Reverse Mortgage Professionals Share Extra Ideas on Latest Appraisal Challenges
Estimates across the mortgage market – from forward to reverse – face an inhibition, and that inhibition has resulted in much tighter availability for the appraisers themselves, as well as excessive turnaround times and prices for a necessary component of the mortgage process. For the more advisory reverse mortgage industry, however, lenders arguably face these difficulties differently than traditional mortgage lenders.
This emerges from interviews with reverse mortgage experts conducted by RMD over the past few weeks who shared a degree of frustration with many of the new difficulties that have plagued them and their forward mortgage counterparts lately. In addition, new data has emerged and documented about a general shortage of appraisers, compounding problems for mortgage professionals, borrowers and home buyers alike.
How certain lenders are reacting to current conditions
When it comes to the reverse mortgage business, many professionals will point out that not much of the transaction on the Federal Housing Administration (FHA) sponsored side remains in their complete control, but to the extent that lenders can try and respond to some of the current assessment difficulties, do what they can.
“We’ve helped our clients understand everything that was going on from the start,” says Omar Ennabe, co-founder and branch manager of Reverse mortgage lender Ennkar, based in Orange, Calif. Outside of our control, and we explain to the client that appraiser Independent contractors are employed by a [appraisal management company] (AMC). ”
While not ideal, Ennkar has also taken an additional step to narrow its list of approved reviewers to those who may have missed deadlines excessively or “consistently” late, as Ennabe explains.
“This prevents another contract from being awarded to an expert who cannot deliver a quality report in time,” he says.
Regional questions, second opinion
As RMD pointed out in a previous article on these current difficulties, some lenders are seeing greater problems due to the HECM program’s collateral risk assessment, which sometimes requires a second property appraisal. After the first story by RMD was published, an author got in touch to describe the difficulties he is having in his local market in Northern California.
“The number of second reports required is much higher [than what some others are seeing]”Says Rich Pinnell, Reverse Mortgage Originator for Primary Residential Mortgage, Inc. (PRMI) based in Redding, California. I understand that much of the problem is the rapid rise in property values across the country, however [this feels excessive]. “
Regarding the major impact on property values between the first and second valuation, Pinnell reports that the difference appears to be very small in most individual cases. Interestingly, however, he also says that in about half of the cases in which he had to submit a second report, the value is actually higher than the first report.
“So, [the U.S. Department of Housing and Urban Development] (HUD) doesn’t get a lot of adjustments in loan amounts, and the second rating creates two additional problems: increasing the cost to the customer (even if the second rating is taken care of by the AMC or the lender) and it’s a backup to the already revised appraisers even more.”
Lack of experts, alternatives
Some experts in the appraisal community have attributed much of the general difficulty mortgage professionals and borrowers face to one key factor: there simply aren’t enough appraisers available to meet the demands of a highly active housing market. This is what Christian Adams, a former real estate agent and current CEO of the AI home inspection company Repair Pricer, says.
“By refusing to train new real estate appraisers to meet licensing requirements, existing appraisers can control the market, causing staggering price increases and massive problems for buyers and their agents,” said Adams, according to a report by RealHomes.com. “There is not enough incentive for experienced appraisers to hire apprentices, as they earn less if they carry out the appraisal in the presence of an apprentice.”
It is possible to work around the problem, believes Ennabe.
“Since location is one of the most important aspects of the value of a home, borrowers should be able to waive the valuation requirement but receive a lower capital limit based on that choice,” says Ennabe. “Automated valuation models (AVMs) and tools like Zillow or Redfin can accurately predict the value of a home within a relatively narrow range. As a result, borrowers should be able to forego a valuation in exchange for a lower capital limit to offset the risk. This would help many borrowers without having much of an impact on the Mutual Mortgage Insurance (MMI) Fund. “
According to Ennabe, a lower capital limit could mean a lower risk that the loan will expire “upside down” and negatively draw on the MMI fund.
A new way the FHA has attempted to smooth reviews-related operations was through the Mortgagee Letter (ML) 2021-23, which described that FHA’s “Catalyst” software now has the ability to do the reverse Include mortgage evaluations in filings that it may receive electronically on behalf of the FHA.
This is done in an effort to streamline the methods available to the reverse mortgage industry for such filings. Unless otherwise noted, HECM assessments must follow the same timeframes outlined in the ML that apply to the FHA-administered single-family term loan program.
This new functionality follows a number of updates the agency made to the software this year, including an earlier update that allowed mortgage borrowers to respond more quickly and accurately to the FHA’s request for case folders on both the front and the front the back of the mortgage responding company.