Reverse mortgage lenders must now submit appraisals to the Federal Housing Administration for a collateral risk assessment before endorsement – a new rule that went into play on October 1.
The guideline was issued late last month after FHA Commissioner Brian Montgomery said an assessment by the agency revealed a bias on 37% of HECM appraisals.
It’s only been in play for a few weeks and the industry continues to speculate just how impactful the mandate will be. In the meantime, FHA sought to clear up any confusion among lenders, recently publishing a list of FAQs in its online Support Center with details on the new guideline.
Among the questions the agency asks and answers: How can a lender obtain a copy of the collateral risk assessment performed on their appraisals?
The answer? They can’t.
“The collateral risk assessment is a proprietary FHA process,” FHA wrote. “Thus, mortgagees will not be able to obtain a copy of the assessment.”
FHA also confirmed that the cost of a second appraisal, if required, can be financed into a borrower’s closing costs, and that there is no additional fee for the risk assessment itself.
The agency’s FAQs drove home the point that it will not be giving anything away when it comes to the methods it will be using to determine if a property’s value has been inflated.
If you’re wondering why one appraisal was flagged while a similar file was not, FHA won’t shed any light on this for you, reasserting that its assessment is “proprietary” and stating that it “evaluates each HECM individually to determine if a second appraisal is required.”
And if you think you can jump the gun by ordering two appraisals off the bat, think again.
“The mortgagee must wait for the FHA collateral risk assessment to determine if a second appraisal is or is not required,” FHA wrote. “Mortgagee Letter 2018-06 does not allow for an exception to HUD’s requirements regarding ordering second appraisals and appraiser independence.”
While the FAQs reinforce HUD’s promised three-day window for reporting back to lenders to let them know if a second appraisal is required, the agency warns lenders not to assume that they can proceed with endorsement if they don’t hear back within this timeframe.
“A lack of timely response must not be construed to mean that a second appraisal is not required,” FHA wrote, asserting that lenders must wait to receive an email notification from the FHA Resource Center.
But the process may soon speed up with the implementation of HUD’s automated system.
FHA said its fully automated system should be in place by Dec. 1, 2018, or even sooner, and that a notice will be posted on FHA Connection as soon as a transition date is known.