PMI & bank appraisal question, any recourse?

loralee_2007September 30, 2008

I have a question that I'm hoping any of you can give advice on because our bank's home appraiser cost us quite a lot of money and I'm wondering if we have any recourse?

We tore down and built a new house last year. At the time, the bank had an appraiser look over our plans and budget and give them an appraisal which came in at $275k. Based on our existing mortgage (55k) and new mortgage for the build ($182k), we would not have the requisite 20% equity to avoid mortgage insurance. However, we truly believed the appraiser was wrong based on homes that were selling in our area, and to prove our point, we requested another bank appraisal upon completion of our build (in order to get a HELOC), and sure enough, the new appraisal came in at 360k - with the 2nd bank appraiser telling us we would get "at least" 420k once the landscaping and garage were complete.

The reason I'm now irked is because if the 1st appraiser had given us a proper assessment (we did not upgrade during the build as we had picked everything out ahead of time so our assesser knew exactly what finishes & materials we were using), then the new mortgage would not have required the PMI fees because with our home value of 360k, and loan of 237k, we clearly had 20% equity and therefore would not need PMI - which is what I said in the beginning. But because the 1st bank appraiser was so far off the mark, we had to pay over $5000+ in mortgage insurance fees and I can't help feeling ripped off because this guy didn't give us an accurate assessment - I mean, that's a fairly big "mistake" to be off by $85,000 in my books.

Is there anything I can do? I'd sure prefer having that money in my pocket!! TIA.

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housekeeping

Are you sure you paid that much for the PMI for just one year? That's more than $400 a month! And it seems very high to me.

Molly~

    Bookmark   September 30, 2008 at 9:08PM
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sublime2

With PMI ins. In addition to the monthly payment you pay an initial premium at the start of the mortgage.The amount you pay up front depends on the amount of the mortgage..

    Bookmark   October 1, 2008 at 12:59AM
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lyfia

I don't know, but it sounds like one of those gray areas I think the time to have done something was when you didn't believe the appraiser and before you did the mortgage. It is always hard to come a year later and argue something. At the very least see about getting the PMI dropped now.

I'm guessing if you read the fine print of your mortgage documents or your closing documents there might be something that covers the above as banks/mortgage companies seem to be good at covering themselves and you can't be the only one this has happened to.

Maybe take it to a lawyer for a consult to see what they say.

    Bookmark   October 1, 2008 at 8:19AM
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loralee_2007

Molly, the situation is as sublime has stated...we had to pay an upfront premium on the total loan amount we needed. So if we didn't use the whole loan amount, our fees would have pro-rated to what we did use. But because we knew ahead of time what our budget was, and the loan was the total amount, we used it all and were charged the entire fee - when if he had completed our assessment properly, we shouldn't have paid at all because insurance wasn't necessary.

Thanks Lyfia, I do have a call in to the bank to see about cancelling the monthly fees now. I have reviewed our mortgage docs and there is nothing in there covering a situation like this.

    Bookmark   October 1, 2008 at 10:58AM
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sue36

I had a construction loan through Wells Fargo that then converted to a permanent loan. I didn't pay PMI during construction, and the second appraisal (done when we were 95% complete) showed we had more than 20% equity, so no PMI. However, I knew this was the way going into it.

    Bookmark   October 1, 2008 at 6:46PM
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bushleague

With appraisers being indicted left and right they are going to be on the rather conservative side. PMI is purchased in increments of 25, 35, or 45%. Any guesses what crushed AIG?

    Bookmark   October 2, 2008 at 7:58PM
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