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Does the government ever do random requests for a second appraisal for a reverse mortgage?

By Marilyn on 11.29.2018

Hello Marilyn,

HUD recently implemented a new procedure requiring lenders to upload all appraisals for reverse mortgages into the FHA system. At that time, FHA will, at its sole discretion, determine if a second appraisal is needed. 

This process was initially announced and outlined in HUD Mortgagee Letter 2018-06 on September 28, 2018, and it was just announced via FHA News and Updates that this is now an automated process. 

Although we do not know exactly what will and will not trigger the requirement for a second appraisal, it is not a “random” request.   After having many properties requiring a second appraisal over the past few months, some patterns are beginning to emerge. 

Appraisals wherein the appraiser had to use older sales; sales that required large adjustments for or size condition of the sales compared to the subject property; comparable sales that are farther away but are in suburban or urban areas that should have local sales available; unique properties or properties with large lots and outbuildings are all some common themes we are already seeing for second appraisal requirements. 

Time will tell if these factors continue to hold true or if other value considerations start coming up more often, requiring second appraisals.  HUD is still seeing significant losses on the reverse mortgage program currently. 

After having the experience of seeing thousands and thousands of reverse mortgages, reviewing those with losses, and being able to check their appraisals with hindsight, they are doing their best to isolate the causes of appraisal deficiencies and eliminate as many of those deficiencies as possible before they result in additional losses.