NRMLA Ethics Advisory Opinion 2015-1 Freedom of Choice Remaining Draw Options After 12 Months/Ethical Obligations and Restrictions February 4, 2015 The Ethics and Standards Committee (the "Committee") of the National Reverse Mortgage Lenders Association ("NRMLA"), the trade association of the reverse mortgage lending industry, enforces the NRMLA Code of Ethics and Professional Responsibility (the "Code of Ethics"). All NRMLA Members are required to comply with the Code of Ethics as a condition of their continued membership in NRMLA. If the Committee determines that a NRMLA Member has not complied with the Code of Ethics, sanctions may be imposed, up to and including the termination of NRMLA Membership. Committee decisions enforcing the Code of Ethics may be made public. The Committee also interprets the Code of Ethics and, from time to time, proposes changes to it for consideration and approval by the NRMLA Board of Directors. This Ethics Advisory Opinion 2015-1 is such an interpretation of the Code of Ethics. In Mortgagee Letter 2013-27 (September 3, 2013), HUD established a limitation (an "Initial Disbursement Limit") on the amount of HECM loan proceeds that may be advanced at loan closing or during what it defined as the "First 12-Month Disbursement Period" after loan closing. It defined the Initial Disbursement Limit as the greater of sixty percent of the defined Principal Limit of the HECM loan or the sum of defined Mandatory Obligations plus ten percent of the Principal Limit. This Initial Disbursement Limit applied to all HECM loans (except those with a defined Single Disbursement Lump Sum Payment Option to which the Initial Disbursement Limit concept was not applicable). In Mortgagee Letter 2014-11 (June 18, 2014), among other things HUD focused on the period following the First 12-Month Disbursement Period, when the Initial Disbursement Limit no longer was effective to limit remaining amounts under the HECM loan that a mortgagor may draw. In Mortgagee Letter 2014-11, in the Committee's view, HUD made two key points with respect to such remaining amount draws: (1) that mortgagees, whether through pricing options, marketing or advertising, may not "encourage" mortgagors to take that remaining amount after that period "whether they need it or not;" and (2) that it is mortgagors, and not mortgagees, who are to be permitted to 68
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