For over a decade, experts have been emphasizing the need to reform the current regulations regarding the reverse mortgage industry and lifetime annuities. The Association of Financial Enterprises and the largest mortgage funds in Poland are appealing to the government to take action on the Act on Lifetime Monetary Benefits, which will ensure transparency and consumer protection. It is worth mentioning data from the Ministry of Justice, which shows that in recent years approximately 14 thousand lifetime contracts were established annually. Some of these contracts were unprofessional, leading to abuses. This practice continues.
At the end of January, a ZUS report titled: “Voluntary poverty. On the consequences of voluntary ZUS for the self-employed” was published. It shows that as much as 99.18% of people running their own business pay minimal social security contributions. Such a practice leads to a situation where many self-employed people, especially women, are exposed to pension poverty, receiving only minimal benefits in the future. As a result, the state will have to subsidize minimal pensions for many of them.
In addition, research commissioned by the Chamber of Commerce of Pension Societies (IGTE) shows a low level of pension awareness among young Poles. As many as 87% of respondents expect a higher pension than ZUS forecasts, while only 6% actively seek knowledge about the pension system. This lack of awareness results in a lack of actions aimed at securing financial stability in old age.
In the face of various economic and demographic challenges, a reverse mortgage could provide significant support for seniors, providing them with additional financial resources. However, insufficient legal regulations in this area expose retirees to the risk of unfair practices and loss of their life’s work.
Robert Majkowski, President of the DOM Mortgage Fund, recently read a moving article in Newsweek by Małgorzata Święchowicz about lifetime contracts concluded between private individuals, for example, parents and a child. Unfortunately, the text was full of examples of seniors who, through unprofessional contracts, lost their life’s work and the roof over their heads, and are still suing their own children with no happy ending in sight.
As a professional institution affiliated with the Association of Financial Enterprises, which has created ethical norms for the entire industry, they experience each such article. They also try to educate seniors, preparing many educational materials about the legal aspects and provisions in contracts that should be taken into account. But this is definitely not enough. As long as the government does not reform the existing regulations, we will continue to read about abuses, and yet the scale of such fraud is much larger than what is written about in the media.
The reverse mortgage operates in Poland in two models. The first model is the reverse mortgage loan, which banks could offer to seniors if they wanted to. In 2014, parliament passed the law on the reverse mortgage loan, and the president signed it into law. It did not bring much desired effect as no bank offers this product to this day. The second model is the annuity, the reverse mortgage in the sales model, i.e. a service offered by, among others, mortgage funds, which have been operating in Poland since 2008.
For over 10 years, they have been calling for appropriate regulations that would introduce quality, ethics, and safety to the market, obliging all those who wish to operate in this market, says Robert Majkowski, President of the DOM Mortgage Fund, which has paid more than 28 million benefits to seniors since 2008. Majkowski reminds us that professional mortgage funds participated from 2013 in the works on the draft Act on Lifetime Monetary Benefit, but unfortunately the draft Act was withdrawn from the legislative process.
The industry is open to dialogue. The global market is forecast to triple over the next decade. Today, the most developed markets in the world are primarily the United States, the United Kingdom and Australia. In each of these countries, thanks to the reverse mortgage service, seniors annually release over 2 billion dollars in capital, and the number of companies offering such products varies in individual countries from several to several hundred entities, as is the case in the UK. Highly developed markets also include Canada, Norway, Sweden and the Netherlands.
It is worth emphasizing that in the most developed countries, reverse mortgage has been in operation for over thirty years, but dynamic development began in the last decade. A very important role in this process was played by the standards of offering the service and the reputation of service providers. The Polish market, if looked at globally, is still a young market, waiting and even requesting appropriate regulations. Majkowski hopes that the new government will re-examine the issue of reverse mortgages. They are open for discussion. With nearly twenty years of experience in this area, they are eager to share their knowledge and experience.
Source: https://ceo.com.pl/czas-na-reforme-hipoteki-odwroconej-12511
