Damning results of a reverse mortgage shadow shopping survey have sparked urgent calls by the Mortgage and Finance Association of Australia (MFAA) to create market standards.
Consumer watchdog Choice sent shadow shoppers to 15 mortgage brokers and analysed 23 reverse mortgage loans.
Pitfalls included poor product information, contracts with wide default clauses - which could lead to retirees losing their homes - triggered by small oversights.
Choice found the majority of brokers recommended borrowing a larger sum than shadow-shoppers needed and failed to discuss the alternatives to a reverse mortgage, like down-sizing.
"Choice is deeply concerned about our findings and will be lobbying all state government to adopt the New South Wales mortgage broker legislation. This legislation ensures all mortgage lenders have a licence and a dispute resolution scheme and requires all advice on reverse mortgages meets a minimum standard," a Choice spokeman said.
The MFAA has produced a Code of Proper Process for equity release products and helped to deliver an education program endorsed by the Senior Australians Equity Release Association of Lenders.
"MFAA is intent on doing all it can to ensure brokers work closely with those who provide advice to consumers, including financial advisers, accountants and lwayers to help people make the right choices," MFAA head of education Kevin Conlon said.
