More than 1,000 reverse mortgage consultants have now been officially accredited across Australia, according to SEQUAL, the peak industry group representing reverse mortgage lenders.

“Retirees’ demand for reverse mortgages is growing rapidly alongside our ageing population,” said SEQUAL’s Head of Education, Kevin Conlon, who was appointed in 2007 to spearhead the initiative.

“SEQUAL is committed to ensuring seniors have access to accurate information on reverse mortgages and retirement financial planning. In just one year, SEQUAL’s education courses have created a geographically diverse network of trained reverse mortgage professionals on whom seniors can rely,” he says.

‘It is encouraging that brokers and planners are active participants in the program. It is critical that these parties combine their skills in the best interests of seniors,” says Conlon.

“SEQUAL’s Reverse Mortgage Consultant (RMC) designation allows retirees to easily identify market practitioners who have the skills to be considered a trusted source of reliable information. Accreditation is a badge of quality.” 

Choice (Australian Consumer’s Association) recently released a report estimating the major banks are charging consumers $4 billion a year in fees.

Senior borrowers are among the worst affected, with reverse mortgages by two of the largest banks both attracting monthly fees of $12 and $15 respectively. These fees will immediately attract interest, which will eventually compound. Based on their current rate of 10.49%, a monthly reverse mortgage fee of $12 would attract approx $8,000 in compound interest over 20 years!

Some may argue that the monthly fees and higher interest rates charged by the big domestic banks are offset by the security their balance sheet (size) offers consumers. However, for those more concerned with price the good news is there are also much cheaper alternatives available in the market. Many lenders do not charge monthly fees at all, and have significantly lower rates. For assistance go here or to Seniors First.

The announcement by the Rudd government yesterday that reverse mortgages will be regulated federally through ASIC is a welcome development for consumers. How will this help in a practical sense? It will mean that ALL brokers and organisations selling and advising on these products MUST be licensed and properly qualified. Whilst many reputable groups, such as Seniors First, already meet already meet the standards that regulation is likely to require, the fact is that the current system does not demand all operators comply. Although the vast majority of mortgage brokers do the right thing, there is undeniably a small element of shonky operators. The regulation should weed these guys out, and reduce the risk of getting ripped off or poorly advised.

The down side to this announcement is that the regulation is not likely to take effect until late 2009. So what to do in the meantime? Should you hold off taking from taking a reverse mortgage until then?

 The quick answer is no.  Just be careful who you deal with. Check that your broker or adviser has the following:

• SEQUAL Accreditation
• Access to at least 3 different reverse mortgage lenders
• Membership of the MFAA

If you are unsure or would like guidance, contact Seniors First on 1300 745 745.

The Federal Government yesterday released a Green Paper on the impending federal regulation of the credit sector. This discussion paper indicates that ASIC will soon regulate the provision of reverse mortgages to senior consumers.

The Green Paper outlines a way forward for the Commonwealth and states to transfer the remaining financial services regulation from the State level. Under the plan, delivered by the the Hon Nick Sherry, Minister for Superannuation and Corporate Law, financial services including mortgages, mortgage brokers, margin lending, non-bank lending and trustee companies, will move to the Federal level.

“This is about better protection of the Mums and Dads who take out a mortgage and deserve to know that the brokers selling it to them are reputable and upfront with their fees and charges,” said Mr Sherry.

“The Financial Services and Credit Reform Green Paper provides a plan for change – to benefit the consumer, while reducing red tape and compliance costs for business, and ensuring Australia stays ahead in the international financial services market,” Minister Sherry said.

“On mortgages, it’s absolutely critical that the advice new borrowers receive is top quality and that they are not getting into debt they can’t service. I am also concerned about reverse mortgages and the number of people taking them up without a clear understanding of the implications.”

There is no single, easy answer to this question. All of the banks and lenders who provide reverse mortgages in Australia have different rates, fees and product features. The best lender for you will be determined by your specific needs. For example: if you are seeking a 3 year fixed rate, only two lenders in the market offer this option.

Sometimes the cheapest option may not necessarily be the best solution for you. Other factors can come into play: is my lender safe? Will my cash reserve funds always be available for future use? Is the ‘No Negative Equity G’tee’ rock solid? Also, the best lender for your circumstances may be very different from the lender that is best for your friend. It’s a personal thing. In any case it’s very important you get good information and help from an independent source, such as Seniors First.

However, rates are important. There is currently a big difference in the interest rates charged by the banks, and choosing the wrong lender can end up being a very expensive mistake. To check your loan, go here.

If you’re thinking about a reverse mortgage, then your best source of information and assistance will be someone who has completed the SEQUAL accreditation. If they’ve done the course and gained the accreditation, they will have a good understanding of all the issues surrounding these loans and should be able to show you how to save many thousands of dollars in interest.

Indeed, the Mortgage & Finance Association of Australia and all of the SEQUAL lenders now make this a mandatory requirement for any finance brokers who wish to offer reverse mortgage products to consumers. Be sure to ask your broker if they are SEQUAL accredited. If they are NOT, seek assistance elsewhere immediately.

Public seminars can be a highly effective way to get information on reverse mortgages you need. For people in Melbourne considering a reverse mortgage, Seniors First are conducting a series of FREE public forums this week. With representatives from Centrelink and the legal profession attending, this is your opportunity to get all the facts.

The dates and venues are:

ESSENDON - 21st May, 10am. Buckley Bowls Club, Cooper St Essendon.

BULLEEN - 21st May, 2pm. Manningham Club, 1 Thompsons Rd Bulleen.

BOX HILL - 22nd May, 10am. Best Western ‘The Tudor’, 1101 Whitehorse Rd, Box Hill.

BENTLEIGH - 22nd May, 2pm. The Bentleigh Club, Yawla St Bentleigh.

To book your seat please call 1300 745 745.

If you live in Victoria you may recall the ‘Money for Living’ scam of 2005 where several hundred pensioners were fleeced by a former convicted fraudster operating a dodgy equity release scheme. ASIC have now successfully prosecuted the director, Gary O’Neill, and he recently pleaded guilty to two counts of dishonestly using his position as an officer of a company.

This is a great result for ASIC, and yet another illustration to senior consumers of why it is so important to deal with ONLY SEQUAL accredited introducers when seeking to release equity from their homes.

So how did this dodgy scheme work?

It went like this: Money for Living used the celebrity endorsements of Dawn Fraser & the actor Paul Cronin to aggressively advertise their scheme on TV as an alternative to reverse mortgages. Although it purported to release equity from people’s homes, it in fact required that applicant sell their home for less than market value to Money for Living, in return for a guaranteed monthly income and lifetime tenancy. A BIG no-no.

Money for Living failed to disclose the lifetime tenancy agreements to the lenders who took subsequent mortgages over the properties in question, and the whole thing fell over like a house of cards.  At the time of this debacle in 2005, reverse mortgages were only just getting off the ground in Victoria and many people understandably confused this scheme with reverse mortgages and other legitimate forms of equity release, and the Victorian market has subsequently lagged behind the rest of the country as a result.

This scheme was completely different from conventional equity release. For instance, normal reverse mortgages are just loans that:

• Do not involve the sale of a property
• Do not require an change in ownership structure
• Are repaid from the future sale of the property

 Hopefully this successful prosecution will now see Victorians use legitimate forms of equity release in greater numbers.    

Bluestone Equity Release has announced that they will scale back their Australian reverse mortgage offer as a result of the global credit crunch.

Due to the rising cost of funding, Bluestone have withdrawn from the mortgage broker & financial planner channel. Although their award-winning reverse mortgage will still be available via credit unions and other alliance partners, the product will no longer be sold through mortgage brokers due to the higher cost of originating loans through that channel.

Whilst this is disappointing for consumers, as the product level of choice diminishes further, it should hopefully be temporary. Indeed, Bluestone CEO Peter McGuinness has indicated that once global liquidity pressures ease, they will review this decision.  

The Australian Securities & Investments Commission (ASIC) is seeking people to participate in research on reverse mortgages. ASIC is undertaking this research into consumer’s experience of reverse equity, as part of it’s role as the consumer protection regulator.

Participants must live in Victoria and have taken out a reverse mortgage within the last 12 months. The research involves a confidential 40 minute chat. Chant Link & Associates, the agency conducting the research on behalf of ASIC can be contacted on 03 9517 9607.