Following a recent ASIC report on reverse mortgages, an industry association is calling for the introduction of mandatory training and accreditation.
The training would be for anyone wanting to offer reverse mortgages, to ensure borrowers receive the right advice and understand the long-term implications and opportunities.
Executive director of the Finance Brokers Association of Australia (FBAA) said the findings by ASIC highlighted the need for higher standards in the sector.
In its report, ASIC reviewed 17,000 reverse mortgages and found that while they can help Australians achieve a better way of life in retirement, there was a poor understanding of the risks and future costs of the loan.
It found that lenders had a “clear role to play” and should be doing more to communicate with borrowers.
Peter White said the FBAA had been working closely with ASIC on reverse mortgages for some time. It has 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.
Rasmussen said, “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.
“Our working group is focussed on a whole 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 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.”
White said the FBAA knew there were gaps and was committed to closing them. He added, “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.”