The Low Appraisal Nineteen Days Before Lock Expiration

Move first, dispute on facts - not on the conclusion.

File a reconsideration of value through the lender's appraisal dispute channel, attaching:

1. The gross living area error - 1,850 vs. 2,050 square feet is a factual mistake in the report, and it drives the price-per-square-foot conclusion.
2. Comparable selection - the three comps are outside the subdivision and 4 to 5 miles away. The pending sales inside the subdivision and the 60-day-old closed sale are more similar in location and are available data.
3. Request the correction and an explanation of whether the value changes. If the value does not change, ask for the appraiser's written rationale.

What the MLO must not do:

• Do not call or email the appraiser to argue for a higher number or to suggest a target value. Coercing or unduly influencing an appraiser is prohibited under 12 CFR 1026.42 and is a license-level violation in every state.
• Do not let the realtor contact the appraiser directly; route everything through the lender.
• Do not order a second appraisal purely to get a better number, and do not tell the borrower the deal is dead before the dispute process plays out.

Timing: file immediately. Nineteen days is enough for a correction but not for a slow dispute plus a re-underwrite plus a new closing disclosure.

The math: $320,000 / $372,000 = 86.0% LTV, against a program that was priced at 80% with no mortgage insurance.

Option A - keep the loan at $320,000 and add mortgage insurance. Borrower keeps her down payment; the monthly payment rises by the MI premium and the loan is now an 86% LTV loan that must be approved at that level.

Option B - reduce the loan to 80% of appraised value. 80% x $372,000 = $297,600, so the borrower brings an additional $22,400 to closing. No MI, but the loan amount, pricing, and cash to close all change.

Option C - renegotiate price or cancel under the contract's appraisal contingency.

Disclosure consequences:

• The appraisal outcome is a valid changed circumstance. A revised Loan Estimate reflecting the new loan amount, new MI premium (if any), and any repriced fees must be provided within 3 business days of the change, and received no later than 4 business days before consummation.
• If the APR on the Closing Disclosure ends up more than 1/8 of 1 percentage point above the last disclosed APR (more for irregular transactions), a revised Closing Disclosure is required and the borrower must receive it 3 business days before consummation, pushing the closing date.
• If the delay pushes past the lock expiration, any extension fee is a new charge that must be disclosed and agreed to; it cannot simply appear at closing.

Decline. Withholding loan documents to manage a buyer's emotions is not a service to the buyer - it strips her of the ability to make an informed decision about a $22,400 cash requirement and puts the MLO and the lender in conflict with disclosure timing rules.

Obligations that continue regardless:

• The borrower already received the appraisal, as required. Under 12 CFR 1002.14 she is entitled to copies of all valuations promptly upon completion, and in any event no later than 3 business days before consummation. If a second appraisal or a reconsideration produces a new valuation, she gets that too.
• Revised Loan Estimates and Closing Disclosures must be delivered within their regulatory windows; the MLO cannot pause the clock for a third party's convenience.
• The borrower decides among the options in the previous task. The MLO should lay out Option A and Option B with actual monthly payment and cash-to-close figures so the choice is informed.

On the realtor relationship: the MLO can keep the agent informed of process, but not of the buyer's confidential financial details without the buyer's consent, and cannot let the agent's commission timeline drive disclosure decisions. Document the buyer's decision and the date it was made.