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#2220585 - 08/28/19 04:59 PM Construction/Perm Appraisal question
Sheba Offline
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Sheba
Joined: Mar 2002
Posts: 73
Oz
Has anyone ever elected to get an updated appraisal after the construction phase of a construction/permanent loan. My lender has a construction/permanent one-time closing loan that is ready to modify to permanent status. The appraisal is still good. However the borrower is asking for a new appraisal as he made several upgrades during the construction period. Is the decision to do this purely a management decision or is there some compliance regulation that addresses this situation? Additionally, if we order the new appraisal, so that it supports the current value of the property, how do we disclose the additional appraisal fee charged to the customer?

If more clarification is needed please let me know. This is a new situation for me.

Thank you for your help.

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Lending Compliance
#2220593 - 08/28/19 05:36 PM Re: Construction/Perm Appraisal question Sheba
rlcarey Offline
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rlcarey
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Galveston, TX
However the borrower is asking for a new appraisal as he made several upgrades during the construction period.

Tell them to go out and get one then - you apparently don't need it under your policies.
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#2220599 - 08/28/19 06:02 PM Re: Construction/Perm Appraisal question Sheba
Truffle Royale Offline

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Is the borrower asking to increase the loan amount too? Or will a higher value affect his loan in any way? If so, then I should think the bank DOES want the new appraisal done too. The borrower requesting the second appraisal to show increased value is a valid CC so the bank should order it and provide a redisclosure to the borrower to capture the additional cost.

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#2220600 - 08/28/19 06:17 PM Re: Construction/Perm Appraisal question Truffle Royale
Sheba Offline
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Sheba
Joined: Mar 2002
Posts: 73
Oz
Borrower is trying to avoid possible PMI insurance. He thinks his additional upgrades with increase the appraisal value.

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#2220602 - 08/28/19 06:33 PM Re: Construction/Perm Appraisal question Sheba
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
So in essence they are wanting to cancel PMI on an existing loan. Follow the guidelines under Section 4902(a) of the Homeowners Protection Act.

I would require them to pay the appraisal fee up front in case the value doesn't come in high enough to cancel the PMI.
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#2220606 - 08/28/19 06:39 PM Re: Construction/Perm Appraisal question Sheba
John Burnett Offline
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John Burnett
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Cape Cod
TR - The loan apparently will be modified to amortized basis -- this isn't a new loan -- so the "changed circumstance" isn't applicable.

Sheba, is the bank going to be imposing a PMI insurance requirement on the borrower as a condition of the modification to perm (amortizing) status? If so, and if the borrower wants an updated appraisal, you can certainly accommodate the borrower, but order the appraisal for the bank and bill the borrower for it as part of the cost of the deal.

If you weren't planning on imposing a PMI requirement, tell him so and tell him that, if he still wants the appraisal, he can order it himself.
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#2220630 - 08/28/19 09:06 PM Re: Construction/Perm Appraisal question Dan Persfull
Sheba Offline
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Sheba
Joined: Mar 2002
Posts: 73
Oz
Thanks Dan. The question was broached as a TRID question and PMI never entered my thoughts. That is definitely were our issue is based. Appreciate your help.

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#2220631 - 08/28/19 09:11 PM Re: Construction/Perm Appraisal question John Burnett
Sheba Offline
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Sheba
Joined: Mar 2002
Posts: 73
Oz
John, we are modifying with PMI as part of the deal. So I am going to recommend, as suggested by you and Dan, that we order the appraisal, charge the customer and then review to see if the PMI can be removed from the requirements when the loan is modified.

Thank you so much for all of your help. Some days all it takes is a different perspective on an issue to help us get on the right track.

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