28LCReverse mortgages—presumption of unsuitability of credit contract if certain loan to value ratios exist

#### 28LC Reverse mortgages—presumption of unsuitability of credit contract if certain loan to value ratios exist (1) This regulation: (a) is made for the purposes of the following provisions of the Act: (i) paragraph 164(d); (ii) paragraph 118(2)(c) (when the credit contract must be assessed as unsuitable—entering the contract or increasing the credit limit), as modified by subregulation (2); (iii) paragraph 123(2)(c) (prohibition on suggesting or assisting consumers to enter, or increase the credit limit under, unsuitable credit contracts), as modified by subregulation (3); (iv) paragraph 131(2)(c) (when credit contract must be assessed as unsuitable), as modified by subregulation (4); (v) paragraph 133(2)(c) (prohibition on entering, or increasing the credit limit of, unsuitable credit contracts), as modified by subregulation (5); and (b) sets out circumstances in which a credit contract is unsuitable. Modifications of Act (2) For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3‑7 of the Act applies apply as if paragraph 118(2)(c) of the Act were varied to read: “(c) if the regulations prescribe circumstances in which a credit contract is: (i) unsuitable; or (ii) unsuitable unless the contrary is proved; those circumstances will apply to the contract;”. (3) For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3‑7 of the Act applies apply as if paragraph 123(2)(c) of the Act were varied to read: “(c) if the regulations prescribe circumstances in which a credit contract is: (i) unsuitable; or (ii) unsuitable unless the contrary is proved; those circumstances will apply to the contract;”. (4) For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3‑7 of the Act applies apply as if paragraph 131(2)(c) of the Act were varied to read: “(c) if the regulations prescribe circumstances in which a credit contract is: (i) unsuitable; or (ii) unsuitable unless the contrary is proved; those circumstances will apply to the contract;”. (5) For the purposes of paragraph 164(d) of the Act, the provisions to which Part 3‑7 of the Act applies apply as if paragraph 133(2)(c) of the Act were varied to read: “(c) if the regulations prescribe circumstances in which a credit contract is: (i) unsuitable; or (ii) unsuitable unless the contrary is proved; those circumstances will apply to the contract;”. Circumstances (6) A circumstance in which a credit contract is unsuitable unless the contrary is proved is that: (a) the credit contract is part of an arrangement that is a reverse mortgage; and (b) at the time the credit contract is entered into, the youngest borrower under the reverse mortgage is 55 or younger; and (c) the loan to value ratio of the mortgage is higher than 15%. (7) A circumstance in which a credit contract is unsuitable unless the contrary is proved is that: (a) the credit contract is part of an arrangement that is a reverse mortgage; and (b) at the time the credit contract is entered into, the youngest borrower under the reverse mortgage is older than 55; and (c) the loan to value ratio of the mortgage is the sum of; (i) 15%; and (ii) 1% for each year that the borrower is older than 55. > Note: Examples of unsuitable loan to value ratios are: (a) if the youngest borrower is 60, a loan to value ratio that exceeds 20% is unsuitable unless the contrary is proved; and (b) if the youngest borrower is 70, a loan to value ratio that exceeds 30% is unsuitable unless the contrary is proved. (8) In this regulation: > loan to value ratio, in relation to a reverse mortgage over a reverse mortgaged property, is: >  where: A is the amount of credit owed under the credit contract for the reverse mortgage. B is the value of the reverse mortgaged property.