1400 16th Street, NW Suite 420 Washington, DC 20036 Tel. 202.939.1760 Fax. 202.265.4435 Ethics Advisory Opinion 2011-02 Ethical Refinancing of Reverse Mortgage Loans February 24, 2011 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. The Code of Ethics establishes Values that convey the ethical and professional principles that NRMLA Members are expected to portray in all business and professional interactions. The Code of Ethics also establishes Rules that address the guidelines and standards of ethical and professional behavior applicable to NRMLA Members and to which they are required to adhere. One of those Values under the Code of Ethics is Fairness. It requires that NRMLA Members treat consumers in a manner that is fair and reasonable, as they would want to be treated. One of the Rules related to the Value of Fairness requires that NRMLA Members provide to consumers only products and services that they have determined may provide a “bona fide advantage” to consumers. See Rule 107. There are circumstances under which there may be a bona fide advantage to senior reverse mortgage consumers currently holding adjustable rate reverse mortgage loans to refinance those loans into fixed rate full draw reverse mortgage loans. Where a NRMLA Member determines that such circumstances exist, the offering of such reverse mortgage loan refinancing opportunities to such seniors would be consistent with Rule 107 and the Code of Ethics. However, where a NRMLA Member either determines or should have determined that such circumstances do not exist, then the offering of such reverse mortgage loan refinancing opportunities to such seniors would not be consistent with Rule 107 or the Code of Ethics. The purpose of this Ethics Advisory Opinion 2011-02 (Ethical Refinancing of Reverse Mortgage Loans) is to provide additional guidance to NRMLA Members as they determine, as virtually all NRMLA Members do and as they each are required to do under the Code of Ethics and its Rule 107, whether the refinancing of adjustable rate reverse mortgage loans into full draw fixed rate reverse mortgage loans (referred to in this Opinion as an “Adjustable to Full Draw Fixed Rate Refinancing”) may provide a bona fide advantage to senior consumers. Indeed, if a NRMLA Member were to fail either to make such a bona fide advantage determination or to make it incorrectly, prior to offering such reverse loan refinancing opportunities to senior consumers, either directly or indirectly through others, such a NRMLA Member would be engaging in unethical conduct under the Code of Ethics. There is no place in NRMLA for those who engage in unethical conduct under our Code of Ethics. In the view of the Committee, an Adjustable to Full Draw Fixed Rate Refinancing that may provide a bona fide advantage to a senior consumer generally is one that may provide to the senior consumer cash in the amount of a full draw that the senior consumer actually and reasonably wants, at a reasonable cost to the senior consumer. 45
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