Can a senior underwriter's decision to lower an apraisal trump the underwriter's written evaluatuion?

Asked by Kenneth, Chicago, IL Tue Dec 28, 2010

I've been attempting to secure a purchase rehab loan through Wells Fargo for the past year. For various reasons, after the third aprasial with a carefully written addendum explaining all the factors that came to bear on his decsion. The apraisors evaluation was over written by the senior underwriter in what seems to be the last minute.The underwriter reduced his appraisal by 100k Can this be done? Is it legal? Does it follow FHA guidelines?

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6
Matt Bukovy, Mortgage Broker Or Lender, Chicago, IL
Tue Dec 28, 2010
Suzanne is dead wrong.

Underwriters can and do reduce the value of an appraisal all the time. Most of the time, it's when a property is "over-improved". One may think that because you're adding a jacuzzi tub, porcelain tile, cherry hardwood floors, etc., that the subject property should obviously be worth more than all the other homes in the neighborhood, but that's exactly the problem from an underwriting standpoint: There are no other comparable sales.

Good luck,

Matt Bukovy
1 vote
Robin Silver…, Mortgage Broker Or Lender, Garden City, NY
Thu Dec 30, 2010
We have been finding more and more lately that the Desktop Underwriting system is asking for field reviews and desk reviews. Their system might have been tweeked in the past few months to come up with some kind of average value for the surrounding area. Generally, we have been lucky that the desk or field reviews have supported the original appraisers value.
Although we don't really have enough information here, the biggest question is why this is taking a year. Is it a short sale that hasn't been approved yet?
0 votes
Jody Wise, , Chicago, IL
Thu Dec 30, 2010
I dug into this with a lender and his response was: "The senior underwriter trumps a first level underwriter and they can override the previous decision. All loans go through a final review by a higher level of underwriter and on rare occasion decisions can change. I'm assuming this is a difficult property to comp and the senior underwriter didn't see enough evidence to support the appraised value nor the appraisers explanation. I would suggest that the individual looking to obtain the loan seek the advise of their legal council on this."

The most interesting part of this is the issue of comps. I am not sure from your notes what the price point of the proeprty was but $100,000 difference seems quite large. If there are very comparable properties then maybe the appraisal was wrong but if it is very hard to comp - there are very few if any properties that are similar - then it is hard to value and the underwriter.
0 votes
Aimee Renkes, , Chicago, IL
Tue Dec 28, 2010
I agree with my colleague Matt B and this is not against FHA guidelines nor illegal if there are questions on the validity of the appraisal from the underwriter's perspective. When seeking a FHA purchase rehab loan there has to be sales data in your area to support the improved value of your home so that you can roll in all repair and renovation costs. Based on your comments it seems the comparable sales in your area are lower than the cost of your purchase price PLUS the work you intend to finance. Underwriter discretion can adjust appraised value although it is not very common, and to adjust downward by $100k seems extraordinary unless the home is priced comparably to how similar units have been selling lately?

Since this took one year, perhaps sales data has declined which hurts your ability to finance all of the costs? Without more info it is hard to give you more clarity on the issue and a solution. I hope this helps and if you want to discuss more feel free to contact me or Matt. Either way, good luck!
0 votes
Philip Sencer, Agent, Chicago, IL
Tue Dec 28, 2010
Sure it can be done and the banks do this and other things all the time. I would avoid Wells and all of the other big banks that helped create the real estate mess we are now in. Try Brad Eggers, Ardain Mort 847-744-0168 for a 203K loan
0 votes
Suzanne MacD…, Agent, Morristown, NJ
Tue Dec 28, 2010
WOW, I have never heard of this! Why on earth has this taken a year? Are you working with a realtor to make this purchase? You should be! Have you tried any other lenders? FHA 203K loans can be written by numerous other lenders, it's not exclusive to Wells Fargo. Something just doesn't sound right here, it should not take a year to get the loan, It was always my understanding that appraisers were, by law, independent and held at arms length from the mortrgage company and its underwriters. I KNOW the underwriter cannot reduce an appraisal. Is it possible the terminology is questionable?

I would be glad to communicate with you privately about this situation, but my initial reaction is, try a different lender. Something is not right here, either I am not understanding correctly or something, but this just sounds wrong.
0 votes
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