Does this sound unethical?

Amy, a relative of mine is also a fully-credentialed mortgage underwriter (FHA-direct endorsement, VA automatic, conforming conventional, the works) and she could make no sense of your situation either; she echoed what many have posted here in that a higher appraised value simply lowers the loan-to-value ratio of your purchase and concomitant initially-applied-for loan amount. She felt that the bank is trying the screw you as much as the agents are.

Also, I've read only bits and pieces of what FNMA is trying to do with "declining-market" underwriting, and THAT sounds suspiciously close to red-lining (i.e. imposing different underwriting standards on proposed purchases in troubled economic areas {which had decidedly racist overtones in years past}), which is a big no-no. Or was, at least.

If it's possible to switch funding banks, I vote do it.

A-Jock
 
Amy, I am sorry this came across wrong, your agent is obligated to inform the Seller's Agent about the fact that there are problems with the financing. However, the financing has nothing to do with the appraised value and therefore, there is no obligation to disclose the appraised value and if I was the agent I wouldn't disclose it to protect my client's interest.

I know this is very frustrating for you, Amy, buying a house is a very emotional process, and things don't always go smooth, there can be bumps in the road. I, however, completely understand that you are annoyed about the mortgage broker and your agent, I would be more than annoyed!

Hopefully your mortgage broker and your agent have gotten the message and get their butts into gear now to work for YOU as they are supposed to. Or maybe the Seller's Agent is smart enough to realize it is time for solutions and not let this go sour. It still may work out well for you and if it doesn't there will be something better in store for you.

"Also, I've read only bits and pieces of what FNMA is trying to do with "declining-market" underwriting, and THAT sounds suspiciously close to red-lining".

A-jock, this is exactly what they did and this is why everyone was up in arms about that policy. Due to that Fannie Mae is suspending this policy effective June 1.
 
Amy, your sich is starting to obsess me!

Methinks the mortgage broker might also have an interest in your upping your loan amount as well. Think of it: a higher sales price benefits the listing and selling agents, not to mention the sellers. A higher loan amount benefits the lender (think of the additional interest they'll be collecting on your higher monthly payments) and the mortgage broker will collect a higher origination fee, not to mention a higher yield-spread premium if there is a nice difference between the interest rate you lock in at vs. what the interest rate of the loan pool your loan is actually sold into.

As has been noted many times, you and your DH are in the driver's seat here. This is totally a buyer's market right now, and, as has also been noted many times, you have a valid purchase agreement that all are obliged to honor. If the appraised value had come in LOWER than the purchase price you might have wanted/needed to renegotiate, but IMHO everybody's kicking themselves because they undersold the property to you. Tough noogies.

In my state, mortgage brokers must be licensed in the same way as real estate brokers and salespersons. I don't know if the same holds true in your state, but I'd check it out and contact that authority as well.

Maybe you could do a global e-mail to ALL impacted parties (your agent {and his/her broker if only a salesperson} listing agent {ditto}, the mortgage broker, the sellers, the funding lender) and copy your e-mail to whatever state authority governs real estate transactions, decribing the situation and insisting that the transaction be closed the way you all agreed to initially?

A-Jock
 
Thanks all for your replies and helpful information. Now I feel much more educated and that I know what questions to ask. Really, thanks!

Aquajock, I see your points about the mortgage broker wanting to up the loan amount. But like you said, either our purchase agreement is honored or we walk away. Your email idea is brilliant. I will keep it in mind if the situation continues to unfold in this way.
 
I am kind of like A-Jock, this thing bugs me.

I do see A-Jocks point and I hope that the lender and/or agent don't do this in the hopes to make additional money.

The problem is that the lender is not part of the purchase contract. at this point there is really no indication that the Seller and/or Seller's Agent have done anything wrong. They agreed to a purchase price and really don't have anything to do with the Buyer's lender. They may end up in a pickle as well, maybe they have already purchased another house and are out money as well.

I think the blame should be squarely on the lender/mortgage broker and maybe Amy's Buyer's Agent.

I can't emphasize enough how crucial it is to work with a reputable and honest lender. What most people are not aware of is that until final approval the lender is not legally bound and can change anything they want, downpayment, interest rate, closing cost, etc. The borrower doesn't have to accept it and can either find a different lender or cancel the purchase contract or refinance.

Something to the effect that this is not a binding contract until final loan approval can probably be found somewhere in the fine print on the initial papers the lender provided. Final loan approval is after the underwriter has signed off and the loan docs are ordered, usually a couple of days before closing.

The purchase contract between the Buyer and the Seller does not legally bind the lender.

Don't just "walk away", Amy. I am sure there are provisions in your purchase contract that give clear timelines and who has to be notified and how.

BTW, Michigan does have first-time buyer assistance programs, there actually is a lot of good information and recommended lenders.

http://www.michigan.gov/mshda/0,1607,7-141-45866_45870-172114--,00.html

Sometimes it is worth to also check with your county, they may have additional assistance programs.

All right, now I am going to zip it and not say anything more, unless you have another question :p :)
 
Amy, I guess you came to the right place for advice. Catheites are very knowledgeable aren't they? I just wanted to write and ask that you keep us updated. I think we all want to know how this drama ends. I'm thinking you'll get the agreed price and people will start backing down on upping the selling price. But still. :)

Carolyn
 
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