While “the kinks” are being worked out of any system, not only will problems arise, but realistic and practical methods of solving them must also be found. During this exploratory period, it’s comforting for prospective borrowers to know that they have not been left without a map and guide.

Senior Australians Equity Release Association of Lenders (SEQUAL) is the not-for-profit members’ association of the reverse mortgage industry. Founded in January 2005 by the first banks and lending institutions to brave this new financial frontier, SEQUAL has grown to encompass 95% of the reverse mortgage market in Australia.

SEQUAL requires its members to adhere to a strict code of conduct, available in its entirety for public viewing on their website. This code of conduct includes such intangibles as requiring that all prospective borrowers be treated with respect and dignity. More concrete specifications include requiring members to participate in an external dispute resolution scheme, to reveal all costs in a clear manner to prospective borrowers, and to encourage them to discuss the loan with family members and an independent financial advisor prior to signing.

This code of conduct has evolved to meet the needs of this emerging marketplace. Changes made in 2007 include bulletproofing the guarantee of no negative equity that’s required from each lending institution. This guarantee, designed to ensure that no borrower will ever owe more than the realistic value of the home involved, previously could be breached under certain conditions; however, in August 2007, SEQUAL tightened up this requirement for its members, and now the guarantee of no negative equity can in general only be breached in instances of outright fraud or willful damage to the property in question.

SEQUAL also conducts training seminars to instruct the representatives of lending institutions and brokerages in the proper methods of analysing the needs of prospective borrowers and assisting in meeting those needs, offering accreditation courses for accountants, brokers, legal advisors, and financial planners. These courses include both online and in-house programs as well as national workshops.

However, it’s important for prospective borrowers to remember that, no matter the ethics of the member organisation nor the strictness of their code of conduct, banks are in business to earn a profit. While it is certainly permissible to form a professional and even agreeable relationship with the loan agent, one should keep in mind that a banker is neither a friend nor an independent financial advisor, and it would be improper and unwise to depend upon one in such a capacity. Prospective borrowers should seek out their own financial advice prior to taking out a reverse mortgage, no matter how ethical the banker—and SEQUAL strongly recommends that course of action.