Updated Validity Periods for Appraisals for Reverse Mortgages

A reverse mortgage is a loan using the equity in a homeowners house for those 55 years of age and older.  This type of loan allows borrowers to receive payments from the bank instead of making payments to the bank.  

It’s very important to understand the details of a reverse mortgage if you are interested in getting one.  It’s a big financial decision, and like a traditional ‘forward’ mortgage, there are a handful of steps that are part of the closing process.

When applying for a reverse mortgage, the lender will order an appraisal of the homeowners property.  This appraisal is completed by a professional that has no relationship with the lender in order to keep things on the up and up.  The value of the appraisal helps determine the overall amount of the loan.  

For 2022, the home value limit for Home Equity Conversion Mortgages (HECMs) is $970,800.  HECMs are insured the Federal Housing Administration (FHA).  Periodically, the FHA makes changes to the rules that govern things like reverse mortgages.

Recently, the FHA announced a change to the appraisal validity period for reverse mortgages.  This means the amount of time an appraisal is valid once it has been completed.  Starting July 12, 2022, the validity period for appraisals for a reverse mortgage is 180 days.  This is an increase of 60 days from the previous validity period of 120 days.  

According to the FHA (via ML 2022-11) “increasing the appraisal validity periods decreases administrative and financial burdens associated with obtaining appraisal updates.”  What does this mean for borrowers and lenders?  The bottom line is more time to complete closing on a reverse mortgage.  

Closing on a reverse mortgage involves many steps and can take a good bit of time.  When an appraisal expires, it creates a frustrating situation for both the borrower and lender.  For the borrower, this might mean having to pay for another appraisal.  For the lender, it could mean that the borrower chooses not to continue with the loan due to the need for another appraisal (and cost).

Lenders want these loans to close just as much as borrowers.  By the time the appraisal is ordered, the bank likely has spent a good deal of time and money working with a borrower.  Both the lender and borrower want to see the reverse mortgage close smoothly with no hiccups or unexpected delays.  Having an appraisal validity period of 180 days instead of 120 days just removes one more challenge from the process. 

If you are interested in a reverse mortgage, or simply learning more about a reverse mortgage, please contact the team at Equity Access Group.  EAG specializes in reverse mortgages, and they can help you with the next step.