In announcing the “Delivering for Seniors” package on Saturday, Prime Minister Gillard has confirmed that a re-elected Labor Government would provide greater protection for older Australians with a Reverse Mortgage. She said she would ‘stop the rip-offs’ and provide the following protections:
- Extended protection for reverse mortgages and home reversion schemes, including greater disclosure of the features and fees on these products.
- A statutory protection against negative equity so consumers aren’t left with a debt significantly greater than the value of their property.
Whilst these goals are laudable, they seem to ignore the fact that such protections largely exist already. SEQUAL providers already fully disclose all fees and charges payable, and insist borrowers obtain independent legal and financial advice so they’re fully informed. In addition, SEQUAL providers offer a ‘No Negative Equity Guarantee’ which shields senior borrowers from the effects of potential future negative equity (ie; if the size of the debt were ever to exceed the value of the home).
Although the official reverse mortgage industry’s self-regulation via SEQUAL is fundamentally sound, fringe dwellers and rogue operators offering dodgy financial products purporting to be ‘equity release’ continue to pose the gravest threat to seniors. If the Prime Minister’s initiatives have the effect of shutting these operators down and forcing all remaining providers to adopt SEQUAL best practise, then a significant positive reform will have been achieved.