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Can a lender demand a second appraisal?
August 14th, 2009, 2:00 am · 32 Comments · posted by Mathew Padilla
Randy Johnson, president of Independence Mortgage Co. in Newport Beach, author of “How to Save Thousands of Dollars on Your Home Mortgage” and a mortgage broker since 1983, answers questions…
Bob Davies in Lake Forest asks:
Q. I’m buying an investment property in Riverside, a duplex for $200,000. Is it normal for the lender to insist that I pay for two appraisals, a regular one and then three weeks later a review appraisal?
A. Not having seen the actual report, I can only venture this thought. It is unusual for a lender to require a review unless there is some particular question about the facts that the appraiser used or the manner in which he developed his conclusion that have created in the mind of the lender a question about the value. This is especially unusual in that since May 1 all appraisals done for Fannie Mae and Freddie Mac loans must be ordered in accordance with the Home Valuation Code of Conduct. This means it was ordered from an independent Appraisal Management Company that then ordered it from the appraiser. These AMCs have quality control procedures that are designed particularly to prevent this exact situation from happening.
You have a right to see the appraisal — they DID send it to you, didn’t they? — and I think you have a right to hear from the lender exactly why they want the review. Remember that a good appraisal is there to protect your interest as well and it may have uncovered something that might lead you to not want to buy this property.
Finally, as a matter of courtesy, if the review upholds the original value and you proceed, it would be nice, as a matter of courtesy, for the lender to refund the extra fee you paid.
MortgageMess in Mission Viejo asks:
Q. We have a 5-year, adjustable-rate mortgage (interest-only at 5.375%) that is due to reset in July 2010. The loan amount is for $496,000. We have a second HELOC 20-year fixed at 6.99% for $95,798. According to Zillow.com, our house value is now around $507,000 (down from the low $700,000s at the peak). We have tried to refinance with our current lender but they said our loan-to-value is too high. We would really like to convert our adjustable-rate to a fixed-rate product. What do you suggest we do?
A. Your loan was a jumbo loan at the time it was originated in 2005. Although Fannie Mae and Freddie Mac now do loans that size, they didn’t back then and they will only re-do loans they already own. So I don’t know of any way to help you because jumbo lenders don’t seem to be offering any help.
Readers in a similar situation but whose loans are currently owned by Fannie Mae or Freddie Mac will, unfortunately, find themselves in one of those Catch 22 situations. The new program will allow refinance transactions up to 125% loan-to-value but will just refinance the original loan. They will not allow the HELOC to be paid off with a new, larger loan although they would allow subordination. However, it is virtually certain that the lender on the HELOC will not approve a subordination with an LTV >100%.
I hope that my industry becomes a little more responsive because the current programs are sure leaving a lot of people behind.
That’s it. If you want Johnson to answer a question, email it to Mathew Padilla at mapadilla(at)ocregister.com. Include your name or nickname and the city you live in — that information will be published with your question.
Johnson will answer up to three questions each week, so keep checking back for a response. If many questions are submitted, it could take a while to get a response, or he may never get to it. Also, readers keep submitting variations on the same question, which has already been answered: what to do when you can no longer afford your mortgage. I have decided not to publish most of those questions, because they are repetitive, although I appreciate the difficult situation many homeowners are in these days.
Read prior questions and answers by clicking on the headlines below…
- Income windfall … save it or pay off mortgage?
- Can you get a mortgage with social-welfare income?
- Is it harder to get loan aid from some lenders?
- Think twice before using one mortgage to pay another
- Buying an investment property? Some loan tips…
- Is paying off a mortgage the best option?
- Loan help, or loan shark?
- Answers for first-time home buyers
- Time to double-down on housing?
- Refinance to survive a cash-flow crunch
- Rainy day fund vs. lower mortgage payment
- Is ‘walking away’ from a home justified?
- Real estate investors get no sympathy
- The case for buying a home now
- Bigger home loans coming to O.C.
- A complicated mortgage that could fund retirement
- Loan doors open for serial housing investors
- Forget dodging refinance fees
- No job, no refinancing
- Avoiding a rate hit on an investment property
- Who qualifies for Obama’s mortgage refinance plan?
- Paying off a mortgage vs. refinancing
- Mortgage problems of the wealthy
- The skinny on 40-year mortgages
- Refinancing questions and answers
- How to buy with little money down
- Do banks renegotiate mortgages for ‘good’ borrowers?
- Is it time to buy a rental property?
- Caution urged on mortgages that fund retirement
- Refinancing can be tricky if your home was recently for sale
- Shopping for lowest rate is dumb way to get a mortgage
- Speedy mortgage payoffs could cost you
- Paying your mortgage may be the best use of your money
- A ‘good’ borrower these days is someone who…
- When insurers kill your mortgage application
- Mortgage insurance companies not giving breaks
Find out more about: MORTGAGE ANSWERS | MORTGAGE RATES | FORECLOSURES | HOME PRICES | INVENTORY | RENTS | FED |
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“It is unusual for a lender to require a review unless there is some particular question about the facts that the appraiser used or the manner in which he developed his conclusion that have created in the mind of the lender a question about the value. This is especially unusual in that since May 1 all appraisals done for Fannie Mae and Freddie Mac loans must be ordered in accordance with the Home Valuation Code of Conduct.”
Actually - the new HVCC appraisal requirements don’t guarantee a quality appraisal so it is entirely possible that the value is in question, particularly if AVMs raise any questions at all. Most lenders also have certain guidelines regarding mandatory appraisal reviews (max financing, re-habs, bank owned foreclosures, NALs, etc…). Review appraisals are not unusual at all in this market.
Matthew,
Are you guys going to report at all about the RealtyTrac numbers released yesterday? It’s very strange that the OC Register is ignoring such important news.
Here is the link to the RealtyTrac news release
thanks
http://www.realtytrac.com/ContentManagement/PressRelease.aspx?channelid=9&ItemID=7192
There have been issues with RealtyTrac’s numbers and I have stopped reporting them.
Jumbo lenders won’t talk (or help) to you unless you become one of the bad guys…missing a few payments. Being a good guy (making your payments on time) won’t get you the time of day with these lenders. And of course if you’re making payments on time, why should they help you modify your terms. Why lenders don’t look at things from a strickly business point of view blows my mind. This person is very much under water with his loans and home value. If a lender looked at the value they would get by selling the home in a foreclosure (market value, carrying cost, etc.) vs.the encumbrances currently on the books with this property, and then meet the borrower half way, we’d have a lot fewer foreclosures on the market, lenders would lose a lot less money on their loans, and the homeowner would stay in the home…..A win-win scenario…..but they don’t.
I beg to differ with the HELOC resubordination answer. They are more screwed if they don’t resubordinate than if they do. You need to call them and find out for yourself.
I agree. Resubordinations are common these days because 2nd lien holders knows that if you stop paying on the 1st, they have no chance of getting paid back.
You are also a perfect candidate for a loan modification. The Fannie refi program is only one of three possibilites, the 2nd being the MHA (Making Homes Affordable) loan mod program and the 3rd being private loan mod programs. You need to apply asap.
Lousy advise today, Randy.
Tracker, no one will listen to you regarding loan modification unless you’re deliquent at least three months on your payment. Private isn’t going to modify knowing they’re way behind the equity going in. Lousy advice today, Tracker.
You don’t know what you are talking about. You do NOT need to be delinquent to get a loan mod. You are also completely crazy if you think “private isn’t going to modify…..”. Private simply means your existing lender and servicer’s own programs. They already hold your over 100% LTV loan! Doh!
Tracker, you live in a silver cloud. Great theory, but totally not reality. It just isn’t happening.
And your proof would be……….
Read the papers, ask Matt, listen to the news, ask Randy, call the lenders….etc, etc, etc. It ain’t happening the way you see it.
Believe what you want, you are mistaken.
Believe the facts folks. Tracker is a realtor. Realtors don’t give facts.
It would be nice if you had something worth, I dunno, anything to add.
well said CP.
lol
Funny, yet true.
I always love when I can agree with Tracker (because it happens so infrequently LOL).
Tracker is right. We are modifying 6000+ loans a month, and you do not have to be 3 months del’q.
Having said that, these folks may have a different challenge:
1. The HAMP program is for people who’s payment is currently OVER 31% of gross HH income. Since they sound like financial prudent folks, their payment may already be less than 31%, which precludes them from HAMP.
2. A lender-sponsored program is not going to be interest-only, so even if the lender offered a lower rate, the payment would be higher. Since you need to be in a “hardship” to qualify it’s difficult to say, “I want a higher, fixed payment”
Thanks…..sort of. I don’t think he can’t afford the current payment, only the potential future payment. Do you look at future payments, or must the change have occurred already?
I withdraw this question. Rates are obscenely low right now, so that won’t cause much hardship.
Exactly! These people have likely a 6-month LIBOR interest loan with likely no MORE than a 2.75% margin. Since the 6-month LIBOR is currently BELOW 1.0% they will have a loan at BARELY ABOVE 3% in all liklihood and maybe at MOST if rates rise somewhat, 4%. These are just panicking people who like ALL of those not smart enough to ride out their ARM’s as they DIP into uncharted realms NEVER before seen are seking the psychologically though not currently FINANCIALLY safe move of refinancing into a MUCH higher fixed rate.
Also, they state they have a “fixed rate HELOC” of 6.99%. *Shaking Head* HELOC’s are NEVER “fixed”…they are variable based on the movements of the Prime rate. A 2nd with a “Fixed rate” is not a HELOC though SOME HELOC’S did offer an an “Option” to “FIX” a portion of the loan after the LOC portion (Line Of Credit) was used but that is now just a “Fixed” loan NOT still a HELOC.
“Mortgage Mess” is a good moniker for these folks who have two DREAM loan rates and types since their understanding of mortgages, money, and SAFETY are apparently an ignorance-driven mess! If the new amortized higher payment is going to cause financial hardship, they should try to “Modify” their loan not force a “refinance” of a loan they have already been paying on for 5 years. How financially safe and intelligent is it to pay “Interest Only” of $26,660 a year for 5 years($133,300 over that span) and then PANIC and agree to a higher rate and payment 30-year new mortgage??? Can’t get that $133,300 back and get a do over “Mortgage mess”. Stupid cows stampede over cliffs when they panic…some people have a lot in common with the stupid cows! This is an example of renters-in-homeowners-clothing-think!
Also, I’ve heard of continuation of IO. Is that not the case where you are?
A) we look at current payment. With adjustment a year away, we’d tell the to reapply if the adjustent becomes a hardship.
B) we don’t do I/O mods, but I can only speak for where I’m at
Thanks. You bring much good info to the table.
6,000 loans a month being modified?….Gee, you would think this would be
HUGE news. Matt, why haven’t you done an article on this guys company, you’d be the first to break the news?
What are you talking about? There are progress reports all over out there.
BofA has done 150,000 ytd (outside of the government sponsored program). You can google that
Readers only care about bad news.
“Readers only care about bad news.”
On this and other blogs with the same subject matter, the “Doomsday is upon us” types are usually only commenting on stories they feel prove their overwhelmingly bleak world view! Just look here at how many people with agenda-transparent monikers like “National Bubble” and “buy the dip later” had something to say when “Tracker” was posting FACTS but when “Modguy” brought his actual INDUSTRY FACTS to the board they scatter like cockroaches in the light and can’t be bothered to challenge him. Funny. And pathetic at the same time.
Matt covers these numbers whenever a report is released. There haven’t been any lately besides the HAMP beat down on servicers.
150,000 mods YTD from Bofa is NOTHINg considering there are 4-5 million people mationwide under water. The government needs to roll out a better product to assit those upside down or the FCL market will continue to get worst. We have seen nothing yet!
Define “under water”. If by “under water” you mean “we more than home is valued at” well who cares? Current market value only affects the minds of SIMPLETONS and greedy LOTTERY HOPEFULS who liked bragging about the vaule of their homes and their “investment saavy” when values were going up. VALUE does not = AFFORDIBILITY!!! I’ve said it before and I’ll say it again and again….you pay OFF a loan over time and I guarantee you will have 100% equity…and NOBODY cares about the value of the home or building they are RENTING because they own NOTHING yet HAVE to pay SOMETHING to SOMEONE to have a roof over their heads. Current value ONLY matters if you need to sell OR if you want to refinance to pull cash out. If a loan has become “unaffordable” well, that is what MODIFICATION is for.
If by “under water” you mean “can no longer afford due to job loss or reduced income” then well, THAT is the REAL problem! As I began posting (among many others) well over a year ago, unemployment was the key to the Housing Bubble completely breaking and what would prevent the economy’s recovery. The no money down “Lottery hopefuls” and “investor pretenders” who bought at the peak in order to flip their properties were just the easiest sheep to fleece in the foreclosure wave. Now, it is often longtime owners who could give a rats ^%^# about the current VALUE of their HOMES that have lost their jobs and in many cases will NEVER make what they once did that are looking for help based on often 50-70% LESS in income. Now THAT is “Under Water” and is the REAL threat to any recovery. And it is THESE people that the government HAMP program is trying to address. But it takes two to tango. I am still amazed at some of the people that I talk with that want to talk about “refinanciing” on an upside down home and in many cases haven’t even heard the WORD “modification” until I direct them back to their banks for it. In my opinion a MAJOR component of what started this whole slide, “FINANCIAL IGNORANCE” of ALL thing mortgage related are causing people to just “give up” rather than pick up a phone and call their lenders to see if anything can be done.