Will a bank ever reduce the amount of your mortgage if their own appraiser was full of shit?
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susanc (
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March 11th, 2010
I bought a house at the top of the bubble for a sentimental reason without negotiating down by the standard (at that time) 20 per cent below the asking price. The bank’s appraiser went along with the asking price – transparently a way to help the bank justify loaning out as much as possible. The house was never worth that much. And THEN the bubble burst. Like many people, I now owe much more than the house is worth. Why should the bank profit?
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6 Answers
Maybe if your bank goes under and is taken over by another bank, they’d get a clue. I don’t know. Sounds reasonable to me in this scenario.
They are unlikely to reduce the amount of your mortgage, although if you’re in trouble they may adjust the terms. The pressuring of appraisers by lenders and the caving to that pressure by appraisers are serious problems and only getting worse. My mom recently retired from appraising, partly because she was getting even more pressure from lenders to jack up appraisals than she did during the bubble. There have been recent changes in the industry that also make many appraisals less independent than they were before. Basically, we haven’t actually fixed a lot of the systemic regulatory problems that led to the trouble we’re in now.
The bank is profitting with the interest you pay for the amount they loaned you. Are you suggesting you should not pay the amount for the house for which you contracted? Faulty appraisals have caused a lot of problems in the past—remember savings and loans and that crisis? Most states have much stricter regulation and license requirements as a result. If you want to keep your house you owe the entire debt as you agreed to. If you don’t, sell it—good luck. You can always default and let the bank foreclose, ruining your credit, and depending on your equity the house may not bring as much as is owed on it. Bottom line, you can’t try to blame anyone but yourself if you overpaid for your house.
I suspect the only way to go about getting a renegotiated mortgage would be to claim that the bank mis-sold you a financial product. This might stand-up in court if you can prove the banks appraiser was negligent.
The process of renegotiating a mortgage is fraught with danger to your credit. I inquired about how the government program worked at my bank and they told me it would appear as a bad mark on my credit report. They have no interest in helping anybody out if they are making money despite the spirit or intent or mandate of any government program.
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