Equity release, reverse mortgage and home equity conversion: perspectives in different law systems and questions for harmonization at EU level

Abstract:

In developed countries, the elderly are often homeowners, but sometimes they face problems of liquidity since their pension incomes do not always provide them with adequate revenues. For this reason, some solutions have been studied in different law systems to grant such people the necessary income for their needs by using their householders’ rights.

For the purposes of this analysis, the reference is to home equity conversion mechanisms, among which equity release instruments are probably the most common ones. Using such instruments, householders’ rights can become liquid and be of great benefit for both homeowners and the market in general.

Reverse mortgage is one of the equity release instruments which are popular in the market. However, reverse mortgage is regulated in different ways in many law systems. This paper analyses how EU (with the addition of some extra-EU) law systems regulate reverse mortgage, highlighting the main legal differences among them, peculiarities and problems. A specific analysis is carried out with regard to new legislation recently adopted in Italy about reverse mortgage (c.d. prestito vitalizio ipotecario).

The final reflections will regard the possibility – or, better, the need – of a wide harmonization at EU level in relation to legal provisions regarding reverse mortgage. This would create a clearer framework for all Member States, in which homeowners of different law countries could easily profit from an instrument regulated at high level and take advantage – with no doubt and uncertainty for them – of their householders’ rights in order to make them liquid, with the final objective of giving a practical answer to the crisis we are faced with.