An increasing number of lenders are requiring appraisal management companies to offer specialized reverse mortgage appraiser panels. It’s a trend from which all parties to the transaction—lenders, appraisers, AMCs and especially borrowers—stand to benefit.
The quality of valuations will improve because the best and most experienced appraisers will be assigned to handle those loan files. Improved quality means lenders will have more confidence entering into reverse mortgage transactions because they will know the valuations are accurate.
But the biggest benefactors will be appraisers who will be paid more than in the past—and far more than generalists. AMCs that focus on developing specialty panels gain as well because their services are of a higher quality and can justify larger fees. There could emerge a two-tier marketplace, one in which AMCs that deliver specialty panels are paid better than appraisers who don’t.
Specialty panels require AMCs to identify appraisers who have experience and a track record working with reverse mortgages to ensure that specialists—ones who know the business exceptionally well and have the ability to provide excellent customer service to homeowners—perform the valuations. Because homeowners who purchase a reverse mortgage are elderly, and many were last in the mortgage market years or even decades ago, they find the housing market more than a bit mysterious. For them, the process is unquestionably confusing and very different than when they last shopped for a mortgage.
To help allay their fears, borrowers go through a counseling process via an impartial third party. The aim is to ensure that borrowers understand the reverse mortgage product. While meeting with a counselor is required, it’s not sufficient. Experienced appraisers know that they need to be courteous, take their time answering questions, and act with empathy and compassion toward these borrowers.
That’s why appraisers who serve these consumers will need the ability to provide accurate valuations, communicate well and provide unparalleled customer service. The AMC will select specialists that have these traits in addition to their appraisal acumen because if they don’t, lenders will continue to experience service-related complaints from dissatisfied consumers.
From my perspective, specialization of reverse mortgages and other sophisticated, esoteric mortgages types was virtually inevitable once the mortgage industry had time to mull over the lessons learned from the real estate bubble and the effect of new CFPB regulations that govern lenders, AMCs and appraisers.
To be sure, specialized panels are a startling development, one that represents one of the best—albeit indirect—results of the imposition of new regulations. It’s an opportunity for appraisers and AMCs to do more sophisticated work and earn larger fees than in years past. It will become an industry standard, but only if AMCs select appraisers who demonstrate a superior skill set.
To illustrate the point, consider the degree to which standards for accuracy and professionalism have risen because appraisers have the independence they need to determine the valuation of a residential property. They no longer worry that an appraisal is too low for the transaction to go through, and as a result, they will no longer receive business from an AMC or a lender. Instead, the focus is on accuracy, knowing the local market, adding value and working with the most skilled professionals possible.
The new business model is refreshing: AMCs will gather information on appraisers’ backgrounds, experience, and the type and quantity of appraisals they have completed. Those who have completed a sufficient number of reverse mortgage appraisals will be deemed an expert and added to the specialty panel. As in most businesses, specialists bring a level of demonstrated expertise that few of their peers can match, as well as the ability to deliver the most accurate appraisals possible.
To support reverse mortgage specialists, forward-looking AMCs will create innovative support teams and deploy intuitive technology that automates the appraisal process and improves quality control. To attain those goals, some will restructure their firms, but many others will lack the vision to replace legacy platforms with systems that have been customized, or better yet, that have been developed to meet the requirements of the emerging specialist landscape.
The results will likely be fewer AMCs, but those that remain will deliver more accurate, higher-quality appraisals than ever before. n
