Wall St. Journal - "inflated Home Appraisals Drain Billions From Government Insurance Fund"

[Deleted member 128537]

I'm not sure why you think that you are jeopardizing a homeowner more on a reverse mtg than a standard mtg.

Often, the homeowner is dead when the reverse mtg problem rears it head; not sure they can be jeopardized much beyond this.

However, on a std mtg, the owner is usually still alive and can suffer economic losses if an appraiser chooses an advocacy position.

1. In a reverse mortgage people are using the value of their house like a bank. They are depleting their equity in the house. In a standard mortgage people are paying down on the house and are increasing the equity in their house.
2. If the older person has a situation where they have to sell and they have used their home as a “bank” for 10 years the likelihood of them being underwater is higher than for a typical standard mortgage.
3. Also as people get older they often neglect maintenance on the home due limited resources. Therefore the condition of the home is often worse than when it was appraised. An example of this is the house I bought. I purchased it from an older lady whose husband tragically died about 6 mos. after building it. The lawn was a mess, the maintenance on the outside was neglected, and the interior was old and dreary. She had to sell the house because she couldn’t afford to live in it.

 

[Mark K]

All three of those points you mention can be said for standard mortgages.

1. How many times have you seen owners use their house like an ATM through HELOC abuse.
2. If owners use their house like an ATM, they'll probably end up under water.
3. I've seen hundreds of neglected homes that didn't have reverse mortgages.

There are a lot of instances where a reverse mortgage is not a bad thing. The bad part comes from excessive fees and LTV ratios that are too high.

But my main point was that it is not your place to be 'conservative' in appraising. Its not your job to try to save the world. I've seen plenty of regular mortgages go bad and many that I could tell would go bad within a couple of years after purchase. That doesn't mean its my job to decide which appraisals I should be 'conservative' or 'liberal' with.

If you have some personal bias against reverse mortgages, you should not be appraising for them. If you can't be an objective, disinterested third party you should decline the assignment.

 

[Deleted member 128537]

All three of those points you mention can be said for standard mortgages.

1. How many times have you seen owners use their house like an ATM through HELOC abuse.
2. If owners use their house like an ATM, they'll probably end up under water.
3. I've seen hundreds of neglected homes that didn't have reverse mortgages.

There are a lot of instances where a reverse mortgage is not a bad thing. The bad part comes from excessive fees and LTV ratios that are too high.

But my main point was that it is not your place to be 'conservative' in appraising. Its not your job to try to save the world. I've seen plenty of regular mortgages go bad and many that I could tell would go bad within a couple of years after purchase. That doesn't mean its my job to decide which appraisals I should be 'conservative' or 'liberal' with.

If you have some personal bias against reverse mortgages, you should not be appraising for them. If you can't be an objective, disinterested third party you should decline the assignment.

Frankly I don't have to worry about it anymore because I no longer do Reverse Mortgages because I think they are a scam on the borrower. I also don't do FHA anymore for a whole hosts of reasons.

And also I do feel a certain responsibility to the borrower to not put them in a precarious situation. That's not "saving" the world. That's just called the golden rule.

 

[Mark K]

And also I do feel a certain responsibility to the borrower to not put them in a precarious situation.

IMO, you have a greater (greater, as in legal) responsibility to your client to be an objective observer, a D3P, and not intentionally skew appraisal results one way or another.

Probably a good thing you don't do those appraisals anymore.

 

[Deleted member 128537]

IMO, you have a greater (greater, as in legal) responsibility to your client to be an objective observer, a D3P, and not intentionally skew appraisal results one way or another.

Probably a good thing you don't do those appraisals anymore.

No one is completely objective. That's a fallacy. One can try to divest themselves of their bias but it's pretty hard.

My responsibility is to give a credible opinion of value based upon the needs of the client which ultimately is to protect their collateral stake in that property. That credibility can exist along a scale of possible values; especially in rural areas where comparable sales are often hard to find and where adjustments can be large.

 

[Joe Flacco]

Annual US mortgage originations for 1-4 units is like $1.5 trillion to $2 trillion per year. Annual reverse mortgage originations is like $10 billion per year. Drop in the bucket.

 

[Terrel L. Shields]

If you have some personal bias against reverse mortgages, you should not be appraising for them.

Exactly, and the reason I refused to do them when I was FHA.