An Origination News article seeks to address the issue of home appraisals and reverse mortgages, with national banking alliance Lenders One noting that underwriting a reverse mortgage is 100% dependent upon the borrower’s equity, and hence the appraisal of the home.
Lenders One CEO Scott Stern told Origination news that many deals die once the appraisal comes back, and that makes people less likely to apply for the loans in the first place. Additionally, he noted the high refinance activity in forward lending as hurting the reverse mortgage business.
Origination News writes:
The valuation issue is actually keeping people from applying for these loans, [Stern] said. The typical reverse mortgage applicant, plus his family members, financial planners, accountants and/or other advisors are very cautious. “Nobody wants to get into a transaction that may not close or where they think they are spending money where there may not be a positive result,” Stern continued.
They are not even willing to spend the money for an appraisal to see if there is enough equity. Then again, many reverse mortgage borrowers are tight on money to begin with and can’t afford to spend the fees necessary to get a loan only to see the deal blow up because of a lack of equity.
…But these kind of complaints have been heard even when the market was doing well, [Global DMS chief appraiser Stefan] Lamanna said. “Are we hearing about them more because of the decline in values? One hundred percent.”
Read the full article on Origination News.
Written by Elizabeth Ecker