NRMLA Publishes Ethics Code on Refinancing of HECM Loans

The National Reverse Mortgage Lenders Association published a refinancing legal advisory under its code of ethics, reminding members that one of the “Values” in the association’s Code of Ethics & Professional Responsibility is the concept of fairness.

The advisory, “Ethical Refinancing of Reverse Mortgage Loans,” discusses appropriate circumstances for refinancing a adjustable rate reverse mortgages into a fixed rate loan, with the fairness value in mind. The association underlines the importance of treating customers in a manner that is fair and reasonable, and it advises lenders to offer products and services “that they have determined may provide a ‘bona fide advantage’ to consumers.”

“In the view of the Committee, an Adjustable to Full Draw Fixed Rate Refinancing that may provide a bona fide advantage to a senior consumer generally is one that may provide to the senior consumer cash in the amount of a full draw that the senior consumer actually and reasonably wants, at a reasonable cost to the senior consumer,” says the advisory.

Examples of loan transactions that are appropriate and those that are not can be found in the advisory as guidance.

“If a NRMLA Member were to fail either to make such a bona fide advantage determination or to make it incorrectly, prior to offering such reverse loan refinancing opportunities to senior consumers, either directly or indirectly through others, such a NRMLA Member would be engaging in unethical conduct under the Code of Ethics,” the advisory specifies.

All members must sign the code of ethics as part of new or renewed membership.

To view the refinancing advisory, click here.

Written by Elizabeth Ecker

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