Guide to the Italian NPL market for foreign investors

Those who attend meetings on NPLs surely know that one of the most common topics is the foreign investors’ opinion on the Italian NPL market.

In line with the stereotypes involving our Country, a special emphasis is given to the fact that the regulatory framework is unstable, the assets are difficult to be assessed, the recovery times are uncertain, etc. Genius and intemperance.

It is commonly believed that this situation is likely to discourage foreign investors, while actually the capital increases every year and the Italian servicers are sold to foreign companies or funds at high prices. Clearly, the capital to be invested is greater than the assets to be purchased, and an apartment in the Italian countryside is not worse than an apartment in the English or German countryside.

Therefore the foreign investors or servicers willing to purchase some Italian NPLs should take into account the 5 following aspects:

– The worst way of calculating the value of an NPL mortgage guarantee is the open market value (OMV) to which a flat-rate percentage is subtracted. In Italy, in fact, the open market and the judicial auction market are completely different.

Distrust the reports which calculate the value through the application of this method: the uncertain property release time and the poor access to the actual situation are too decisive.

The only element comparable to an auctioned property is another auctioned property under the same conditions;

– It is true that the land loans are collected faster than the mortgage ones, but do not consider this to be truthful: law, in fact, is implemented in different ways depending on the competent court; someone will send 90% of the money to your account directly from the contractor, while others will not apply Article 41 of the Consolidated Banking Act (relevant legislation), in addition to various intermediate scenarios;

– If you invest in collective procedures, make sure that the servicer to whom you are entrusting your money is aware of the fact that one or more people should be appointed exclusively to call the professionals and ask for urgent replies;

– If you do not want to wait far too long for the court decision at each stage and want to avoid any annoyance, enter 30% higher data into the algorithm. In Italy challenges, postponements and new hearings are very common. It averagely works after 100 loans;

– Invest only in one asset class at a time and apply to a servicer who specifically manages that asset class.

Note: Recently we have created a Twitter account: @GMAsrl1

Emanuele Grassi

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