All: While reviewing some trade material today, I came across an interesting article that supports my distain for certain mortgage lending practices. Iâ??ve lost count how many times I or my staff have attempted mortgage default resolution, only to learn the underwriting was flawed â?? by no fault of the consumer. So for those seeking or in-route to home purchase or mortgage acquisition, heads-up! http://www.reprofile.com/rep/story/1,1005,32252,00.html?PersonId=
Very interesting read Anthony, I checked the article regarding FHA appraisals to soar, thanks goodness I am already in my home!
All right, I'm trying to understand this. I know from personal experience that lenders/creditors have no mercy or conscience. But, what I don't understand is trying to blame mortgage companies, especially if going for a refinance, for getting the appraisal the borrower wants to to make the deal happen. I know in my situation I didn't want to here the appraisal was to low. If you know you can't, at the time pay the bill, then don't ask for it at all. Am I missing something here?
Durango: In a word, yes, youâ??re missing the overall picture. Although true that while in most refi situations the consumer wants or needs (perhaps to pay down bills) a certain amount, skewing the appraisal is still not in their best interest. What if that borrower decides to sell the subject property shortly after loan origination, as a simplified example? If market value is lower than the appraised number, whom do you think the lender will expect to pay the difference? There are many other ancillary issues why skewing an appraisal isnâ??t good for anyone concerned, such as ultimately affecting prevailing rates and approval guidelines â?? just to name two. Yet in essence what youâ??re suggesting is that the consumer should be allowed to pay more, for an object he/she KNOWS is worth less. How can that be a good thing, generally speaking? As far as trying to â??blame mortgage companiesâ? for this practice, who else is finally responsible BUT the lender? Iâ??ll explain in a bit more detailâ?¦ Last year I did some consulting work for a national mortgage lender (a huge one), whose California line collectors boasted of having 10,000 REOs (properties taken back by foreclosure) in one state alone! After analyzing a sampling of their delinquent portfolio valuations. Sure enough all those tested had skewed values at origination, which corresponds proportionately to the high number of foreclosures. Bottom-line is that over inflating property values, for whatever the reason, is a crapshoot highly dependent on market stability and steady property appreciation. When national financial aspects start to go flat, and they always do sooner or later. The consumer ultimately pays the price for over exaggerated appraisals, more so than the lender. Does the concept make more sense to you now? [;-)
Anthony, you are right on the money. I do believe that this happens. This happened to me on the last home I owned. I know lenders take the figures of the appraiser for underwriting the loan. I also know it would be costly, but to protect my interests next time I will also hire my own appraiser. This way I will know if the property appraises out. This way I won't have an appraiser fudging the numbers to make the loan happen. I would rather not get the home rather than have the home over-appraised. At least then I won't risk losing my house if I had to sell in an emergency. I have paid a high price in the past for my mistakes, but this will not happen again.
Actually there is a more cost-effective way of doing that, protecting your interest in relation to appraisal. Itâ??s far less expensive to have a BPO (Brokers Price Opinion) or CMA (Current Market Analysis) composed by a reputable Realtor. Each include (or should) area comps and are generally accurate within 5%. You could do a search on the Net for BPO providers (who more often than not, work for lenders but will serve a consumerâ??s need as well). The main differences between the two are price. An appraisal can run several hundred dollars, while a BPO can cost as little as fifty bucks. CMAâ??s are often done by Realtors as a consumer courtesy (mostly FREE), but are less reliable than a thorough BPO.
