One component of the reverse mortgage—and general mortgage—business seems to be shrinking fast, in spite of rising demand: Appraisers.
Once a booming business, many appraisers left the industry upon the housing crash, never to reenter the market. More generally, though, changes including new regulations have led to a decline in qualified appraisers at a time when borrowers are starting to need their services increasingly once again.
“A lot of appraisers left when business volume tanked and many were frustrated with AMCs that offered very low fees,” says Erik Richard, CEO of Landmark Network. “Appraisers are an aging population and then couple that with the difficulty there is now in becoming an appraiser, and the number of appraisers are way down.”
Today’s regulations require appraisers in training to partner with a working, certified appraiser in a sort of apprenticeship role. Historically, that process allowed a new appraiser to get the right education while logging a set number of hours before applying for a full license.
Under the arrangement, trainees were able to complete appraisals with the certified appraiser, essentially co-signing the report. But today, there are fewer certified appraisers and more importantly, very few will bring on trainees. Exacerbating the problem, few financial institutions will accept work done by a trainee.
“It really is the perfect storm when you add the rise of loan applications and the stabilization of home values in many markets,” Richard says.
Further, the industry is having a hard time recruiting new people.
“The appraisal industry is in a dire situation,” says Brian Coester, CEO of Coester VMS. “New appraisers are not coming in and old appraisers are getting out.”
“The problem is exacerbated by the inability to attract the next generation of appraisers to the profession,” wrote Michael Kleber-Diggs of Vesta Valuation in a January article in online publication Appraisal Buzz.
Source: The Appraisal Institute
With the market for appraisals beginning to show an uptick through homeowners refinancing under The Home Affordable Refinance Program (HARP) II, as well as values beginning to drive sales again in a few select areas of the country, the shortage is actually leading to longer turn times for getting an appraisal.
“A lot of appraisers that are strapped and are busy,” says Davide Stroop of Mortgage Information Services. “They’re pushing their turnaround times out a bit. Normally, we’d find another appraiser to take care of the overflow, but that’s where we’re seeing the reduction. There are not as many who are able to take that work on today. Turnaround times haven’t been impacted that greatly, but where’s the next wave of appraisers coming from? Where are they?”
Looking ahead, the lack of supply and growing demand could also lead to rising costs to borrowers. In some markets this is already the case, AMCs say.
“Appraisals will cost a lot more,” Coester says, as a result of the supply and demand. “Borrowers have a big enough problem paying for appraisals now in the reverse mortgage space.”