COMBINED-Code of Ethics and Advisory Opinions 02132024

the chosen loan by an amount equal to at least five (5) times the total cost of the chosen loan excluding closing costs paid by the lender or broker on behalf of the borrower. For this purpose, “accrual rate” means the note rate plus the on‐going MIP. For guidance in making this calculation, NRMLA Members are referred to Mortgagee Letter 2004‐18 (April 23, 2004) (Refinancing Existing HECM Loans), and to Exhibit 1 thereof (How To Calculate The Total Cost of Refinancing). That Mortgagee Letter required that calculation to be made for a different though closely related purpose, described by HUD in that Mortgagee Letter as assuring that the borrower is not being induced to refinance her existing HECM loan without benefit to the borrower and/or solely for the benefit of the lender. That, in the view of the NRMLA Ethics Committee, is the essence of the bona fide advantage to the consumer requirement of Rule 107 and the NRMLA Code of Ethics, and it is for that reason that the approach adopted by HUD in this Mortgagee Letter is the one adopted by the NRMLA Ethics Committee as it applies this requirement in this context under its Code its Ethics. Absent the demonstration by a NRMLA Member in this context that such a bona fide advantage has been made available to the consumer, the NRMLA Ethics Committee may conclude that such Member engaged in the "churning" of these or similar loans as it offered such choices and closed such loans for consumers, in violating of the NRMLA Code of Ethics. A purpose of this Ethics Advisory Opinion 2010‐01 is to establish an "Anti‐Churning" requirement as part of the NRMLA Code of Ethics responsibilities of NRMLA Members. Demonstrating that the choice offered to the consumer meets the tests of this Ethics Advisory Opinion, as described above, is not the only way for a NRMLA Member to establish that it meets its obligation under the NRMLA Code of Ethics to provide a bona fide advantage to the consumer as they make such choices. But, absent the ability of a NRMLA Member to demonstrate its compliance with that requirement in that or some other persuasive manner, the NRMLA Member would be subject to sanctions under the NRMLA Code of Ethics. Accordingly, it is also a violation of the NRMLA Code of Ethics for a NRMLA Member, directly or indirectly, to engage in HECM‐to‐HECM refinance activities that constitute churning as outlined above, or otherwise not to provide a bona fide advantage to consumers for each product offered to consumers by Members. A NRMLA Member offering and providing a choice to consumers between a HECM Standard and a HECM Saver, as part of a Pipeline Loan transaction, or as a refinance of a HECM Standard or HECM Saver, must be able to demonstrate that that consumer was provided with such an advantage because the calculations and determinations described in this Ethics Advisory Opinion have been completed and met, or in some other persuasive manner if that Member is to meet its obligations under the NRMLA Code of Ethics. In addition, NRMLA Members are reminded that in making any such refinancing decisions, they also must comply with applicable state laws that may impose additional or related obligations upon them to determine that a "net tangible benefit" or similar advantage is realized by the consumer in connection with such refinancing transaction. Further, Regulation Z has been revised, effective April 1, 2011, to prohibit 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. 27

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