"Non-performing loans" are a legacy of the 2009–2019 crisis and have become a major economic and social scourge, while all related measures have proven ineffective.
The tens of thousands of required foreclosures on debtors’ homes have sparked massive social backlash, which is nearing a breaking point. This problem can be addressed immediately and swiftly through the introduction of the new institution of reverse mortgages.
A. Introduction to the domestic market
In developed countries, reverse mortgages (Home Equity Reverse Mortgages) have been developed with the aim of supplementing the protection of retirees (who receive public and private pensions). In Anglo-Saxon countries, they have been offered for many decades by insurance companies and banks, while in the last decade they have begun to expand into Continental Europe, primarily through banks.
A reverse mortgage is a loan that allows a homeowner to borrow money against the home’s equity without having to sell or move out of the home. The amount that can be borrowed will depend on the homeowner’s age, the appraised value of the home, and current interest rate conditions.
A reverse mortgage does not require repayment of the loan, but upon the borrower’s death, ownership of the property transfers to the lending institution.
Reverse mortgages use the equity in a retiree’s home to provide a lump-sum payment to the retiree or to fund an annuity (either for life or for a specific term).
B. Use of Reverse Mortgages to Drastically Reduce Non-Performing Loans (NPLs) of Individuals
Non-performing loans (NPLs) for individuals amount to 41 billion euros in 2025 (25 billion in mortgages and 16 billion in consumer loans). The overwhelming majority of borrowers are over 60 years old (HERMs are available for individuals over 60).
The inability to repay non-performing loans over the past 15 years has led to a series of legislative measures, which, however, have not resolved the problem because (a) borrowers lack the means to repay the loans, and (b) foreclosures result in the borrower being evicted from their home.
Both of these problems can be effectively addressed with reverse mortgages. The average loan-to-value ratio ranges from 15% at age 60 to 60% at age 80.
The amount of the reverse mortgage will be used to fully and permanently repay the Fund/Servicer, while the borrower will continue to live in their home until the last day of their life, with no further financial obligations to anyone. Upon their death, the property will become the property of the Organization that financed the loan.
The Reverse Mortgage Financing Agency should be controlled by Greek interests, so that the tens of thousands of properties/homes that will be acquired in the coming years can be integrated into the country’s overall housing policy.
Non-Negative Equity Guarantee: a proposed legislative provision to protect heirs (in the event of the borrower’s longevity and/or a decline in the property’s value).
The time required to prepare and launch the program (legislation, establishment/sourcing of a fund, organization, and operation) does not exceed 3 months.
C. Expected Results
- Use of an innovative financial tool (Reverse Mortgage) for the rapid and definitive resolution of a significant economic and social problem, which is a Greek peculiarity at the European level, and whose solution is continuously deteriorating over time due to legislative regulations.
- Repayment of the Funds/Servicers that have taken on the non-performing loans, and a drastic shortening of the time required to complete their mission.
- Reduction or elimination of the likelihood of the government’s guarantees being called upon.
- Protection of borrowers/debtors, allowing them to remain in their homes until the last day of their lives. This will have a tremendous social impact. Furthermore, their heirs will be fully exempt from inheriting the debts.
- The implementation of this program will have immediate positive economic, social, and political implications.
* Mr. Miltiadis Nektarios is a professor of Insurance Science at the University of Piraeus