More than 40 equity release brokers have banned at least six reverse mortgage lenders from their recommended lists.
The newly-formed group, known as Fortus, has agreed to abide by a strict code of conduct and charter.
They say the move is necessary to protect retirees from wide default clauses and loans that end up costing more than the value of the property.
The 44 brokers from around the country will only recommend reverse mortgages from providers that belong to the Senior Australians Equity Release Association of Lenders (SEQUAL).
The group is also open to lawyers, financial advisers and accountants, Fortus chairman Craig Swan said.
“It is our intention to be more than just brokers,” Swan said.
“Equity release products are a specialty area that requires particular skills and expertise that many mortgage brokers aren’t prepared to develop.”
The decision affects lenders who are not SEQUAL members such as Lifeplan Funds Management, Transcomm Credit Cooperative Limited, HomeStart, Home Building Society and Royal Guardian Mortgage Corporation.
Last year ASIC forced Transcomm to correct misleading advertising and refund borrowers who used its Annuity Plus Reverse Mortgage.
The regulator found the company had made false claims about the product’s impact on pensions and the extent to which the consumer was protected.
The code of conduct also mandates that members identify and recommend products that have the fewest possible default conditions and offer consumers the best no negative equity guarantee.
Members need to have done formal training through SEQUAL, be a member of a professional body such as the FPA and belong to an ASIC-approved external dispute resolution scheme (EDRS).
“If your intermediary isn’t a member of an ASIC-approved EDRS, you’d have to wonder why not,” Swan said.
