NRMLA Stresses Ethics of HECM to HECM Refinancing

In light of the recent changes to home equity conversion mortgage principal limit factors, the National Reverse Mortgage Lenders Association is re-enforcing its Code of Ethics and Responsibility to protect reverse mortgage borrowers with respect to HECM to HECM refinance transactions.

NRMLA is redistributing its Ethics Advisory Opinion, first issued in 2010, which provides guidance on ethical practices on HECM-to-HECM refinancing and anti-churning best practices.

Above all else, the association stresses that NRMLA members “need to assure that the loan products it offers to consumers provide to them a ‘bona fide advantage.’”

This requirement is particularly applicable now, after new PLFs are making more proceeds available for some reverse mortgage borrowers, and borrowers may be given the opportunity to refinance.

However, NRMLA states that a HECM-to-HECM refinance may not take place unless it occurs after six months of the closing of the loan being refinanced.

NRMLA’s re-enforced guidance prohibits loan originators from “steering consumers to loan products, including closed end reverse mortgages, based on the fact that the originator will receive additional compensation when that loan may not be in the consumer’s best interest.”

Additional guidance is provided in the association’s Ethics Advisory Opinion and can be accessed here.

Written by Emily Study

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