Homeowners looking for a reverse mortgage may have to undergo a second appraisal in certain circumstances, thanks to new guidance from the FHA.

Under the new requirement, homeowners will have to provide a second property appraisal before receiving a Home Equity Conversion Mortgage (HECM), commonly referred to as a reverse mortgage, if the FHA suspects the home’s value of being inflated. The requirement will take effect for cases assigned on or after October 1.

A  2017 Study of FHA’s Mutual Mortgage Fund– which provides insurance on FHA-guaranteed mortgages – found higher-than-expected loses, which the agency attributed in part to “optimistic estimates of collateral value driven by exaggerated property appraisals when the loan was originated.”

FHA, as part of this reform, will perform a risk assessment of all appraisals submitted for reverse mortgage origination for FHA-guaranteed mortgages. If the agency determines a second appraisal is required, the lender must use the lower value of the two appraisals.

Real Estate Definition of the Dayabsorption analysis-A study of the number of units of residential or nonresidential property that can be sold or leased over a given period of time in a defined location (See also feasibility study)