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Low Appraisal

Question: 
If an appraisal comes in low and causes the loan to have mortgage insurance, the borrowers challenge the appraisal and the results come back the same. The three day time frame for re-disclosing on a new LE to show the MI has passed and now the borrower wants to pay for MI upfront. Is this a valid reason for a change of circumstance or is it now a cost to cure since the re-disclosures were not sent within three days of the appraisal received?
Answer: 

by Jim Bedsole:

I think it's going to be a cure cost. The change in circumstances occurred when the appraisal came back and you determined PMI was going to be required. A new LE should have gone out within 3 business days. That new LE could have shown the MI as a monthly amount, and then when the borrower indicated they would rather pay the MI upfront, that also would have been a CiC and would have given you another 3 business days to issue a new LE with that reflected.

Answer: 

by Randy Carey:

The first part of this scenario presents an even bigger issue. If the bank had an approved appraiser prepare the original appraisal and it went through the bank's appraisal review criteria and was accepted by the bank, the applicants cannot "challenge the appraisal" and the bank could not go out and get another appraisal based on the applicants challenge. That would be equated to shopping for value, which destroys the independence of the appraisal. As such, the bank has now fallen on their own sword.

First published on 08/14/2016

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