The Finance Brokers Association of Australia (FBAA) has called for the introduction of mandatory training and accreditation for anyone offering reverse mortgages to ensure borrowers receive the right advice and understand the long-term implications and opportunities.
FBAA executive director Peter White said the release of findings by the Australian Securities and Investments Commission (ASIC) highlights the need for higher standards in the often-misunderstood lending sector.
“ASIC found that while reverse mortgages can help people stay in their homes longer and therefore meet their short-term financial goals, often the long-term risks associated with reverse mortgages aren’t adequately explained.”
Mr White said the FBAA had been working closely with ASIC on reverse mortgages for some time and had formed a specialised working group under the chairmanship of Stephen Rasmussen following on from the foundational work of the Senior Australians Equity Release Association of Lenders, which folded in 2017.
“We are seeking to develop a co-ordinated industry understanding and strategy towards higher levels of training and accreditation, and to improve consumer access to accurate, timely and appropriate advice on their financing options,” Mr Rasmussen said.
“Our working group is focussed on a whole of industry approach to strengthen consumer safeguards, but it’s important to note significant protections have been in place since 2011 including high level disclosure requirements and the ‘no negative equity guarantee’.
“While in the main lenders have maintained high standards, this is a highly specialised area ideally served by practitioners who have developed the knowledge and experience in the sector. The tick-box response from some lenders is not appropriate as all applicants for reverse mortgages deserve good, independent advice taking into account long-term needs.”
Mr White said the FBAA knew there were gaps and was committed to closing them. “More than a year ago I instructed our registered training organisation to develop a new leading-edge course for reverse mortgages which was fully compliant and up to date. Our members must complete this course if writing reverse mortgages and we have made it available to non-members also.”
ASIC found that 63 per cent of borrowers could end up with less than they need to pay the upfront costs of aged care by the time they reach 84 years of age. Conversely ASIC found that with stable interest rates and modest growth in property prices reverse mortgages can lead to increased net equity.
Mr White said all reverse mortgage writers should be accredited to the same high standards demanded of FBAA members.