However, the Standards and Ethics Committee also has determined that it is appropriate that those requirements and restrictions of Ethics Advisory Opinions 2010-1 and 2011-2--that generally remain in effect--also be updated, as follows: 1) As previously noted in Ethics Advisory Opinion 2010-1, 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 generally 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. Demonstrating that the choice offered to the consumer meets the tests of Ethics Advisory 201001, 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. 2) Ethics Advisory Opinion 2010-1 establishes a “5 to 1” cost limitation applicable in certain circumstances, absent other clear demonstrable bases for concluding that a bona fide advantage is presented to the consumer. Among the considerations that might help support such a bona fide advantage determination by a NRMLA Lender Member might be the addition of a borrower on a loan, such as a previously non-borrowing spouse or a family member residing in the home who now qualifies for and would like the advantages of being a HECM borrower. And, among the circumstances that might be reflected in the 5 to 1 cost limitation calculation might be the potential beneficial effects of, say, lowering an interest rate cap currently applicable in the HECM loan to be refinanced, particularly if that is combined with, say, providing closing cost credits in connection with the refinanced HECM loan that effectively lower, in a material way, the applicable monthly MIP of the borrower. 3) Also, in calculating an applicable 5 to 1 cost limitation, the Additional Principal Limit amount included in that calculation should reflect and include only that portion of any Available Principal actually available to a borrower to draw. For example, a HECM could be refinanced by a new Fixed Rate HECM where the mandatory obligations are less than 90%. In this example, there would be unused and unavailable funds in the Available Principal Limit (as defined by HUD to be the entire Principal Limit and thus including funds that will never be available to the senior). In this example, the Available Principal Limit used to calculate the 5 to 1 ratio may not include such funds not actually available to the senior. These ethical requirements apply to all HECM-to-HECM refinancing with which a NRMLA Member is involved, through or a result of origination, processing, underwriting, funding, or securitizing, and irrespective of whether such loans are brokered, sold or acquired on a flow or closed loan basis. 66
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