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Reverse Mortgage Market in Poland: Need for Regulation and Professional Standards

REAL ESTATEReverse Mortgage Market in Poland: Need for Regulation and Professional Standards

After eight years of ruling, PiS party returns to the political faction, whose members – many years ago – were working on regulating the reverse mortgage market. Discussions about this service have been taking place in Poland since 2012. Back then, several organizations including UOKiK, KNF, the Ombudsman for Civil Rights and the Union of Polish Banks pointed out the need for regulation. In 2014, the Act on Reverse Mortgage came into effect, but it is known as the “dead law”. Why? First, no bank has introduced this service and, second, the act only regulates a part of the market. According to the Ministry of Justice, each year seniors sign approximately 16,000 lifelong contracts, through which they transfer property ownership in exchange for lifelong benefits. This means that 16,000 people each year are exposed to the risk of losing their home, flat, or being “dragged” through courts by someone who does not pay the promised cash benefits or does not fulfill their contract obligations.

It is worth reminding that the reverse mortgage operates in Poland in two models. The first model is the Reverse Mortgage, which could be offered to seniors by banks if they wanted to. In 2014, parliament passed a law on reverse mortgages to regulate the “banking service”, which proved to be futile, because no bank offers this product till date. The second model is a lifelong pension, a reverse mortgage in the sales model, a service offered by, among others, mortgage funds.

According to Robert Majkowski, President of the DOM Mortgage Fund, unfortunately professional institutions, without a proper act regulating this part of the market, are often mentioned alongside non-professional entities or private individuals committing abuses.

The latest data from the Ministry of Justice shows that in 2022 a total of 16,451 new lifelong contracts were signed, resulting in the transfer of property rights in exchange for financial benefits or care. It is pointed out that there is a potential, but there is no law. In 2020, Ernst & Young in cooperation with the European Pensions and Property Asset Release Group (EPPARG) prepared a report on reverse mortgages worldwide indicating the most and least developed markets and estimating the development prospects for equity release products worldwide.

It is estimated that by 2031 the annual volume in Poland can reach about USD 0.6 billion. Replay Professional funds are calling for appropriate regulations that would bring quality, ethics, and security to the market, and are open for talks.

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