NRMLA Leaders Support New Reverse Mortgage Appraisal Rules

In a message to its members Tuesday, the National Reverse Mortgage Lenders Association’s co-chairs reiterated the trade group’s support of the latest changes to the Home Equity Conversion Mortgage appraisal process — a shift designed to stop losses to the Mutual Mortgage Insurance fund.

Written by leaders Joseph DeMarkey, the strategic business development leader of Reverse Mortgage Funding, and Reza Jahangiri, the CEO of American Advisors Group, the message expressed NRMLA’s “faith” in the Federal Housing Administration’s decision.

“On October 1, FHA Commissioner Brian Montgomery told the press he viewed this solution as less disruptive than the alternatives (i.e., PLF cuts or MIP increases),” the message states. “We agree.”


The FHA issued Mortgagee Letter 2018-06, effective October 1, which stated that all HECM appraisals will be be subject to verification under the FHA’s proprietary collateral risk assessment. If the first appraisal appears to be inflated, a second appraisal will be ordered and the lesser of the two must be used. The process is expected to be fully automated by December 1, and will employ automated valuation models (AVMs).

Speaking to reporters last week, Montgomery said that last October’s principal limit changes were not enough to stop the losses to the MMI Fund, and that the appraisal change was the best of many solutions considered.

The new policy was enacted after FHA reviewed 134,000 HECM appraisals with an AVM program, revealing that about 37% of appraisals were at least 3% over-valued. Some of the loans reviewed were from 2008 to 2010 — a period when appraisals were estimated to be 30% too high or more.

The message mentioned that NRMLA had presented possible solutions to the FHA to stop the losses to the MMI Fund before the changes were announced, but that “timing was critical.”

“Prior to this announcement, the NRMLA Board had submitted other proposals to address the fund’s potential shortfall. But, given the fact that the FHA Commissioner seat had remained vacant until June of this year, the staff was under great pressure to act expeditiously,” the message said.

The NRMLA message also acknowledged some of the industry’s concerns about the new process, which include the potential for overly lengthy appraisal timelines and the unreliability of AVMs.

“While there are some concerns being expressed within the industry about this appraisal process, especially with regards to the impact to consumers, for now, we believe what is best for the industry and the program is for all of us to work within the new appraisal process structure, observe its impact, and continue to share our findings with the FHA staff,” DeMarkey and Jahangiri wrote.

Montgomery said the process will be reviewed periodically over the next year, and NRMLA is dedicated to being part of the process.

“FHA has a long history of being open and responsive to dialogue with our industry association and representatives for which we are appreciative,” the message stated. “They have also expressed their strong support of the HECM program, and based on Commissioner Montgomery’s statements, we have faith in his commitment to seek a solution to the immediate issue that can work best for the MMI fund, the OMB, our senior borrowers, and the industry. We look forward to ongoing conversation as we observe the results together.”

When FHA first made the announcement, NRMLA released a statement of support.

“This is a step that has become necessary due to HUD’s analysis of appraisals on properties subject to a HECM,” Peter Bell, NRMLA’s president and CEO, said in a statement provided to RMD on September 28. “It is a logical step to address the concerns they’ve identified. We appreciate that they’ve chosen to implement this, while avoiding any decrease in principal limit factors or increase in mortgage insurance premiums.”

Written by Maggie Callahan

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  • I agree to a point with what Joe DeMarkey and Jahangiri has said. However, time will tell what impact it will have on the industry.

    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 are going to turn into a second appraisal requirement? If it becomes 30% 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, 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 with Joe DeMarkey, Jahangiri and NRMLA!

    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

    • John,

      “…deceptive…at the expense of ‘our’ seniors….” (Single quotation marks added.)

      Strong words. If this change does not pan out, will this suggestion look like nothing more than a ruse to HUD?

      • George,

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

        Believe me, I want everything to work out in the most positive way but we all have to be realest. I am just pointing out the “What if’s”

        I agree with you, my words were strong, I meant them to be. I as much as anyone wants to see this pan out but it is to soon to tell anything. We have to see how the entire procedure will work from a functionality standpoint, this is all I am saying.

        I do appreciate you questioning my strategy behind my statement my friend, you make it a good one.


  • Despite the claims of some, PLFs are not increasing at the beginning of fiscal 2019. NRMLA has stated it has faith in the FHA decision in Mortgagee Letter 2018-06.

    However, this is the first Mortgagee Letter impacting new books of HECM business that has a sunset provision built into it. While sunset provisions are not unusual when created by Congress, sunset provisions of just one year are very rare. This shows a lack of confidence in the outcome by the Department.

    Once again we see FHA creating a change which attempts to minimize business risk. We saw that with financial assessment and that has not helped the financial status of the MMIF to any degree at all. This might but to what degree?

    I don’t blame NRMLA for attending the review of the appraisals in six months and nine months after all this action was suggested by NRMLA.

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