Estimates across the mortgage market – from forward to reverse – face an inhibition, and that inhibition has resulted in much closer availability for 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, which can affect customers’ perceptions of how well they are being served by their lender or lender.
This emerges from interviews with reverse mortgage experts conducted by RMD over the past few weeks. 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 the Orange, Calif.-based reverse mortgage lender Ennkar, and we explain to the client that appraisers are independent Contractors are those of a [appraisal management company] (AMC). ”
While not ideal, Ennkar has also taken an additional step to trim its list of approved reviewers for 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 that sometimes requires a second property appraisal. After the first story by RMD was published, an author got in touch to describe the difficulty he is having in his local Northern California market.
“The number of second reports required is much higher [than what some others are seeing]”Said Rich Pinnell, Reverse Mortgage Originator at 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 material impact on property values between the first and second valuations, Pinnell reports that the difference appears very small in most anecdotal 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 many adjustments to loan amounts, and the second rating creates two additional problems: increasing the cost to the customer (even if the second rating is handled by the AMC or the lender) and it’s a backup to the already revised appraisers 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 to meet the needs of a highly active housing market. So says Christian Adams, a former real estate agent and current CEO of the AI home inspection company Repair Pricer.
“By refusing to train new appraisers to meet licensing requirements, existing appraisers can take control of the market, leading to staggering price increases and massive problems for buyers and their agents,” said Adams according to to a report on RealHomes.com. “There is not enough incentive for experienced appraisers to hire apprentices because 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 and in return accept 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 “the wrong way round” and negatively draw on the MMI fund.
A new way the FHA has attempted to smooth reviews-related operations has been through the Mortgagee Letter (ML). 2021-23, which stated that FHA’s “Catalyst” software now has the ability to include reverse mortgage ratings in filings that it can 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, the HECM assessments must follow the same timeframes outlined in the ML, as must the FHA-managed single-family forward mortgage program.
This new functionality follows a number of updates the agency made to the software this year, including a previous one To update This allowed mortgage takers to respond more quickly and accurately to the FHA’s request for case folders on both the front and back of the mortgage deal.