If your mortgage goes outside the banks' perimeter

For Italians, owning their own home has always been one of their main goals. Across the Peninsula, according to the latest Confedilizia data, 77% of families live in a house they own. Unfortunately, however, in the event of economic difficulties, this is the first to have to be sacrificed, resulting in psychological trauma and a destabilisation of the owner's life.

Over-indebtedness is a scourge that affects more and more people. The numbers of real estate units that go to auction every day are eloquent: more than 200 daily, which in 2023 will total around 88,000 units, of which almost 60% will be residential. A trend that has continued in 2024: in the first eight months the bankruptcy courts recorded a 16% increase in judicial liquidations, thanks to the post-pandemic rise in rates that affected families with variable-rate mortgages.

The banks in theory should have no interest in dragging their feet and sending families to the brink. Also because this immense amount of houses, flats and villas is hardly ever sold at its real value, considering that each auction is deserted many times and the judge is forced to lower the auction's base price at each subsequent appointment.

But it is increasingly not the bank that calls in the guarantee and sends the property to auction. Until now, without informing unsuspecting borrowers, credit institutions have systematically sold off packages of impaired loans (such as those of borrowers in arrears with their instalments, sold at around 20 per cent of their original value and even less for unsecured loans) to special purpose vehicles (SPVs) set up abroad, with share capital and employees reduced to a minimum. Spvs that on the one hand take action to recover the loan, also relying on specialised companies, the so-called servicers. On the other hand, they issue securities (so-called securitisations), whose yield depends on the probability with which a certain debt will be repaid, and place them with investors. This creates, therefore, a parallel trading system, with hitherto little-regulated operators that were often not picked up by the radar of the supervisory authorities. A mechanism, the one based on securitisations, that has also been encouraged by the European authorities, to allow banks to clean up their balance sheets of non-performing loans, so as to free up liquidity that would otherwise remain shelved for years.

Since last July, with Legislative Decree 116/2024, which transposed the Secondary Market Directive into Italian law, the market for impaired loans should become more supervised and transparent. If it has not yet done so, your bank should tell you what hands your mortgage has fallen into. In addition to disclosure requirements, the new legislation has introduced other measures to strengthen the protections of debtors who, at the first difficulties, have so far too easily risked ending up on their knees. It will now be crucial to monitor the implementation of the new legislation and assess its effects in practice.