The NRMLA Code of Ethics embraces certain Values and requires conformity to certain Rules that embody those Values. Among those Values are Fairness (NRMLA Members shall treat consumers in a manner that is fair and reasonable and as they would want to be treated) and Integrity (NRMLA Members shall disclose to consumers potential conflicts of interest). Among those Rules are Rule 107 ("NRMLA members shall describe to consumers the range of products and products offered by the Member that may provide a bona fide advantage to such consumers") and Rule 301 ("NRMLA Members shall accurately describe both the costs and benefits of products presented to consumers"). The NRMLA Ethics Committee issues this NRMLA Ethics Advisory Opinion 2010‐01 (Ethical HECM‐to‐HECM Refinancing and Anti‐Churning Practices) to provide additional guidance to NRMLA Members as to the manner in which the Values and Rules of the NRMLA Code of Ethics—particularly, Rules 107 and 301—apply, and to inform and restrict the choices NRMLA Members make as they offer both HECM Standard and HECM Saver loan products to consumers, including, in particular, the opportunity to refinance such HECM loans with additional HECM loans. In general, and consistent with the requirements of Rule 107 and the NRMLA Ethics Code, NRMLA Members, subject to market availability and loan origination systems constraints, should make available to consumers directly or indirectly both the HECM Standard and HECM Saver loan products. In addition, and consistent with the requirements of Rules 107 and 301 and the NRMLA Code of Ethics, NRMLA Members need to assure that the loan products it offers to consumers provide to them a "bona fide advantage." That requirement will have particular applicability now—as consumers with Pipeline Loans are given the opportunity to choose between HECM Standard and HECM Saver loan products—and in the future—when consumers are offered the opportunity to refinance from one HECM to another. In this regard, lenders should provide illustrations and comparison of the most prevalent HECM programs that it offers to consumers. The NRMLA Ethics Committee has concluded that, and absent further guidance from HUD with respect to the offering of such choices to consumers, the bona fide advantage standard of the Code of Ethics may not be met unless a HECM‐to‐HECM refinance occurs after six (6) months of the closing of the prior HECM loan being refinanced. Additionally, for a HECM‐to‐HECM refinance that occurs after six (6) months from the closing of the prior HECM loan being refinanced, a bona fide advantage to a consumer may be demonstrated by a lender if it is able to show that both of the following are met: (1) the funds available to the consumer under the chosen loan (after payoff of other loans and other costs) exceeds the funds available under the other or existing loan or some other bona fide advantage is made available to the consumer as a result of the choice, and (2)(i) if the accrual rate on the new HECM is greater than the accrual rate on the HECM being refinanced, the increase in the mortgagor's principal limit as a result of the choice exceeds the “total cost of refinancing” (as defined in 24 C.F.R. § 206.53(b)) of the chosen loan by an amount equal to at least five (5) times the total cost of the chosen loan regardless of whether the borrower, lender or broker pays any or all of the closing costs, or (ii) if the accrual rate on the new HECM is equal to or less than the accrual rate on the HECM being refinanced, the increase in the mortgagor's principal limit as a result of the choice exceeds the “total cost of refinancing” of 26
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