Legislative confusion is slowing down reverse mortgages in Spain.

In November 2022, the Deputy Governor of the Bank of Spain, Margarita Delgado, addressed the media at the conference "40 years of the mortgage market: challenges and trends in the sector" and uttered a phrase that received almost no attention. "In the past, attempts to introduce products such as reverse mortgages have had little success, due to errors in commercialization or coincidence with the onset of the 2008 crisis," she said.

Reverse mortgages

Delgado spoke of this "complex product," as the manual issued by the Bank of Spain describes it. In fact, a reverse mortgage is a financial product designed to enable older people to generate additional income from their homes without losing''550,000 mortgages were granted and only 629 of these were reverse mortgages.' This data shows that this model has not been adopted in Spain, but it is a success in other countries.

Rodrigo Robledo, Director General of Financial Policy and Treasury of the Community of Madrid, explains why this is happening and puts it in perspective: "In the UK, there were 47,000 reverse mortgages in 2018, in Spain we lack financial culture, information and you would think it is an expensive product. In addition, there is a longevity risk for banks, a real estate risk for the bank, which could be left with unlivable properties, and they are also afraid of problems that could affect their reputation. "

Problems and proposals

When signing'. 's solutions and warns of the many problems he sees with reverse mortgages. "I think it's interesting to combine it with the payment of life annuity insurance. "

He also warns that "you don't necessarily have to have an heir to underwrite such products. In addition, an heir could come along at any time. I assume that those who sell this product set their own requirements, but the law does not require it. "

The duration and future of the reverse mortgage also don't appeal to the parties. "The debt has to be paid by the heirs, even though the reverse mortgage expires at age 90, no one can demand payment, it just expires and accrues interest.

"If the heirs don't pay, the bank acts by giving them a period of time to think if they want to pay the rent with benefits. Another problem that needs to be solved to succeed," he concludes on the issue. 'We need to avoid guarantors and mortgage enforcement.

There is another problem that Entrena points out: 'the appearance of guarantors is dangerous because they then end up on the debtors' register. We need to avoid guarantors and mortgage enforcement. If the heirs don't pay or they don't exist, the bank has to start court enforcement or mortgage enforcement within five years, this has to be eliminated, come up with something because you have to avoid it. "

Notary'. 'comments on the foreclosure restriction, the point at which a bank must investigate legacy as well as vacant assets. "Having to chase those assets, identifying them Is another nuisance. You can't spend time researching the legacy of a deceased person. "

In the end, Entrena says reverse mortgages "won't become popular unless you get rid of all these problems." In Spain, Mapfre is confident that the reverse mortgage it will commercialize with Santander, which was approved by the Ministry of Economic Affairs earlier this month, will be successful, although it also admits it is not a product for everyone.

'Generations who are now in their 30s or 40s will need a financial supplement to the state pension, which will always be'''exist and will be of basic importance,' explained the vice president of Mapfre, who also asks for 'greater protection' of such private pension plans by the public administration.

The property environment in Spain has changed in less than two years, and the market and legislation must adapt to the living model of future generations.