Loan Officer Said Appraisal Was Okay, But Underwriter Rejected the Loan

[smcguire2001]

My question involves a mortgage in the state of: Virginia

Mortgage loan officer told me my appraisal was fine and then 6 weeks later said it was not, I was under water.
Started fha 203k refi renovation loan. Loan officer told me the appraisal came in ok. 6 weeks later after underwriting required me to get a engineers report she tells me the appraisal was not ok. She missed it and underwriting just caught it. According to "as is" value I am underwater on my current loan. She said I needed $8300 cash out. I told her I could get that from 401k. I did the 401k loan and then she said oh no you need $12800 cash out. I have several questions. First of all I'm not doing the $12800 cash out loan especially with this loan officer. I feel they should be responsible for the cost of the engineers report and any processing or interest costs from my 401K loan. Second my credit score is 740, I have no late payments on my current fha mortgage. Is there a program to help me get out from under water on my current loan? My tax assessed value is 126,100, my loan payoff is 113,500 and my as is appraisal is at 105,000. The renovation cost with contingency fund is 44,400. Also, my after improvements, appraisal was 151,000.

What liability, if any, do they have for my expenses incurred after the appraisal was completed?

[Mr. Knowitall]

The loan officer does not approve your loan - the underwriter has to approve it. The loan officer's belief that the underwriter will approve the loan, or belief in advance of review by the underwriter that it will be approved, is not the same thing as an approval.

I expect that the reason you could not borrow the money from your 401K is that the loan would have increased your debt load and would have either raised the cost of the loan or disqualified you as a borrower, but if you want to know the rationale that's something you would have to discuss with the underwriter.

If you choose to walk away from the loan, you should expect to walk away from the fees you've paid. You apparently can completely mitigate your damages at this point so, even if we assume that the loan officer's mistake creates a cause of action, any harm that results would be by virtue of your choice to walk away as opposed to that mistake. Further, at least from what you've told us so far, the mistake has not changed the actual terms of the loan - your circumstance would be the same had the loan officer caught the problem with the appraisal.

[smcguire2001]

I could and did borrow money from my 401k. The 401K loan does not disqualify me based on additional debt load. The problem is the "as is" value vs the current payoff. I do understand this concept. However, the loan officer is my contact. I do not speak to underwriting. She did not say "I think the appraisal will pass underwriting" she said "your appraisal value is good, no problem". She said this in an email so I have documentation. I could still do the loan if I was willing to dish out an additional $4500 (on top of the $8300 she originally told me). I am not willing to do that. I realize I am out the appraisal cost. However I feel the cost of the engineers report, which was required by underwriting AFTER my appraisal was complete and reviewed (6 weeks after), should be on them. Also, the cost to withdraw from my 401K, which I did because the Loan officer told me the amount I needed, should be refunded. I discussed taking out the 401K loan with her and she said that would work, there was no problem with my debt to income ratio. Also, once I turned around and paid off an existing 401K loan my monthly payment would only go up $35. Remember she came back to me again with a new cash requirement after my 401K loan. There is more than 1 mistake here. What is her level of responsibility if not to advise me?

[smcguire2001]

Update. After I pointed out their multiple mistakes and how it was the right thing to do, the Mortgage Company has agreed to pay the Engineers report.