Whenever a Reverse mortgage is originated a HUD Case number is assigned to that particular borrower and their loan transaction. This is done after they have completed their HUD required counseling, provided a copy of the certificate to the lender, verifying that they have done so, at which time the case number is ordered.
Once this step is completed the lender may order the appraisal, open escrow or request payoff information on any existing loan that the borrower might have. What’s important for the borrower to know, is that they are assigned only one case number via whatever lender they chose to create their Reverse loan.
If they wish to change lenders, they must request that the original lender release the case number to the lender that they have ultimately chosen to originate their loan. Plus, if any appraisal was ordered and completed under the previous lender’s name and registered with HUD it will be used to determine the amount the amount of money the senior will receive if it is less than the HUD lending limit of $625,500.
I recently had a situation where my clients (unbeknownst to me), applied for their loan through another lender prior to meeting with me and the appraisal was completed by the lender and well under market value (even in our current real estate market). Due to the poor appraisal, they are not able to receive as much money through a Reverse loan that they should be entitled to have.
They were very upset and thought that they would simply apply for their loan through a different lender and get a better appraisal. They were unaware that a HUD case number would be assigned to them and they certainly didn’t know that they would be unable to get another appraisal due to HUD guidelines.
Doing an FHA loan regardless if it’s a Reverse loan or a traditional “Forward” one; the procedures are the same. Few people in the general public would be aware of the need for a case number on an FHA loan and what that would mean to them if they wish to change lenders.
The borrower certainly wouldn’t have any control on how much an appraiser may value their home but it’s important to point out any improvements and possibly have some comparables of other properties in the area for the appraiser’s review. This might prevent a poor appraisal being done but isn’t a guarantee, either.
It pays to know.