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On 11/16/16 my wife and I signed a Loan Estimate for a $417K 30yr conv fixed mortgage at 3.875% (0 point/orig fees). The Loan Estimate states that the rate is locked until 1/4/17. We completed all disclosures and financial info rapidly and were told that all looked good. (Our details: median credit scores of 785 & 754, no debts, $220K annual income).
We paid an appraisal fee to the mortgage company and their appraiser valued the home at $1.2 million. However, the 3 comps in the appraisal had adjustments in the 30-50% range. On 12/14/16 the underwriter said that everything looked good except the appraisal adjustments were too high to use for Fannie Mae. They sent us a Value Reconsideration form and we rapidly hired another appraiser who identified 12 good comps (all closer to subject property, adjustments less than 15%, closed within last 6 months). We submitted them back to the mortgage company on 12/19/16.
The next day (12/20/16) we received a Statement of Credit Denial, Termination or Change with one Principle Reason checked: Unacceptable property. After several inquires, the mortgage company sent an email saying "We were unable to the hold the loan file open while we waited to hear back on the results of the [appraisal] challenge we just submitted..." They explained that this terminated our rate-lock but that they are willing to "re-open" the file and re-lock the rate at current market rates (4.267% today) once the appraisal has been reviewed in 5-7 days.
It seems to us like they are trying to get out of the lock agreement. Or is this delay a legitimate reason to close the application? Since it was their appraiser that caused the problem, I would argue that they are responsible for the delay. Do we have an option to appeal the decision to someone (maybe the CFPB or a state agency [we live in PA])? Do we have power to enforce the rate lock agreement? We just want the mortgage at agreed rate, not a legal battle.
What value was require for your transaction to move forward? There's some key info left out here. Did the UW provide you with his/her adjusted value? Did they kick it back to the appraiser? Was another report ordered? 30% adjustments are typically accepted on one comp, if well explained; but all comps at 30%+, and 50% is really reaching for the value. When we see this situation, the appraiser has skipped over closer, more relevant comps. This is a red flag of an attempt to hit the value. I'm scratching my head to figure out how this report was turned in - the AMC (company handling order) should have caught this.
Every owner thinks their home is worth more than its appraised value. One way to see if you are barking up the wrong tree is to view assessments between homes on the appraisal and see if the taxes are proportionately similar to your assessment. This could reveal an over-improvement to the neighborhood. I am not saying it's not possible the value is there, only that I can understand the lender's reluctance to accept that report. Another report should have been ordered, immediately, with the report you have been rejected.
No one has the luxury, there's not that much business out there to get out of locks. If you have a lock, there's nothing to get out of. Dodd Frank set up timelines that must be followed. If they are not challenging the report, your file has had what we call a change of circumstances and that lender must reprice (reissue rate/points) and send you updated disclosures within 72 hours of receiving a value or report. Unfortunately, it appears they did not have financing for your scenario and had to issue a decline.
What loan amount were you seeking? Are you paying off one loan or two? If there is a second loan being paid off, was that loan obtained when you purchased the property? Are you putting any cash in pocket or paying off other debt? Different banks have different requirements, not all are Fannie, more and more portfolio are popping up every day. And finally, has anyone provided a value without the heavy hand on the adjustments? There could be a couple of solutions for you to move forward, but I am not optimistic about recourse with the State and CFPB. The most impact you could have is to contact your Representatives (federal level) and let them know you have been trapped by regulations enacted post mortgage crisis. You lender is tied into tight guidelines and is more concerned about meeting regulations than resolving your issue.
Thanks for the reply. Value we needed to move forward was $600K and appraised value was $1.2M. Underwriter did not provide me with his adjusted value but I will ask. The appraiser is based about 25 miles away and his comps are in a tight cluster near where he lives (so 20 to 25 miles from subject property). Possibly because of the low LTV ratio maybe he thought the high adjustments were okay?
We're fine with the value from the banks appraiser. Are appraiser was looking for comps with lower adjustments and closer to the property. And we found many better comps.
Currently there is no mortgage on the property. It is new construction that we financed out of pocket. We would like to get a single conforming mortgage of $417K as a cashout refinance but we aren't paying off existing mortgages.
The appraiser we hired didn't do the full analysis but they thought the value from the banks appraiser was pretty close to reality.
Thanks for the reply. Value we needed to move forward was $600K and appraised value was $1.2M. Underwriter did not provide me with his adjusted value but I will ask. The appraiser is based about 25 miles away and his comps are in a tight cluster near where he lives (so 20 to 25 miles from subject property). Possibly because of the low LTV ratio maybe he thought the high adjustments were okay?
We're fine with the value from the banks appraiser. Are appraiser was looking for comps with lower adjustments and closer to the property. And we found many better comps.
Currently there is no mortgage on the property. It is new construction that we financed out of pocket. We would like to get a single conforming mortgage of $417K as a cashout refinance but we aren't paying off existing mortgages.
The appraiser we hired didn't do the full analysis but they thought the value from the banks appraiser was pretty close to reality.
Oh you just said the magic words. Cash out refinance. You almost sound like you are using Wells Fargo. Which lender?
Hi, Thanks for the help. I'd rather not say which lender since I still don't fully understand what is going on. Why is "cash out refinance" the magic words? Does this sort of a mortgage have different criteria? I can see in some cases why this could be considered a risky loan but in our case it seems reasonable. We just spend $1.5M out-of-pocket on the construction; taking out a $417K mortgage to replenish some personal accounts doesn't seem unreasonable.
I'm not a lender, but have sold and bought several properties including new construction. Why did the appraiser use comps 20 miles from the subject property? I've never heard of this and I think comps have to be within a couple mile radius of the subject property. I would bring that up!
Second... if it is Wells Fargo run, fast!! And other big box banks will just make the loan process more difficult as well, IMHO. I suggest going through another lender and forget who you're going through now. Try a broker such as Amerisave or Guaranteed Rate.
Sometimes it can be very hard to find comps even with adjustments such as pool, no pool, #BR, #BA, sqft, age built, etc., let alone within some distance radius.
Okay, it sounds like an appraisal that cannot be used. The reason everyone keeps asking you who the lender is, is to determine the relationship between appraisal company and the bank. Most, now have a firewall to insulate themselves from conflict, while a few are hanging onto their in-house appraisal company. If the lender is using their own appraisal company, it's hard to avoid responsibility, and you could push, their appraisal company, their lock problem.
Otherwise, if you are looking for 417K cash out, why they overshot the value by so much, is hard to say.
Hi, Thanks for the help. I'd rather not say which lender since I still don't fully understand what is going on. Why is "cash out refinance" the magic words? Does this sort of a mortgage have different criteria? I can see in some cases why this could be considered a risky loan but in our case it seems reasonable. We just spend $1.5M out-of-pocket on the construction; taking out a $417K mortgage to replenish some personal accounts doesn't seem unreasonable.
It has been my experience with Wells that with HELOC's and cash out refi's that they are unreasonable. They do all sorts of crazy things that other lenders don't do. That is why I was asking.
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