We hold the first lien which is $245,000. LO used an existing appraisal prepared for a mortgage company when doing that loan. Customer's now applying to refi the $35,000 2nd they have with another lender, and LO wants to still use that existing appraisal that was prepared for the mortgage company. I don't think you can use that since it was not prepared for a regulated financial institution, but I want to be sure - I'm gonig to get a lot of push back on this. We won't even go into the fact that this appraisal is from 2006 in a declining market.

Frequently Asked Questions on the Appraisal Regulations
and the Interagency Statement1 on Independent Appraisal and Evaluation Functions March 22, 2005

27. What is the useful life of an appraisal?
Answer: The useful life of an appraisal varies with market conditions and property type. The agencies allow a regulated institution to use an existing appraisal to support a subsequent transaction if the institution documents that the existing value estimate remains valid. Factors which could impact the value include the passage of time; the volatility of the local market; the availability of financing; the inventory of competing properties; improvements to, or lack of maintenance of, the subject property or competing surrounding properties; changes in zoning; or environmental contamination. (See “Valid Appraisals and Evaluations” in the interagency guidelines.)

28. Can a regulated institution advance new funds without a new appraisal if the value of the total loan continues to be supported by an existing appraisal and is consistent with supervisory LTV limits? Does the age of the appraisal matter if the physical condition of the property and the market conditions have not changed?
Answer: A regulated institution may use an existing appraisal or evaluation to support a subsequent transaction, as long as the credit file documents the facts and analysis that support the institution’s conclusion that the appraisal or evaluation remains valid. Criteria for determining whether an existing appraisal or evaluation remains valid will vary depending upon the condition of the property and the marketplace and the nature of any subsequent transaction.

It appears to me that you need to validate the usefull life of the existing appraisal and make sure it is really NOT an evaluation as your loan is now going over $250,000

You can't use the appraisal unless it's assigned to the bank by the mortgage company. However, the appraisal is way too old. It's worthless. Call any appraiser and they will tell you the same.