Reverse mortgage originators often remain a key point of contact for their clients from initial consultation to long after the loan closes. But getting to the closing table can come with its own set of unique challenges, whether it comes from rules that govern the Home Equity Conversion Mortgage (HECM) program or the potential bias of an appraiser.
This message was shared by a panel of reverse mortgage originators who met last month at the National Reverse Mortgage Lenders Association (NRMLA)’s Western Regional Meeting in Irvine, California.
The initial question that started this part of the conversation was more general in nature. But the panel quickly jumped on issues they’ve face with appraisals as a key impediment in the closing process.
Second appraisals
In September 2018, the Federal Housing Administration (FHA) announced a new requirement for HECM lenders that resulted in some loan applications requiring a second appraisal. The rule was implemented with the aim of stemming losses to the Mutual Mortgage Insurance (MMI) Fund. It went into effect for all case numbers assigned starting in October of that year.
Opinions among reverse mortgage professionals about the second appraisal requirement has varied over the years. Some continue to call it the single biggest issue they face in their business, while others say they have adapted and adjusted to it.
But at the panel in Irvine, second appraisals were immediately cited by Lisa Moriello of loanDepot as an impediment to closing a loan.
She also cited the reconsideration of value (ROV) process as an issue, which can lead to strange requests for the clients themselves.
“I literally just had an investor come back to me, and [they] asked my 80-year-old client to provide a 12-month history of condominium sales in the area, and how they were increasing,” Moriello explained.
“I don’t even have a subscription for that, so how do you expect a client to do it? How do we mitigate that risk? I don’t really have an answer for you.”
Possible bias, preparation
Ernie Severson of Summerlin Financial Inc. cited appraisal bias as an issue. He suggested that appraisers may look at a property differently if they’re aware that the appraisal has been requested for a reverse mortgage transaction.
“I know that’s a big topic, but they need to look at it in the terms of seniors,” Severson said. “And the fact that we have the AMC is a great step, but an appraiser should not know this is a reverse mortgage before they get [to the property]. And unfortunately, they can say they’re not biased to it or anything else, but it’s all risk mitigation.”
Tom O’Donoghue of Reverse Loans Now suggested that it’s a good idea to document the experiences that LOs and customers have with particular appraisers, noting the values that are determined and the experiences that clients have with an appraiser.
O’Donoghue also advises his clients to tell him who their appraiser is. He then checks notes to see if there have been any issues from past interactions.
Moriello added that clients can indicate they’ve had a bad interaction with an appraiser. If they appear stressed, or if they feel they’ve been spoken to in a condescending manner, that can be a sign of a poor experience.
Christina Harmes Hika, a loan originator who attended the event, shared advice about recording a video to give customers an idea of what to expect from an appraisal. This can make them feel more confident and prepared once the appraiser appears at their door.
Harmes Hika and other industry professionals have previously recommended video tools like Loom, which can be shared with the borrower and any trusted advisers to walk them through the particulars of a reverse mortgage.
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