The mortgage credit markets

Generally speaking, the Italian mortgage market is finding it difficult to get moving again.

In fact, a mismatch between supply and demand has been observed for various reasons (see also the “Non-performing loans: the opinion of the subjects directly involved/1”.article.) This may be due to the decisions of the institutions to avoid any excessive depreciation of their assets, while others emphasise the fact that real estate loans have been put aside in the budgets only to a very small extent, and now the creation of provisions is even harder due to lower earnings; moreover, some believe that the offerings of the major acquiring funds/companies are too low. Probably, there is some truth in all these assumptions.

However, the number of the servicers dealing with these loans is increasing.

Maybe they are arranging the future massive sale or introducing some diversifications. Actually, many servicers of unsecured loans have focused on the IPO system, always applying the same business model.

The same applies to lawyers, real estate appraisal companies, appraisers, real estate funds and the like are all pursuing their profits.

Sometimes, we bump into these professionals/companies coming from other areas, and we understand their intentions straight away, because of their different business models and points of view or lack of experience. The mortgage credit market is extremely multi-faceted and requires a specific training.

Far from extending this judgment to the entire categories, a list of the indispensable requirements for mortgage servicers is provided below:

– ability to properly identify the credits: “mortgage credits” are different from the other kinds of “credits.” Mortgage security, in fact, once combined with executive and/or collective procedures, implies certain calculation and assessment rules. However, in spite of the applicable regulations, every court follows different calculation criteria.

– ability to identify third-party expenses: it is quite easy to assess the internal costs to be borne, while it is hard to anticipate the external ones. For example, within a collective procedure, this ability can exert a significant impact on the outcome of the deal. The development of the exit strategies should also consider this aspect: a suitable planning of the expenses and predeductions provides a more accurate numerical analysis. In this case, too, each court applies its own customs and rules.

– local connections/ networks: through the performance of advanced analyses and works, the local verification acts as a confirmation. In some cases, it plays a crucial role, since the real estates in Italy are extremely various, even the adjoining one, just like the Italians.

– right approach to real estates: mortgage credits which are destined to remain credits represent an opportunity lost; the valuation results to a large extent from the interventions on the property covered by a guarantee. This implies a dramatic change, since the real estate mechanisms are different and must coexist with the financial ones. The establishment of a Reoco is not enough; in order to be successful, the Reoco must be an actual and independent company.

 

Emanuele Grassi

 

 

 

 

 

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