTHLY BASIS TO UNICREDIT S.P.A., SO THAT THE AMOUNT OF THE LOAN CAN BE HIGHER. DEUTSCHE BANK S.P.A. AND INTESA SANPAOLO S.P.A REQUEST THAT INTERESTS ARE COMPOUNDED YEAR BY YEAR AND PAID AT THE END OF THE LOAN TOGETHER WITH ITS REIMBURSEMENT AND RELATED EXPENSES.

18 CLAUSES & CHOICES (5/5) THE «PLACE» SELECTED BRANCHES IN 5 CITIES (INTESA SANPAOLO S.P.A.) OFF-SITE AGREEMENTS SEEM A VIABLE ALTERNATIVE (INTESA SANPAOLO S.P.A. AND DEUTSCHE BANK S.P.A.)

19 CONCLUSIONS (1/2) THE SUPPLY OF REVERSE MORTGAGES IN ITALY IS A VALUABLE OPPORTUNITY BUT POTENTIAL USERS SHOULD BE PROVIDED WITH ADEQUATE CONSUMER FINANCIAL PROTECTION AND BE SUPPORTED BY QUALIFIED COUNSELORS IN ORDER TO MAKE BETTER CHOICES

20 CONCLUSIONS (2/2) UNPRECEDENTED ENERGIES SHOULD BE DEVOTED TO FINANCIAL COUNSELING, LITERACY AND EDUCATION, IN ORDER TO INCREASE INDIVIDUAL INVESTORS AWARENESS EVEN PROFESSIONALS SUCH AS REALTORS AND HOME CARE WORKERS MAY NEED TO BE EDUCATED ON HOW THESE LOANS CAN POSSIBLY BETTER SERVE THEIR CLIENTS

21 THANK YOU!