FHA Amends Appraisal Requirements for Home Equity Conversion Mortgages

FHA issued Mortgagee Letter 2018-06, setting forth amended appraisal requirements for Home Equity Conversion Mortgages (HECMs). Per the Mortgagee Letter, FHA will perform a collateral risk assessment of appraisals submitted for use in new HECM originations. Based on the outcome of the assessment, FHA may require the lender to obtain a second appraisal prior to approving the reverse mortgage for insurance endorsement. If a second appraisal is required, the lender must use the lower of the 2 appraisal values to underwrite the loan and the cost of the second appraisal may be financed as part of the HECM closing costs. Lenders may not order a second appraisal from an appraiser that is associated with the same appraisal company as the first appraisal.The Mortgagee Letter also describes interim procedures for uploading appraisals and initiating FHA’s collateral risk assessment (in place beginning October 1st). Fully automated procedures will become operational on or before December 1, 2018. If the automated procedures are in place prior to December 1st, FHA will communicate this updated information through its standard communications channels. The amended requirements are effective for all HECM originations with FHA case numbers assigned on or after October 1, 2018, through September 30, 2019. FHA will review the impact of these new appraisal requirements throughout the fiscal year to determine whether such requirements should be extended beyond fiscal year 2019.

Click Here to View the FHA Mortgagee Letter 2018-06