Watchdog sounds mortgage broker crackdown
Rising investor interest and media hype surrounding equity release products, exacerbated by the recent collapse of a company spruiked by swimming legend Dawn Fraser, have prompted renewed calls from the corporate watchdog for increased regulation of the mortgage broking industry.
Regulation of equity release offerings, which include reverse mortgages, through the Financial Services Reform Act (FSR) only apply to third party providers like financial planners.
Direct providers and mortgage brokers, however, are not governed by the tight disclosure regulations of FSR.
“The risks facing consumers who receive inappropriate advice about equity release products brings the previously identified need for regulation in the broking industry into sharp focus and should be considered in any regulatory reforms that take place,” said the Australian Securities and Investment Commission (ASIC) in a 52 page report on equity release products released yesterday.
To strengthen their case for regulation, ASIC also referred to a recent survey of 290 mortgage brokers that found levels of commission were the single biggest factor influencing their product recommendations.
ASIC said that current regulations applying to credit products such as reverse mortgages are outdated and cannot adapt to issues raised by equity release products.
Nevertheless, the corporate regulator said it would be upping its surveillance of equity release providers and mortgage brokers under the ASIC Act powers.
The Federal Government is currently considering submissions from a host of industry organisations, such as the Financial Planning Association and the Real Estate Institute of Australia, about the introduction of a new national regulatory regime for real estate professionals.
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