NRMLA: Lenders remain liable for sponsored TPO conduct in HECM origination

The opinion clarifies that outsourcing origination functions does not exempt lenders from their responsibilities under the NRMLA's Code of Ethics and Professional Responsibility or applicable federal regulations. This guidance specifically pertains to Federal Housing Administration (FHA)-insured HECM loans and aims to define lenders' supervisory and consumer protection duties when engaging with TPOs.

NRMLA President Steve Irwin stated that the association periodically releases such opinions as reminders to its members about the commitment to an ethical reverse mortgage market and to provide references to HUD/FHA guidance. This advisory is the second of its kind this year.

The NRMLA code expects lenders to implement sufficient supervisory systems and controls over their employees, agents, and TPOs, holding them accountable for entities operating under their sponsorship. The advisory opinion references HUD Handbook 4000.1, which outlines requirements for FHA-approved lenders working with sponsored TPOs, including oversight, compliance procedures, and advertising rules.

Lenders are responsible for ensuring that all advertising, whether created by them or on their behalf, adheres to HUD and FHA standards and must promptly address any identified violations. The NRMLA's Ethics Committee emphasized that this direct responsibility cannot be transferred through contractual agreements with TPOs. The committee handles ethics complaints and potential disciplinary proceedings on a case-by-case basis.

Furthermore, the opinion advises lenders to incorporate HECM loans originated through sponsored TPOs into their quality control programs and to take swift corrective actions upon identifying deficiencies, noncompliance, or misconduct during monitoring. Failure to address known or reasonably discoverable issues could be considered an ethics violation.