COMBINED-Code of Ethics and Advisory Opinions 02132024

(In that connection, the Committee also notes that its establishment, through this Ethics Advisory Opinion 2013-03, of a twelve month limit on the planned refinancing of such HECM loans by NRMLA Members, is consistent with the First 12-Month Disbursement Period limit established by HUD in Mortgagee Letter 2013-27 for related purposes.) In addition, it is the view of the Committee that planned repayments of HECM Single Disbursement Lump Sum Payment Option Loans into other HECM loans, within the twelve month period following the closing of such initial HECM loans, can seriously impede the development and vitality of the secondary market for HECM loans. Repayment/prepayment expectations play an important role in determining the secondary market value of HECM loans, and unexpected planned repayments of disbursed funds has a negative impact on the development of an effective, robust secondary market—a market that is needed to help assure that the HECM product remains competitive and viable in the long term. Accordingly, it is the view of the Committee that such planned refinances are inconsistent with the Professionalism Value under the Code of Ethics, and its other Values and Rules. Finally, it is the view of the Committee that consumers interested in HECM Single Disbursement Lump Payment Option Loans timely should be informed by NRMLA Members that the refinancing of such loans into other HECM loans within a twelve month period following the closing of such initial HECM loans will not be possible, as described in this Ethics Advisory Opinion 2013-3, and thus that such consumers (with the assistance of the counselors who advise them, as appropriate), should consider the fact as well as such HECM loan options are evaluated. The following provides a further illustration and explanation of the limitations and restrictions established by this Ethics Advisory Opinion 2013-03, related to such HECM loans. The HECM loan described in Example 3 in Mortgagee Letter 2013-27 may be originated as a Single Disbursement Lump Sum Payment Option Loan. If so originated, this loan, with an assumed Principal Limit of $200,000, and assumed Mandatory Obligations of $17,000, would yield an Initial Disbursement Limit of $120,000, and, for our purposes, mostly importantly, permit a single draw, at closing only, of no more than $70,000 in funds to the consumer. See Example 3, Mortgagee Letter 2013-27. Now, assume that, as a result of a planned refinance of this HECM loan for this consumer, or otherwise, this loan is refinanced within twelve months, for the same consumer, into a new HECM Single Disbursement Lump Sum Payment Option Loan. For this new HECM loan, the Mandatory Obligations rise from $17,000 (the Mandatory Obligations for the initial HECM loan) to $120,000 (defined as a Mandatory Obligation under Mortgagee Letter 2013-27 for this new HECM loan since it is an "amount required to discharge (an) existing lien [imposed in connection with the initial HECM loan] on the property"). For this second planned refinance HECM loan, then, with an assumed Principal Limit still of $200,000, and newly increased Mandatory Obligations of $120,000 (as noted above), the Initial Disbursement Limit would rise to $140,000 (from $120,000 under the initial HECM loan). 60

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