The Federal Housing Administration (FHA) announced today that as of Friday November 30, 2018, the protocols governing new second appraisal requirements for Home Equity Conversion Mortgages (HECMs) will become fully automated.
The HECM second appraisal rule was first announced on September 28 in Mortgagee Letter 18-06, which outlined a series of procedures deployed on an interim basis ahead of the expected implementation of the fully-automated assessment system. Under the interim process, lenders were required to submit the first appraisal and then email FHA’s system before awaiting a response as to whether a second appraisal would be required.
Today’s announcement sees the implementation of full automation arrive within close proximity to that expected date of December 1, speeding the appraisal submission process.
While automation promises to expedite the process of informing mortgagees about the possible requirement for a second appraisal specific to their loan, initial industry reaction to the interim protocol was positive.
“Lenders are seeing turn times as quickly as 30 minutes and up to 24 hours. The interim protocol is working really smoothly,” Elly Johnson, co-chair of NRMLA’s HUD Issues Committee said on a conference panel in October.
Still, the automated system is designed to respond instantaneously. For appraisals processed under the fully-automated system effective November 30, the lender will immediately receive one of two possible messages on the FHAC Logging Screen once the appraisal logging is completed: either that a second appraisal is not required; or that the property subject to HECM appraisal rule second appraisal is required.
If a required second appraisal response is received the lender must obtain and upload a second appraisal into the second appraisal field.
Early data indicated that approximately 19% of submitted HECM loans were asked to submit a second appraisal.
Read the full announcement here.
Written by Chris Clow