The HECM for Purchase program, which allows seniors (age 62 or older) to purchase a new principal residence using loan proceeds from a reverse mortgage, may be impeded by declining property values and insufficient “comps” or comparable price comparisons.
“We can’t do HECM for purchase right now,” says Robert Griffin of Griffin Financial Mortgage, LLC in Fort Worth, Texas, explaining that “declining values make it harder to do such loans.” In certain parts of the country like Florida, “Appraisers are having a hard time finding comps” due to a paucity of sales, according to Griffin, whose company expects to close about 400 reverse mortgages this year around the country.
“The bane in the mortgage industry is the steady free-fall in real estate values,” adds Dennis Haber, executive vice-president, Agency For Consumer Equity. “The torment being felt in the reverse mortgage industry occurs when the appraised value of the subject property falls short. This is particularly distressing to seniors who envision a move into that new home with a HECM reverse mortgage,” Haber remarks.
One long-time reverse mortgage originator points to a larger issue. “The April appraisal guideline changes have caused appraisers to over-react, taking present values even lower than necessary, in the name of ‘future declining valuation analysis’, to avoid fear-based potential future liability regarding their valuation.”
Neil J. Morse has been a communications professional working in the mortgage finance industry for more than a decade, currently specializing in the reverse mortgage sector. He can be reached at firstname.lastname@example.org