ASIC has released an information sheet to assist industry use of ASIC's MoneySmart reverse mortgage calculator. The calculator was created for industry to meet new obligations under the National Consumer Credit Protection Act 2009 (National Credit Act).
Under the National Credit Act, credit licensees are required to use the calculator to make and show prospective reverse mortgage borrowers a range of projections that relate to the value of their home and the debt they may face over time. Credit licensees must also provide consumers with a printed copy of the projections.
Information Sheet 185: Using ASIC’s reverse mortgage calculator (INFO 185) provides:
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practical guidance for credit licensees on how to use the calculator to meet their legal obligations, including the projection of different scenarios, and
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information about how the calculator may be used to meet existing responsible lending obligations under the National Credit Act.
ASIC Deputy Chairman Peter Kell said ASIC wants to ensure that industry understand and meet their new obligations.
‘A reverse mortgage has different risks to a traditional home loan, and it is important that consumers are fully informed about the long term financial implications of taking out such a loan. This calculator is a flexible tool that will show consumers the possible impacts a reverse mortgage may have on their debt over time, and what this may mean for the equity in their home’, Mr Kell said.
The calculator is available on ASIC's MoneySmart website.
ASIC has also updated Regulatory Guide 209: Responsible lending conduct (RG 209) to take into account new responsible lending obligations that apply to reverse mortgages, including:
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the requirement for licensees to make reasonable inquiries about a consumer’s requirements and objectives in meeting possible future needs
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presumptions of unsuitability where the loan-to-value ratio exceeds set thresholds based on age, and
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how the requirement to make and show equity projections can be used to meet existing responsible lending obligations to consider requirements and objectives.
Background
ASIC launched a new reverse mortgage calculator on its MoneySmart website earlier this year (refer 13-040MR)
The National Consumer Credit Protection Amendment (Enhancements) Act 2012 (Enhancements Act) and related regulations introduced a number of enhanced obligations in relation to reverse mortgages in the National Credit Act.
Among other things, it requires credit licensees to make and show projections to a consumer before a preliminary or final assessment of unsuitability in relation to a reverse mortgage is made, using a website approved by ASIC. The credit licensee must make the projections in accordance with any instructions for the making of the projections included on the website approved by ASIC – that is the ASIC's MoneySmart reverse mortgage calculator.
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