Reverse Mortgage Fraud Is On The Rise As HECM Loans See 37% Spike In Appraisal Fraud
Therefore, the agency announced that it will require a second appraisal on select HECM loans. The new guideline went into effect immediately.
The FHA stated that 50,000 of the 134,000 appraisals inputted into its automated valuation model were inaccurate by at least 3%. That is roughly 37$ of new submissions.
FHA Commissioner Brian Montgomery said:
FHA Deputy Assistant Secretary Gisele Roget said that the new process will involve multiple review factors:
The disclosure of the tools and the methodology could result in appraisals being adjusted to conform to these factors. Therefore to preserve the integrity of this new process, we are going to be treating the assessment methodology and the valuation tools as proprietary and confidential.
Roget also stated that the impact on the origination timeline should be minimal and FHA expects to fully automate the process by December 1st.
FHA will issue a report to Congress in November on the state of the reverse mortgage program. The report will focus on the impact of reverse mortgages on the Mutual Mortgage Insurance Fund. The 2017 report revealed its negative net value of $14.5 billion.
The latest guideline is yet another measure FHA is implementing to stop the bleeding.