The government is cracking down on reverse mortgages

Homeowners looking for a reverse mortgage may have to undergo a second appraisal in certain circumstances, thanks to new guidance from the Federal Housing Administration (FHA).

Under the new requirement, homeowners will have to provide a second property appraisal before receiving a Home Equity Conversion Mortgage (HECM), commonly referred to as a reverse mortgage, if the FHA suspects the home’s value of being inflated. The requirement will take effect for cases assigned on or after October 1.

“The appraisal validation policy announced today will further reduce risks to FHA’s Mutual Mortgage Insurance Fund and protect the health of the HECM program,” the agency stated in a press release. “The financial soundness of FHA’s reverse mortgage program is contingent on an accurate determination of a property’s value and condition. The property value is used to determine the amount of equity that is available to the borrower and it is also used by FHA to determine the amount of insurance benefits paid to a mortgagee.”

A 2017 study of FHA’s Mutual Mortgage Insurance Fund – which provides insurance on FHA-guaranteed mortgages – found higher-than-expected loses, which the agency attributed in part to “optimistic estimates of collateral value driven by exaggerated property appraisals when the loan was originated.”

In FHA’s fiscal year 2018 annual report to Congress, the agency revealed its reverse mortgage portfolio had a negative capital ratio of 19.84 percent and a negative net worth of $14.5 billion.

FHA, as part of this reform, will perform a risk assessment of all appraisals submitted for reverse mortgage originations for FHA-guaranteed mortgages. If the agency determines a second appraisal is required, the lender must use the lower value of the two appraisals.

The biggest missed opportunity for growth

How your back office system can help your brokerage compete READ MORE

The changes will run through September 30, 2019, however FHA will periodically review this guidance and may renew may renew these requirements beyond fiscal year 2019.

Email Patrick Kearns

The government is cracking down on reverse mortgages curated from Inman

Comments

Vacation rental company Vacasa buys Sterling Resorts

Vacation rental management tech startup Vacasa isn’t slowing down its ambitions to conquer the market: this week, it announced that it has purchased Sterling Resorts, a vacation management company on Florida’s Gulf Coast. Sterling has changed hands before: it was bought by Pacifica Companies in 2015 and currently manages 450 homes. Now it will become a part of Vacasa’s effort to expand its presence in vacation destinations such as northern Florida, where Sterling is based. At the time of this latest purchase, Sterling’s home inventory was down from 585 properties in 2015. Vacasa has raised more than $200 million since its launch ten years ago. Founder Eric Breon said he was motivated to start the company after struggling to find a satisfactory management solution for a cabin belonging to his wife’s family on the Washington coast. Now Vacasa seeks to provide rental property owners with “a seamless experience…through innovative technology and local staff,” that give them

In An Era Of WeWork, Co-Working Space NeueHouse Sits Above The Fray

NeueHouse CEO Josh Wyatt Seuss Moments In today’s cluttered co-working landscape, it can be hard for companies to makes themselves heard over the din. Elevated co-working space NeueHouse wants to create an unparalleled experience for creatives through elevated programming and outstanding design. NeueHouse describes itself as “ a private cultural and collaborative space for prominent creatives, artists and entrepreneurs,” with current locations in Los Angeles and New York. In November, following an announcement of $30 million in funding , the company announced Josh Wyatt as its new CEO. Wyatt is a veteran of the hospitality industry, having co-founded Generator in 2007, a chain of culture-focused hostels targeted at millennials, before moving on to Equinox to head the fitness brand’s hotel developments in New York City. Forbes interviewed Wyatt to talk about creativity, design, the gun threat incident at NeueHouse New York, and why he isn't phased by his "800 p

Could Ken Griffin's Penthouse Purchase Cost NYC Real Estate Buyers Millions?

'The Billionaire's Bunker' at 220 Central Park South is pictured on January 24, 2019, in New York - Hedge fund billionaire Ken Griffin has completed the purchase of a four-story penthouse in the building for $238 millionm- the most ever paid for a home in the US. The building is a residential skyscraper that is currently under construction. (Photo credit: TIMOTHY A. CLARY/AFP/Getty Images) Getty A 2014 bill that aims to impose an additional tax on part-time New York residents—dubbed the “pied-a-terre tax”—has risen from the dead, largely in thanks to the recent record-breaking Central Park penthouse purchase by billionaire Ken Griffin. Griffin, worth an estimated $11.7 billion and No. 45 on the Forbes 400 , reportedly bought the $238 million-dollar apartment “as a place to stay when he’s in town,” according to his representatives. The purchase drew widespread attention to the financial losses that part-time and foreign property owners can cause the city. Bec

Maureen Mengel Blog

Search This Blog