Can Anyone Explain This?

[RustNeverSleeps]

My neighbors are talking to their bank about getting PMI removed. It's been over 3 years since they bought their house, but they don't have the LTV based on the original purchase price for PMI removal. Home values in the neighborhood have increased roughly 40% in this time period (I'm not making this up as it's based on market stats and recent sales). They have made roughly $10k of improvements (roughly 10% of the original purchase price).

Here is what I don't understand. The bank has given them 2 options:

Option 1: An interior BPO by a licensed appraiser for $150 and the decision to remove PMI will be based on 80/20 LTV of current market value.

Option 2: An interior Appraisal (1004) for $350 by a licensed appraiser and the decision based on 75/25 LTV of original purchase price plus value of improvements. Maybe, and this is a big maybe, they might consider the current market value.

Does this make any sense? Why would more credibility be given to a BPO? Do appraisers really do BPO's? Wouldn't it be an appraisal if an appraiser gives an opinion of value? :Eyecrazy:

 

[Pamela Crowley (Florida)]

Is this in writing?

PLEASE send a copy to me!!!!!!
My Email: pec514 @ yahoo. com (remove the spaces)
My Fax: 321-281-4734

 

[RSW]

Appraisers can't do BPOs in TN.

 

[Lee Lansford]

If a licensed appraiser--who is subject to the USPAP--completes a "BPO" in his or her role as an appraiser, the appraiser has completed an appraisal.

 

[RustNeverSleeps]

Is this in writing?

PLEASE send a copy to me!!!!!!
My Email: pec514 @ yahoo. com (remove the spaces)
My Fax: 321-281-4734

Hi Pam, no its not in writing just based on a conversation with my neighbors. It just sounds wrong to me. What appraiser would do a BPO??

 

[PropertyEconomics]

My neighbors are talking to their bank about getting PMI removed. It's been over 3 years since they bought their house, but they don't have the LTV based on the original purchase price for PMI removal. Home values in the neighborhood have increased roughly 40% in this time period (I'm not making this up as it's based on market stats and recent sales). They have made roughly $10k of improvements (roughly 10% of the original purchase price).

Here is what I don't understand. The bank has given them 2 options:

Option 1: An interior BPO by a licensed appraiser for $150 and the decision to remove PMI will be based on 80/20 LTV of current market value.

Option 2: An interior Appraisal (1004) for $350 by a licensed appraiser and the decision based on 75/25 LTV of original purchase price plus value of improvements. Maybe, and this is a big maybe, they might consider the current market value.

Does this make any sense? Why would more credibility be given to a BPO? Do appraisers really do BPO's? Wouldn't it be an appraisal if an appraiser gives an opinion of value? :Eyecrazy:

Sounds like they trust broker opinions more than those of appraisers. Hell in this market and with all the bad appraisers out there, Im not so sure I blame them.
I know Im gonna get flamed for that .. but think about it ... with number hitters roaming the streets ... its not hard to imagine.

 

[Mztk1]

I agree with PE in that I can't blame them these days; however, something doesn't add up with what they are saying so it leads me to believe that your friend got what he was told a little off-kilter.

Mortgage amount must be 80% or less of the BPO value. Got that, no problem.

Mortgage amount be be 75% or less of (appraised value + the value of the improvements)? I don't get that at all.

If the appraised value and BPO are both $400,000 and the improvements are $275,000, the PMI will be removed with the appraisal if the mortgage amount is $506,250 or less?

I just don't get what is being said.

 

[RustNeverSleeps]

But if both the BPO and Appraisal are by licensed appraisers what's the difference. I have never seen a BPO form so maybe it contains less information?

Jim, the 75% LTV for the appraisal is based on the original purchase price plus value of improvements.

 

[Lobo Fan]

I went through a huge drawn out audit process with a customer over a BPO. The BPO was full of errors, yet I had to make a formal defense of my appraisal because of a dubious BPO.

PE may have a point. There are apparently lenders out there that put more credence in a BPO than a full appraisal. Sad but true.

 

[Mztk1]

Okay so if it is worth $400,000 today it was worth $240,000 at sale and if land values are 30%, the improvements are valued at $280,000. 75% of $520,000 is PMI removal at $390,000 mortgage or less on a $400,000 house as opposed to $360,000 mortgage or less with the BPO. So using those numbers is seems they are putting more precision on the appraisal then on the BPO.

I still think something is wrong though.