You’d better tell them upfront

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Don’t surprise applicants with the Collateral Risk Assessment

Despite her initial reluctance, one originator shared her success when she notified her applicant about the possibility of a second appraisal…



John A. Smaldone October 12, 2018 at 7:27 am


The best part of your presentation was on the approach a loan officer should take with their senior client when it pertains to the appraisal. The way you explained it was great. It was positive for the senior, the loan officer the way you explained it only mentioned what would take place when the appraisal was to done! Then the loan officer would continue to complete their session with the seniors, excellent my friend!

Although, time will tell what impact the new appraisal ruling will have on the industry. Hopefully, like you said, not many second appraisals will be required.

If the process is swift and will not bog down loans for long periods of time, that will be a major relief to many. If the process will extend the approval and closing process 2, 3 or 4 weeks, that will be a major problem!

Another concern is how many Desk Top reviews or AMB’s are going to turn into a second appraisal requirement? If it becomes 30 to 40% or more of all Desk Top reviews, we will once again be facing many problems!

Last but not least, if a majority of the second appraisals come in low, we might as well say that we just faced another PLF downward adjustment on many many loans in process.

Don’t take me the wrong way, I am not saying this will be the case but we do not know yet, only time will tell us how this new ruling will work!

If the Desk reviews come back and truly can justify the need for a second appraisal, OK! If the second appraisal comes in lower than the first appraisal and it logically can be justified, fine! Then I will agree, it turned out to be a good decision on HUD’s

Let us all see what comes out of this as we experience it first hand. I am all for doing what ever is within reason to get the fund back in shape but let it not be in a deceptive way or at the expense of our seniors!!

John A. Smaldone

James E. Veale, CPA, MBT October 12, 2018 at 10:45 am


Our appraisal issue is not in a vacuum. We need to be aware of what is happening in the forward mortgage market as well. If forward mortgage interest rates are increasing every week, then monthly payments are going up which in most localities means values will drop.

It seems as if NRMLA has suggested something that will lower far more maximum claim amounts than we might like to think will happen. With monthly endorsements at decade lows, it will be interesting to see the impact of Mortgagee 2018-06 on endorsements. Let us hope that the turnaround on appraisal reviews is days rather a week or so.

James E. Veale, CPA, MBT October 12, 2018 at 10:34 am

I think we may be approaching the issue entirely wrong. We sound like the Mortgagee Letter but we can say the same thing and look reasonable even if a second appraisal is needed. If a second appraisal is not needed, guess who looks like a hero (unless the appraisers start with conservative values.) So here is my recommended approach:

“HUD now requires a second appraisal but will forego that requirement if HUD determines that the first appraisal is sufficient which they are promising to do shortly after they receive the first appraisal.” To me that sounds better than saying: “HUD will require a second appraisal if they find that the second is inadequate.

By wording it the first way, we are transmitting the message in the Mortgagee Letter without having to come back with mud over our face asking for the second appraisal. BUT you need to find the approach that best works for you. In some cases, seniors will find one approach more acceptable than the other.


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