A rising number of homeowners are complaining that they cannot refinance their homes to prevent them from becoming foreclosure homes because appraisers have been making extremely low home valuations.
California-based aerospace engineer Patti Sanders said her mortgage lender rejected her loan refinancing application because her large Victorian house, which was appraised at $635,000 in 2007, was appraised at only $250,000.
She would have reduced her monthly payments by about $400 if the appraisal was done correctly and if the loan refinancing pushed through. If she could not refinance her home on time, her house could be added to lists of foreclosure homes in the next several months.
During the housing heydays, appraisers complained that they were pressured to inflate their appraisals so that more borrowers could buy the homes they like or more homeowners could take out higher home equity loans.
But now, mortgage lenders, clobbered by thousands of defaulting borrowers, have been demanding appraisers to make conservative valuations. Some appraisers have been expressing concerns that their services could be terminated if they do not accede to lenders’ requirements.
Aside from pressure from lenders, appraisers are also finding it hard to make estimates because of rapid price fluctuations in some markets and the long intervals of sales in other markets.
Mark Rattermann, a trainer of appraisers in Indianapolis, said it is difficult to obtain accurate home values when the basis of pricing is too old.
John Rooney, a Phoenix appraiser, said about 50 percent of the home appraisals he has completed recently have been very low appraisals and that those appraisals prevented refinancing for many homeowners trying to prevent their houses from becoming foreclosure homes.
Rooney added that getting another appraisal would cost the homeowner another $350 or more. It is also uncertain if the new appraisal would enable homeowners to refinance and save their houses from becoming foreclosures homes.
Low appraisals are also preventing some realtors from making more home sales. Connecticut realtor Chris Rubis said he could have sold a four-bedroom house at $750,000 if the appraiser adjusted his original appraisal of $700,000. The buyer is still negotiating because he could not raise more cash to close the gap.
Recently, home appraisers were informed they have to face another challenge when the Home Valuation Code of Conduct was implemented. This code of conduct will apply to home loans that will be backed by Freddie Mac or Fannie Mae.
According to critics, the code has forced mortgage lenders to hire appraisal management companies that pressure appraisers to price homes conservatively, preventing homeowners to refinance their homes to save their houses from becoming foreclosure homes.
Comments on this entry are closed.