NRMLA Ethics Advisory Opinion 2022-1 Responsible Information Sharing of Mortgage Professional Adverse Activity May 23, 2022 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 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 2022-1 (Responsible Information Sharing of Mortgage Professional Adverse Activity) is such an interpretation of the Code of Ethics. Introduction. This Ethics Advisory Opinion addresses the use of adverse activity informationsharing services to assist NRMLA Members in the performance of appropriate due diligence when establishing new business relationships and as an ongoing tool within the NRMLA Member’s compliance management system for evaluating relationships and individual transactions, such as those with mortgage brokers, correspondent lenders, appraisers, warehouse lenders and more. With increased technology and automation employed in mortgage origination and servicing activities, more complex varieties of mortgage fraud have evolved posing a greater financial risk to NRMLA Members and the consumers they serve. Fraud schemes are often ongoing crimes that can go undetected for months or even years and can be time-consuming and costly to address. It is often difficult to fully understand and quantify the extent of the fraud and the harm caused. Measuring losses associated with fraud and material misrepresentation is often an inexact process. Typically, the true cost of fraud and material misrepresentation is greater than the direct financial loss, given the time and expense to investigate, loss of productivity, potential legal and compliance costs associated with remediation, and impact on the NRMLA Member's reputation. In addition, fraud and material misrepresentation in the context of a reverse mortgage may be more difficult to detect since no monthly mortgage payments are due under a reverse mortgage, and therefore oftentimes such fraud or material misrepresentation is not detected until the entire loan balance becomes due. 79
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