Advertisement

Journal of Housing and the Built Environment

, Volume 34, Issue 4, pp 1005–1022 | Cite as

The regulation of reverse mortgages as a source of income in retirement: policy options and legal drivers

  • Héctor Simón-MorenoEmail author
Article
  • 115 Downloads

Abstract

The current context of uncertainty regarding the long-term future of pensions in European countries due to the lack of public resources, coupled with the unstoppable aging of the population, may force the elderly to use private financial instruments so as to meet their needs. One of them is the reverse mortgage, which enables them to withdraw equity from their homes without being required to pay back the loan during their lifetime. The truth, however, is that its use is not widespread, generally speaking, in European countries. This paper explores the regulation of the reverse mortgage in Spain and Italy, countries which have a legal framework for equity release schemes, and taking into account the legislation other countries have enacted to regulate this financial instrument (so the experiences in Ireland, the United Kingdom and the United States are taken into consideration), it concludes by formulating recommendations for policy makers to promote the marketing of this financial instrument.

Keywords

Reverse mortgage Consumer protection Housing equity Welfare state Legal drivers 

Notes

Acknowledgement

Funding was provided by BBVA Foundation (Grants for Researchers and Cultural Creators 2015).

References

  1. Aalbers, M. B., & Fernandez, R. (2017). Capital Market Union and residential capitalism in Europe: Rescaling the housing-centred model of financialization. Finance and Society, 3(1), 32–50.  https://doi.org/10.2218/finsoc.v3i1.1937.CrossRefGoogle Scholar
  2. Álvarez Álvarez, H. (2009). La hipoteca inversa. Una alternativa en tiempos de crisis. Valladolid: Lex Nova.Google Scholar
  3. Baldini, A., & Causi, M. (2016). Il nuovo prestito vitalizio ipotecario: si svilupperà anche in Italia un mercato di strumenti finanziari per gli anziani? Reverse mortgage in the Italian market: A new start? Bancaria, 7–8, 68–72.Google Scholar
  4. Bank of Spain. (2012). Memoria del servicio de reclamaciones (pp. 1–428). Retrieved 25 July 2018 from https://www.bde.es/f/webbde/Secciones/Publicaciones/PublicacionesAnuales/MemoriaServicioReclamaciones/12/MSB_2012.pdf.
  5. Beverley, Y., Searle, A., & Mccollum, D. (2014). Property-based welfare and the search for generational equality. International Journal of Housing Policy, 14(4), 325–343.  https://doi.org/10.1080/14616718.2014.955334.CrossRefGoogle Scholar
  6. Castles, F. G. (1998). The really big trade-off: Home ownership and the welfare state in the new world and the old. Acta Politica, 33(1), 5–19.Google Scholar
  7. Chatterjee, S. (2016). Reverse mortgage participation in the United States: Evidence from a national study. International Journal of Financial Studies, 4(5), 1–10.  https://doi.org/10.3390/ijfs4010005.CrossRefGoogle Scholar
  8. Coda Moscarola, F. et al. (2015). Reverse mortgage: a tool to reduce old age poverty without sacrificing social inclusion (pp. 235–244). Retrieved 25 July 2018, from http://www.icpmnetwork.com/wp-content/uploads/2016/05/Anna-Daddio_What-is-the-Potential-of-Housing-Equity-for-Enhancing-Retirement-Security_Optional.pdf.
  9. Davidoff, T., Gerhard, P., & Post, T. (2015). Reverse mortgages: What homeowners (don’t) know and how it matters. Netspar Discussion Paper, 06/2015-024. Retrieved 25 July 2018, from https://ssrn.com/abstract=2651032.
  10. Delfani, N., De Deken, J., & Dewilde, C. (2014). Home-ownership and pensions: Negative correlation, but no trade-off. Housing Studies, 29(5), 657–676.  https://doi.org/10.1080/02673037.2014.882495.CrossRefGoogle Scholar
  11. Demhow. (2012). Final report—DEMHOW (Demographic change and housing wealth). Retrieved 25 July 2018, from https://cordis.europa.eu/result/rcn/54413_en.html.
  12. Devesa, J. E., et al. (2016). La revolución de la longevidad y su influencia en las necesidades de financiación de los mayores. Madrid: Fundación Edad & Vida.Google Scholar
  13. Dewilde, C., & Raeymaeckers, P. (2008). The trade off between home ownership and pensions: The individual and institutional determinant of old-age poverty. Ageing and Society, 28, 805–830.CrossRefGoogle Scholar
  14. Doling, J., & Overton, L. (2010). The European commission’s green paper: Reverse mortgages as a source of retirement income. Wiadomości Ubezpieczeniowe, 3, 45–57.Google Scholar
  15. Elsinga, M. (2011). A qualitative comparative approach to the role of housing equity in the life cycle. International Journal of Housing Policy, 11(4), 357–374.  https://doi.org/10.1080/14616718.2011.626599.CrossRefGoogle Scholar
  16. Elsinga, M., & Hoekstra, J. (2015). The Janus face of homeownership-based welfare. Critical Housing Analysis, 2(1), 32–41.  https://doi.org/10.13060/23362839.2015.2.1.174.CrossRefGoogle Scholar
  17. Entitats Catalanes d’Acció Social. (2016). Gent gran: pobresa i vulnerabilitat, Informe INSOCAT per a la millora de l’acció social (vol. 7, pp. 1–32). Retrieved 25 July 2018 from http://acciosocial.org/que-fem/informes-i-publicacions/insocat-informe-dindicadors-socials/.
  18. Equity Release Council. (2015). Unlocking the potential: The future of equity release (pp. 1–15). Retrieved 25 July 2018 from http://www.equityreleasecouncil.com/document-library/white-paper-unlocking-the-potential-the-future-of-equity/er-council-white-paper-2015-16pp-digital.pdf.
  19. Eurostat. (2016). People at risk of poverty or social exclusion, by age group, 2016 (% of specified population). Retrieved 25 July 2018, from https://ec.europa.eu/eurostat/statistics-explained/index.php?title=File:People_at_risk_of_poverty_or_social_exclusion,_by_age_group,_2016_(%25_of_specified_population)_YB18.png.
  20. Filandri, M., & Bertolini, S. (2016). Young people and home ownership in Europe. International Journal of Housing Policy, 16(2), 144–164.  https://doi.org/10.1080/14616718.2015.1130606.CrossRefGoogle Scholar
  21. Fornero, E., Rossi, M. C., & Urzì Brancati, M. C. (2011). Explaining why, right or wrong, (Italian) households do not like reverse mortgages, Working Paper 123/11 (pp. 1–21). Retrieved 25 July 2018 from http://fileserver.carloalberto.org/cerp/WP_123.pdf.
  22. Fundación 1º de mayo. (2014). Pobreza y trabajadores pobres en España, Informe Colección Informes, Madrid (vol. 106, pp. 1–42). Retrieved 25 July 2018 from http://www.fsc.ccoo.es/19706da04a0f885689aeb78454aa158f000050.pdf.
  23. Gonçalves, S., & Bravo, M. (2018). Valuation of reverse mortgages: an empirical investigation using Portuguese data (pp. 1–34). Retrieved 25 July 2018 from http://www.international-pension-workshop.com/wp-content/uploads/2018/04/Goncalves.pdf.
  24. Haffner, M., Ong, E. R., & Wood, G. A. (2015). Mortgage equity withdrawal and institutional settings: An exploratory analysis of six countries. International Journal of Housing Policy, 15(3), 545–567.  https://doi.org/10.1080/14616718.2015.1048091.CrossRefGoogle Scholar
  25. Haut Comité Pour Le Logement Des Personnes Défavorisées. (2012). Habitat Et Vieillissement: Vivre Chez Soi, Mais Vivre Parmi Les Autres! 17e Rapport du Haut comité pour le logement des personnes défavorisées (pp. 1–76). Retrieved 25 July 2018 from http://www.hclpd.gouv.fr/IMG/pdf/Rapport_Hclpd_No17.pdf.
  26. Hopkins, J. (2016). Home equity and retirement income planning survey. Madurai: The American College.Google Scholar
  27. Housing Europe. (2017). The state on housing in the EU 2017. Retrieved 25 July 2018 from www.housingeurope.eu/file/614/download.
  28. Institut für finanzdienstleistungen e.V. (2018). Integrating Residential Property with Private Pensions in the EU (pp. 1–225). Retrieved 15 January 2018 from https://www.equity-release.eu/wp-content/uploads/2018/03/Final-report-2018-03-21.pdf.
  29. Jgerenaia, E., Mourao, P., & Verulava, T. (2014). Pension system in Southern European countries—Challenges and opportunities. International Affairs and Global Strategy, 25, 1–19.Google Scholar
  30. Kemeny, J. (1981). The myth of home ownership. London: Routledge.Google Scholar
  31. Key Retirement. (2015). UK equity release market monitor (pp. 1–8). Retrieved 25 July 2018 from https://www2.keyretirement.co.uk/MediaLibrary/KeyRetirement/uploads/documents/Market%20Monitor/Market-Monitor-FY-2015.pdf.
  32. Lennartz, C. (2017). Housing wealth and welfare-state restructuring: Between asset-based welfare and the social investment strategy. In C. Dewilde & R. Ronald (Eds.), Housing wealth and welfare (pp. 108–134). Cheltenham: Edward Elgar Publishing.CrossRefGoogle Scholar
  33. Lennartz, C., Arundel, R., & Roland, R. (2014). Young people and homeownership in Europe through the global financial crisis. CUS Working paper series, Nº 03. Amsterdam: Centre for Urban Studies, University of Amsterdam (pp. 3–28). Retrieved 25 July 2018 from http://dare.uva.nl/document/2/156773.
  34. Malpass, P. (2008). Housing and the new welfare state: Wobbly pillar or cornerstone? Housing Studies, 23(1), 1–19.  https://doi.org/10.1080/02673030701731100.CrossRefGoogle Scholar
  35. Mandic, S. (2010). The changing role of housing assets in post-socialist countries. Journal of Housing and the Built Environment, 25(2), 213–226.  https://doi.org/10.1007/s10901-010-9186-5.CrossRefGoogle Scholar
  36. Mathä, T. Y., Porpiglia, A., & Ziegelmeyer, M. (2017). Household wealth in the euro area: The importance of intergenerational transfers, homeownership and house price dynamics. Journal of Housing Economics, 35, 1–12.  https://doi.org/10.1016/j.jhe.2016.12.001.CrossRefGoogle Scholar
  37. Mazzola, P., et al. (2016). Aging in Italy: The need for new welfare strategies in an old country. The Gerontologist, 56(3), 383–390.CrossRefGoogle Scholar
  38. Ministerio de Empleo y Seguridad Social. (2015). Resumen del Informe a las Cortes Generales 2015. Retrieved 25 July 2018 from http://www.seg-social.es/.
  39. Ministerio de Sanidad, Servicios Sociales e Igualdad. (2014). Plan Nacional de Acción para la Inclusión Social 2013–2016, Informes, Estudios e Investigación (pp. 1–134). Ministerio de Sanidad, Servicios Sociales e Igualdad. Centro de Publicaciones, Madrid.Google Scholar
  40. Mori, M. (2017). 60+ Italians and reverse mortgages: comparing new opportunities. Retrieved 25 July 2018 from https://ricerca.univaq.it/handle/11697/113067#.W2B8WS18u8U.
  41. Müller, T. (2018). Essays on housing and pensions: A European perspective. Wiesbaden: Springer.Google Scholar
  42. Nakajima, M. (2012). Everything you always wanted to know about reverse mortgages but were afraid to AsK, Business Review, Q1. Retrieved 25 July 2018 from www.philadelphiafed.org/research-and-data/publications.
  43. National Statistics Office of Spain. (2014). Proyección de la Población de España (vol. 2064, pp. 1–15). Retrieved 25 July 2018 from http://www.ine.es/prensa/np870.pdf.
  44. Nasarre-Aznar, S. (2011). Malas prácticas bancarias en la actividad hipotecaria. Revista Crítica de Derecho Inmobiliario, 727, 2665–2737.Google Scholar
  45. Nomisma - Società di Studi Economici S.p.a. (2014). I passaggi intergenerazionali di proprietà in Italia e le potenzialità del prestito vitalizio ipotecario, 1-52. Retrieved 26 February, from https://www.cisl.it/attachments/article/631/All.2%20AMM%201015_Nomisma.pdf.
  46. Norton, M., & West, S. (2014). Age UK poverty evidence review: Poverty in later life (pp. 1–20). Retrieved 15 January 2019 from http://www.futureyears.org.uk/uploads/files/Age%20UK%20on%20poverty%20in%20old%20age.pdf.
  47. OECD. (2013). Pensions at a glance 2013 OECD and G20 indicators: OECD and G20 indicators (pp. 1–364). Retrieved 25 July 2018 from http://www.oecd.org/pensions/public-pensions/OECDPensionsAtAGlance2013.pdf.
  48. O’Mahony, L. F. (2007). Conceptualising home: Theories, laws and policies. Oxford: Hart Publishing.Google Scholar
  49. O’Mahony, L. F., & Overton, L. (2015). Asset-based welfare, equity release and the meaning of the owned home. Housing Studies, 30(3), 392–412.  https://doi.org/10.1080/02673037.2014.963523.CrossRefGoogle Scholar
  50. Óptima Mayores. (2010). Informe Anual de la Hipoteca Inversa (pp. 1–22).Google Scholar
  51. Óptima Mayores (2011). Informe Anual Hipoteca Inversa (pp. 1–20). Retrieved 25 July 2018 from https://catseguros.files.wordpress.com/2012/04/optima-informe-hipoteca-inversa-2011.pdf.
  52. Organisation of Consumers and Users. (2012). Fincas y casas, 38, 1–20.Google Scholar
  53. Overton, L., & Doling, J. (2009). The market in reverse mortgages: who uses them and for what reason? Hypostat, European Mortgage Federation (pp. 12–15). Retrieved 25 July 2018 from https://www.law.berkeley.edu/files/bclbe/Hypostat_2009__europe_s_mortgage_and_housing_markets.pdf.
  54. Panageas, S., & Tinios, P. (2017). Pensions: Arresting a race to the bottom. In C. Meghir, et al. (Eds.), Beyond austerity: Reforming the greek economy (pp. 459–516). Massachussets: The Massachusetts Institute of Technology.Google Scholar
  55. Reifner, U., et al. (2009). Study on equity release schemes in the EU, Part I/II, general report and country reports. Retrieved 25 July 2018 from http://ec.europa.eu/internal_market/finservices-retail/.
  56. Richard, R., & Dewilde, C. (2017). Why housing wealth and welfare? In R. Ronald & C. Dewilde (Eds.), Housing wealth and welfare (pp. 1–33). Cheltenham: Edward Elgar Publishing.Google Scholar
  57. Rolnik, R. (2012). The right to adequate housing, United nations General Assembly (pp. 1–23). Retrieved 15 January 2018 from http://www.ohchr.org/Documents/Issues/Housing/A-67-286.pdf.
  58. Ronald, R. (2008). The ideology of home ownership. Basingstoke: Palgrave Macmillian.CrossRefGoogle Scholar
  59. Ronald, R., Kadi, J., & Lennartz, C. (2015). Homeownership-based welfare in transition. Critical Housing Analysis, 2(1), 52–64.  https://doi.org/10.13060/23362839.2015.2.1.176.CrossRefGoogle Scholar
  60. Ronald, R., Lennartz, C., & Kadi, J. (2017). What ever happened to asset-based welfare? Shifting approaches to housing wealth and welfare security. Policy and Politics, 45(2), 173–193.  https://doi.org/10.1332/030557316X14786045239560.CrossRefGoogle Scholar
  61. Rumi, T. (2016). Prestito vitalizio ipotecario e hipoteca inversa: le discipline italiana e spagnola a confront. Actualidad Jurídica Iberoamericana 5, 152–174. Retrieved 25 July 2018 from http://www.revista-aji.com/articulos/2016/num5/151-174.pdf.
  62. Sendi, R., Filipovič, M., & Kerbler, B. (2018). Asset-based welfare: Is housing equity release a viable option for pensioners in Slovenia. Journal of European social Policy.  https://doi.org/10.1177/0958928718804930.CrossRefGoogle Scholar
  63. Settanni, G. (2017). Equity release, reverse mortgage and home equity conversion: Perspectives in different law systems and questions for harmonization at EU level. European Business Law Review, 28, 731–746.Google Scholar
  64. Shan, H. (2009). Reversing the trend: The recent expansion of the reverse mortgage market, finance and economics discussion series (vol .42, pp. 1–41). Retrieved 25 July 2018 from http://www.federalreserve.gov/pubs/feds/2009/200942/.
  65. Sherraden, M. (1991). Assets and the poor: A New American welfare policy. Abingdon-on-Thames: Routledge.Google Scholar
  66. Simón-Moreno, H., Lambea Llop, N., & Garcia Teruel, R. M. (2017). Shared ownership and temporal ownership in Catalan law. International Journal of Law in the Built Environment, 9(1), 63–78.  https://doi.org/10.1108/IJLBE-09-2016-0015.CrossRefGoogle Scholar
  67. Toussaint, J., & Elsinga, M. (2012). Housing as income in old age. International Journal of Housing Policy, 12(1), 13–26.  https://doi.org/10.1080/14616718.2012.651298.CrossRefGoogle Scholar
  68. US Government Accountability Office. (2009). Reverse mortgages: Product complexity and consumer protection issues underscore need for improved controls over counseling for borrowers (pp. 1–74). Retrieved 25 July 2018 from https://www.gao.gov/assets/300/291790.pdf.
  69. White Paper on the Future of Europe. (2017). Reflections and scenarios for the EU27 by 2025. (COM(2017)2025). Retrieved 15 January 2019 from https://ec.europa.eu/commission/sites/beta-political/files/white_paper_on_the_future_of_europe_en.pdf.

Copyright information

© Springer Nature B.V. 2019

Authors and Affiliations

  1. 1.Faculty of Legal Sciences, UNESCO Housing ChairUniversity Rovira i VirgiliTarragonaSpain

Personalised recommendations