topic VA Loan - Spiraling out of control in Mortgage Loans

VA Loan - Spiraling out of control

Anonymous — Sun, 10 May 2020 02:49:57 GMT

Hey guys,

Been around here for about 7 years but never really posted much. I have enjoyed the forums and information obtained on the site. We have been on and off shopping for a new home for about three years. We have gotten more serious in the last couple of months as the mortgage rates has fallen to where it makes sense to take advantage the opportunity (We have a 3.5% fixed for 30 now that we got in 2013, good at the time).

As we started the process, I was pleasantly surprised to learn about the changes that the Blue Water Navy (BWN) Vietnam Veterans Act had on the VA loan program. There is no loan cap any longer (lenders may have overlays) which essentially means that if you can get approved for the loan, the VA will guarantee it.

We had had no issue getting approved for a loan and started the hunt. We found a property that fit our criteria and decided to proceed with submitting an offer. After a few back and forth contracts, we struck a deal. The process was seemingly very smooth at first, then started to get a bit bumpy. The first issue was with our current primary residence. Being that I have an active VA loan on this home, I needed to pay off this note to free up my eligibility (COE). The plan was to get a HELOC and pay off the current note, close on the new property, move into the new property and then sell the previous property and pay off the HELOC at closing. All was good until about a week ago when all lenders started shutting the doors on HELOCs. We got our application in at the 11th hour and luckily, we are approved with an LTV of 60% (not too bad) and a max of $250k.

The home inspection came back and was clean. I had three different inspections done, not required, but I just wanted to cover my bases. The last thing that we were waiting on was the appraisal. The appraisal was ordered by the VA and the appraiser came out and did his thing. A few days later, I get an appraisal report in my inbox and was blown away to find out that the appraised value of the property was 160k less than the asking price. My agent, the seller’s agent and the lender all reviewed the report and they all stated that they have NEVER before, in their carriers, seen a report so bad and so flawed. I reviewed myself and could not believe the comps that the appraiser was using. A few examples below:

Multiple comps were 4-bedroom homes vs subject home at 6 beds. The adjustment for 2 bedrooms was 5k.

.5-acre homes used in comps when subject home is an over an acre (I am on the East Coast of South Florida and our land is EXTREMELY expensive).

Subject home was just renovated (marble floors, impact glass throughout, $100k kitchen, renovated bathrooms, pool with spa, basketball court etc...) and appraiser stated on the appraisal that there were no upgrades to the home in 15 years.

No comps were taken outside of the neighborhood and there are only 39 homes in the neighborhood. This is a sought-after neighborhood and has exceptionally low activity (two comps were 1+ year old sales). In fact, the guy that is selling the house is moving a few doors down (home he is buying was an off-market deal). Buyer agent and seller agent both sent multiple comps within a one-mile radius and he refused to use them.

There are many more issues that we found but these were the highlights. I was extremely frustrated because of all the work, time and money we invested and moved around for this deal. I contacted the VA Regional Office and spoke to a senior loan officer. She could not authenticate me in the system utilizing the reference number / case number on the appraisal. After going back and forth, I provided her some PII and she was able to authenticate me and then told me that the reason that she could not authenticate me previously was that MY appraisal was actually under another veteran's file and the appraiser used this other veteran's loan reference number on my file.

Long story short, we are going to go through the ROV process but as I just found out by reading through the bulletins on VA.gov, the ROV is being capped at 5% of original appraisal.

Sorry for the long rant. It is just frustrating and disappointing that one person would have so much control over the entire loan process without any checks and balances along the way. This one person just ruined our opportunity to take advantage of an amazing program offered by the VA. I have personally ordered another appraisal for the property by an independent appraiser through my lender and we are still moving forward with the transaction.

Anyone have any experience with an ROV? My agent and the lender are telling me that it will more than likely get denied and no change will occur (from their experience). I really want to write a letter to the head of the regional loan office with the rebuttal letter for the ROV and the independent appraisal that I am getting. I am so aggravated. Just looking for others that have been in similar scenarios and the outcome. Really hate to put up $100k+ just because this appraiser was having a bad day or was just rushing through his job.

Thank you for reading through the post and sorry again about the rant. Just frustrated and at my wits end. If the house wasn't really what we wanted (three years of looking), we would just walk away, but my fear is that this could happen again and both our agent and the seller's agent said that they see this all too often with VA loans and they really do not like dealing with them. The appraisers that are used most of the time are outside of the local area being that they are at random and it is clear this guy did not have a clue as to how to properly appraise this property.

Thank you guys, and I wish everyone safety and health during this time.

Re: VA Loan - Spiraling out of control

Anonymous — Sat, 09 May 2020 13:05:50 GMT

If you lose the deal, I wonder if you might consider speaking to a lawyer to explore the possibility of some kind of legal action. I'm not saying there is a cause of action, but based on what you're saying this is so far beyond the pale, could there be some kind of third-party beneficiary breach of contract or tortious interference with a business relationship. I don't know. Would take more research. But this guy sounds like a clown who has no business engaging in this profession.

Re: VA Loan - Spiraling out of control

Anonymous — Sat, 09 May 2020 17:02:40 GMT

I have already asked my realtor about this and will be seeking legal advice. While technically the appraiser has no business relationship with us, the buyer (they are hired and are working directly for the VA) I am sure a good attorney could figure out another angle.

I looked this guy up online. No reviews, no website. Works out of his house. You can't even find this guy online unless you google his name. I do not want to sound pretentious, but South Florida is quite a different animal when it comes to the real estate market (lived all up and down the East coast; FL, GA, SC, NC, VA). In a 5-mile radius, you can go from the slums to multi-million-dollar ocean front properties. The neighborhoods are very nuanced. Additionally, the address that this appraiser has listed as his License Location (State of Florida License search) is a property that is located 40 miles away in a different county.

All said and done, this is going to cost me six figures moving forward, if the VA does not accept the ROV. Just unacceptable. As you have stated, this guy has absolutely no business in this line of work. He just took a really great benefit for Veterans and threw it in the trash.

Re: VA Loan - Spiraling out of control

Revelate — Sun, 10 May 2020 00:22:55 GMT

The LO's who frequent this forum generally aren't on much during the weekend, if you can wait till Monday you may get some additional insight,

The mortgage world was supposed to get better with independent appraisals but if you get one that is clearly absurd it is a mess. That said it's not the first time I have heard of this even here so there are probably ways to redress it.

Re: VA Loan - Spiraling out of control

Anonymous — Sun, 10 May 2020 02:33:32 GMT

I appreciate your input. I look forward to seeing what they have to say, if anything. Any advice is gladly received. My main concern is that this will continue to happen if I walk away from this house and find another house. Every realtor that I have spoken to states that this happenes almost every everytime someone attempts to use the VA loan. My wife an I have been looking online at different forums and I can not believe how many realtors recommend stearing sellers away form buyers that are VA buys. I also found a facebook group of Veterans and LOs that attempt to protect veterans from this.

Thanks again, for your response. Have a great weekend.

Re: VA Loan - Spiraling out of control

VALoanMaster — Tue, 12 May 2020 16:32:37 GMT

@Anonymous wrote:
I appreciate your input. I look forward to seeing what they have to say, if anything. Any advice is gladly received. My main concern is that this will continue to happen if I walk away from this house and find another house. Every realtor that I have spoken to states that this happenes almost every everytime someone attempts to use the VA loan. My wife an I have been looking online at different forums and I can not believe how many realtors recommend stearing sellers away form buyers that are VA buys. I also found a facebook group of Veterans and LOs that attempt to protect veterans from this.

Thanks again, for your response. Have a great weekend.

Hi @Anonymous ,

Do you know if the appraiser did a full interior & exterior inspection? If it was an exterior only report, then the max the appraiser can go is 1.5 times the conforming loan limit. This based on VA Circular 26-20-13. Also the 5% limit was increased to 7% on the ROV in another, recent, circular.

What price point are we talking about? The only time I have even seen an appraisal that far off was on a 2 million+ deal right before the melt down.

Re: VA Loan - Spiraling out of control

Anonymous — Tue, 12 May 2020 18:15:45 GMT

I am assuming that it was interior and exterior as my realtor was there and the seller's realtor. On the appraisal there were interior pictures taken. Mid 900k price point.

@VALoanMaster wrote:
@Anonymous wrote:
I appreciate your input. I look forward to seeing what they have to say, if anything. Any advice is gladly received. My main concern is that this will continue to happen if I walk away from this house and find another house. Every realtor that I have spoken to states that this happenes almost every everytime someone attempts to use the VA loan. My wife an I have been looking online at different forums and I can not believe how many realtors recommend stearing sellers away form buyers that are VA buys. I also found a facebook group of Veterans and LOs that attempt to protect veterans from this.

Thanks again, for your response. Have a great weekend.
Hi @Anonymous ,
Do you know if the appraiser did a full interior & exterior inspection? If it was an exterior only report, then the max the appraiser can go is 1.5 times the conforming loan limit. This based on VA Circular 26-20-13. Also the 5% limit was increased to 7% on the ROV in another, recent, circular.
What price point are we talking about? The only time I have even seen an appraisal that far off was on a 2 million+ deal right before the melt down.

Re: VA Loan - Spiraling out of control

NC_Mtg_Loaner — Tue, 12 May 2020 22:45:55 GMT

@Anonymous wrote:
Hey guys,

Been around here for about 7 years but never really posted much. I have enjoyed the forums and information obtained on the site. We have been on and off shopping for a new home for about three years. We have gotten more serious in the last couple of months as the mortgage rates has fallen to where it makes sense to take advantage the opportunity (We have a 3.5% fixed for 30 now that we got in 2013, good at the time).

As we started the process, I was pleasantly surprised to learn about the changes that the Blue Water Navy (BWN) Vietnam Veterans Act had on the VA loan program. There is no loan cap any longer (lenders may have overlays) which essentially means that if you can get approved for the loan, the VA will guarantee it.

We had had no issue getting approved for a loan and started the hunt. We found a property that fit our criteria and decided to proceed with submitting an offer. After a few back and forth contracts, we struck a deal. The process was seemingly very smooth at first, then started to get a bit bumpy. The first issue was with our current primary residence. Being that I have an active VA loan on this home, I needed to pay off this note to free up my eligibility (COE). The plan was to get a HELOC and pay off the current note, close on the new property, move into the new property and then sell the previous property and pay off the HELOC at closing. All was good until about a week ago when all lenders started shutting the doors on HELOCs. We got our application in at the 11th hour and luckily, we are approved with an LTV of 60% (not too bad) and a max of $250k.

The home inspection came back and was clean. I had three different inspections done, not required, but I just wanted to cover my bases. The last thing that we were waiting on was the appraisal. The appraisal was ordered by the VA and the appraiser came out and did his thing. A few days later, I get an appraisal report in my inbox and was blown away to find out that the appraised value of the property was 160k less than the asking price. My agent, the seller’s agent and the lender all reviewed the report and they all stated that they have NEVER before, in their carriers, seen a report so bad and so flawed. I reviewed myself and could not believe the comps that the appraiser was using. A few examples below:

Multiple comps were 4-bedroom homes vs subject home at 6 beds. The adjustment for 2 bedrooms was 5k.
.5-acre homes used in comps when subject home is an over an acre (I am on the East Coast of South Florida and our land is EXTREMELY expensive).

Subject home was just renovated (marble floors, impact glass throughout, $100k kitchen, renovated bathrooms, pool with spa, basketball court etc...) and appraiser stated on the appraisal that there were no upgrades to the home in 15 years.

No comps were taken outside of the neighborhood and there are only 39 homes in the neighborhood. This is a sought-after neighborhood and has exceptionally low activity (two comps were 1+ year old sales). In fact, the guy that is selling the house is moving a few doors down (home he is buying was an off-market deal). Buyer agent and seller agent both sent multiple comps within a one-mile radius and he refused to use them.

Did y'all do it this way?:

Reconsideration of Value Request Requirements:

The value estimate on a NOV may be changed if the change is clearly warranted and fully supported by
real estate market or other valid information which would be considered adequate and reasonable by
professional appraisal standards.
Any party of interest may request a change to a NOV. For documentation purposes, every such request
must be in writing. Only one request will be completed.
The change request must be submitted to the lender.
Any request for a change in value that exceeds a 10% increase will require a field review