The Consumer Credit Legislation Amendment (Enhancements) Act 2012 amended the National Credit Act (including the National Credit Code) to introduce a number of reforms to the regulation of reverse mortgages.
National Consumer Credit Protection Amendment Regulation 2013 (No. 2) was registered on 21 May 2013.
From 22 May 2013 credit licensees must use the prescribed method to make projections of their home equity (ASIC’s reverse mortgage calculator) and to give those projections to consumers in the prescribed way.
From 1 June 2013 the Regulation:
- introduces additional responsible lending obligations so that a credit licensee’s assessment of whether or not a reverse mortgage is unsuitable must include reasonable inquiries about the borrower’s potential future needs;
- introduces a presumption that a reverse mortgage is unsuitable if it involves a loan to value ratio (calculated by dividing the amount of credit owed under the credit contract for the reverse mortgage by the value of the reverse mortgaged property x 100) above those prescribed (depending upon the borrower’s age);
- prescribes the reverse mortgage information statement (which must be given to all consumers before the licensee makes a preliminary assessment in connection with a reverse mortgage);
- prescribes the form of disclosure that must be given to a borrower if a credit contract for a reverse mortgage does not provide protections for persons who are not borrowers to reside in the mortgaged property; and
- prescribes how credit providers must keep records of nomination and withdraws of a borrower’s consent for a person to reside in the mortgaged property.
