Commonwealth Bank of Australia (CBA) has warned against over-regulating the reverse mortgage industry, stating it supports government legislation as long as it is in line with the industry’s existing guidelines.
“The bank welcomes the government legislating for the whole market and providing additional disclosures and protections similar to what the SEQUAL code of conduct already provides,” a CBA spokeswoman said.
“For example, the code already has a ‘no negative equity’ requirement and information statements to assist consumers with understanding the specific characteristics of the product.”
The spokeswoman’s comments are in line with views expressed by Senior Australians Equity Release Association (SEQUAL) chief executive Kevin Conlon.
Conlon’s comments come as the industry body prepares to submit its views on Assistant Treasurer Bill Shorten’s draft legislation on the $3 billion reverse mortgage industry.
“There are some serious warnings there about ensuring that the regulations don’t overburden an industry that has already demonstrated a track record of being ethical and efficient,” Conlon said.
He cited the no-negative-equity guarantee the industry developed and implemented of its own accord.
Negative-equity protection guarantees that if the sale of the reverse mortgage-holder’s property does not cover the debt, the lender bears the loss.
The industry has also overhauled its product disclosure statements to ensure clarity for reverse mortgage holders, who are mainly retirees.
The CBA spokeswoman said the bank had made a submission to government.
“The bank has already provided comments via a Treasury consultative forum and will provide written comments to the draft bill through the bank’s submission to the broader bill,” she said.
She said CBA had engaged government on reverse mortgages since the release of the Green Paper on National Consumer Credit Reforms.
“The bank is a member of the SEQUAL, which has set a code of conduct to ensure that additional disclosures and protections are achieved for consumers of reverse mortgages and home reversion schemes,” she said.
Meanwhile, CBA said its reverse mortgages business was running broadly in line with that of the overall industry, which posted growth last year but has yet to revisit its 2007 peak.
A Suncorp Bank spokeswoman said the bank was running off its reverse mortgage book.
“It’s a niche area and not one we’re currently looking to participate in,” the spokeswoman said.
A spokesperson for CBA’s wholly-owned Bankwest suggested it was doing the same.
“Reverse mortgages account for less than 5 per cent of our business,” the Bankwest spokesperson said.
“We are happy with our volumes in this market and are committed to sustaining our reverse mortgages book.”
Just over a year ago, Royal Bank of Scotland Australia flagged a sale of its reverse mortgages business and closed it to new clients.
Centuria, formerly the Over 50 Group, has also closed its reverse mortgage book to new business and said it planned to run off its circa $200 million book.
