Assessment of asset value of Home Equity Conversion loans and Reverse Mortgages 108-04100020

Is the customer thinking about borrowing money against the equity in their or their partner's principal home?

• Yes, refer the customer to the Financial Information Service (FIS). Procedure ends here
• No, go to Step 2

Has the customer borrowed money against, or for the purchase of an investment property?

• Yes, HEC provisions do not apply. See Loans and liabilities against assets. Procedure ends here.
• No, go to Step 3

Has the customer borrowed money using their principal home as security or secured a mortgage against their or their partner's principal home?

• Yes, go to Step 4
• No, HEC provisions do not apply. Clarify what the customer has done and action accordingly. Procedure ends here

Was the mortgage obtained to purchase the customer's or their partner's principal home?

• Yes, HEC provisions do not apply. Clarify what the customer has done and action accordingly. Procedure ends here
• No, go to Step 5

Confirm with the customer that the loan is a Reverse mortgage or an actual HEC Loan agreement, and not a home equity loan, by sighting documents that show:

• the date the mortgage was secured
• the amount secured
• how and when the loan will be disposed of

Has the customer provided the required documents?

• Yes, go to Step 6
• No, request the information. Procedure ends here until information is available

Note: usually a HEC loan or Reverse mortgage is not repayable until the homeowner moves out of their home or dies. If in doubt, contact a FIS officer for assistance.

Is the loan agreement a HEC Loan agreement or Reverse mortgage and has the customer received the funds?

• Yes, see Step 1 in Coding requirements for HEC or Reverse mortgage table
• No, HEC provisions do not apply, clarify what the customer has done and action accordingly. Procedure ends here

Has the customer spent any of the HEC loan or Reverse mortgage money?

• Yes, go to Step 2
• No, go to Step 3

Where the customer has spent any of the loan money:

• details of how the customer has spent the money is required, and
• relevant updates to income and assets must be made

For payment correctness, all updates should be made within the same activity ensuring there is no unintended gap in the assessment of the assets.

For example, if the customer purchased a motor vehicle with some of the loan money, code the details of this purchase on the Other Assets (OAS) screen from the same Date of Event (DOV) as a reduction of the loan balance is coded.

Make relevant updates.

Go to Step 3.

Is the HEC loan already coded on Direct Investments (SDVI) screen?

• Yes, go to Step 5
• No, go to Step 4

The first $40,000 of a home equity conversion loan or Reverse mortgage agreement that has not been spent, is an exempt asset for 90 days only but the whole amount is deemed during this time.

The amount of the loan that has not been spent, that is, in excess of the first $40,000 is an assessable asset.

The full loan amount is coded on the SVDI screen with the first $40,000 coded as an asset value exempt amount for 90 days only.

If after 90 days the customer has not spent the loan, the asset exemption is removed. The full amount becomes an assessable asset.

Go to Step 6.

Any loan money the customer has not spent after 90 days becomes an assessable asset.

If actioning a review with the keyword HEC90DAY:

• code a new Date of Event (DOV) of the 91st day from the start date of the loan, and
• remove the Loan/Encumbrance Amt $: field amount

If the customer has spent:

• some of the loan money, update the balance of the loan. If the total balance of the loan is less than $40,000, update the Loan/Encumbrance Amt $: field to match the balance. Note: as the loan is spent, the balance must be updated
• all of the money and the loan does not have a positive balance, close the account

For coding advice see Table 3, Step 4 in Coding income and assets for Centrelink payments in the Process Direct or Customer First subtab.

Once all relevant updates are made, finalise and DOC the update.

Procedure ends here.

For coding advice see Table 3, Step 4 in Coding income and assets for Centrelink payments in the Process Direct or Customer First subtab.

Code the following fields:

• Type: LON
• Balance: the current positive HEC loan or Reverse mortgage balance (the full balance received, minus any amount already spent)
• Event Date: for a new claim, code the claim date. Otherwise, code the date the loan money was received
• Investment Date: code the date the loan money was received
• Loan/Encumbrance Amt $: code the amount (up to $40,000) that is an exempt asset

Once all updates are made, finalise the activity and record details on a DOC.

Go to Step 7.

A manual review is required to remove the amount coded in the Loan/Encumbrance Amt $: field if the customer has not spent all the money within 90 days.

In Customer First, create a manual review on the Review Registration (RVR) screen and complete the fields as follows:

• Service Reason: customer's payment type
• Review Reason: HEC - Check Assessment (HEC)
• Due Date: 91 days from the loan Investment Date
• Source: INT
• Date of Receipt: today's date
• Notes: '90 day asset test exemption for HEC loan account <insert account number> has ceased. Refer to OB 108-04100020 and remove the asset test exemption.'
• Keywords: HEC90DAY
• Workgroup: leave blank
• Position: leave blank
• Transfer to Region: leave blank

The review will mature on the Due Date coded in the RVR activity. Workload Management will allocate the review for manual action.

Procedure ends here.