Refinansiering: What is a Second Appraisal Rule?

Second Appraisal Rules For FHA Mortgages - FHA News and Views

It might be pretty challenging for senior citizens qualify for reverse housing loans now that the FHA or Federal Housing Admin has enacted the second-appraisal rule. However, it does not mean that senior citizens who want to use the equity in their house should panic. The new rule, which applies to the Federal Housing Admin’s HECM or Home Equity Conversion Mortgage program, has not yet impacted most reverse housing loan applications. 

The rule that went into effect requires housing loan lending firms to submit appraisals on Home Equity Conversion Mortgage reverse home debentures to the Federal Housing Admin for what is called collateral risk assessments. During the assessment process, the FHA will take a closer look at these appraisals to ensure that appraisal professionals have not over-value the property. 

If the government does find evidence that appraisers might have overvalued a property, lending firms need to order a second appraisal procedure before the reverse home debenture can move forward. The rule could hasten the reverse home debenture made through the Federal Housing Admin’s Home Equity Conversion Mortgage program. And that is very important: The scheme is the most popular reference for reverse mortgages (RM).

To find out more about HECM programs, click here for more information.

A limited impact

Today, the impact of this new rule has been next to nothing. According to reports, only 20% of Home Equity Conversion Mortgage appraisals have been identified for having overinflated values and have been recommended to undergo a second appraisal. What does it mean for senior citizens applying for RM? They might worry more about appraisal processes, but they should not let fear of this rule keeps them from an RM. 

What is a reverse housing debenture?

This thing has long been a way for older property owners to access their HE (home value) without making monthly amortizations. The Federal Housing Administration insures these things are made through the Home Equity Conversion Mortgage program. They allow property owners who are 62 years old or older to use their value. 

An RM gives individuals some options. People can borrow lump sums of funds, set up a LOC (line of credit) to borrow against as they wish, or receive a series of fixed amortizations for the rest of their life. In many circumstances, people do not have to repay the debenture as long as they are living in the house; the debenture is designed to be paid with the sale proceeds of the property after they pass away or otherwise vacate it. 

How much people can borrow depends on the amount of their property equity. Equity is the difference between what they owe on their house and what its current worth is. Say they owe fifty thousand dollars on their house, and it is worth two hundred fifty thousand dollars; they now have two hundred thousand dollars value in their property.

Why implement these new rules?

According to experts, at least 30% of reviewed FHA loan appraisals are found inaccurate by at least 3%. These numbers prompted the government to impose the second-appraisal rule. In a statement from the National Reverse Mortgage Lenders Association, they welcomed this new rule. 

Second-appraisal approaches are preferable to various changes in either the principal limit factor (things that determine how much money is readily available to people taking out these mortgages) or increases in mortgage insurance policies on RMs. These are steps that have become very important because of the United States Department of Housing and Urban Development’s analysis of appraisals. It is an important step to address the problems they have identified.

How appraisals work? Visit to find out more.

Ordering a Second FHA Appraisal: The Rules in HUD 4000.1

Too many changes?

According to real estate professionals, the frequent rule changes that the Federal Housing Admin has imposed on RMs are providing challenges to loan officers. They said that the government had enacted rule changes to their Home Equity Conversion Mortgage program on a steady basis. It means that the government has not allowed enough time to see if previous rule changes will have any effects before the organization makes more changes. 

What’s maddening from a debenture officer’s point of view is that it is very hard to do business when rules are constantly changing. But there’s always light at the end of the tunnel. Frequent rule changes might inspire more financial institutions to offer their own proprietary RM programs that do not rely on government insurance. It would, in turn, provide various options for property owners looking for RMs.

A significant impact on property purchases

According to experts, the second-appraisal rule could possibly have a significant impact on property purchases. Since the Great Recession or Housing Bubble of 2008, the government has allowed property owners who are 62 years old or older to use its Home Equity Conversion Mortgage RM program to purchase a house. 

The scheme is designed for senior citizens who want to move out of their current house and move into one that fits their needs. Maybe they live in a two-story house, and they would rather live in a one-story, smaller residence. Under the Home Equity Conversion Mortgage for purchase scheme, homeowners sell their house and then use the proceeds from the sale as a DP on a new house. 

The equity that property owners earn on the new house through this DP and the new value determines how big of an RM borrower can get. With standard Home Equity Conversion Mortgage RMs, borrowers do not have to pay their RMs until they move out of their new house or until the owner dies.

The government’s second-appraisal rule could have greater effects on Home Equity Conversion Mortgage for purchase programs compared to what it might have on standard RMs. This second appraisal could add five days to one week to the closing. We understand that people can be working on other conditions during this time, but there will still be some delays in addition to the actual costs. Second appraisals could hinge on possible sales if it comes in too low. 

For instance, a new house a person wants to purchase through the Home Equity Conversion Mortgage for purchase scheme is listed for one hundred fifty thousand dollars. Still, the second appraiser values the property at just one hundred twenty thousand dollars. It could ruin the real estate deal since lending firms will not loan the person more than what the house is worth. Low appraisals have been something for property purchasers to fear. 

According to real estate agents, purchasers have options when appraisals come in too low. However, these things are not overly pleasant. Sometimes a property seller might lower the asking price. If they are unwilling to do this, purchasers can make up the difference by bringing cold cash to the table to make up the difference between the sales price and the appraised value. 

There is also a good chance that purchasers might try to contents the value appraisal. The good news is that low appraisals are rare occurrences. Buyers can avoid these by working with refinansiere lån agents who can spot overpriced properties before their clients make offers. The key here is professionalism. If people work with experts across the board, it will be a very rare occurrence.

According to financial professionals, the lending firm and real estate agent can file an appeal with appraisers if they think the appraisal is too low. Although getting a new appraisal is not always a straightforward procedure. Lending firms and agents will need to present appraisal professionals with comparable house sales that are different compared to the ones originally used by these professionals. 

When providing new computations, appeals need to explain why these computations are better compared to the original computation. Lending firms and agents can also present appraisers with factual mistakes. Maybe they missed a bedroom when valuing a house or used incorrect square footage. According to professionals, appraisers usually have two days or forty-eight hours to review and decide on the property owner’s appeal.