Refi not approved - low appraisal

[Jean T.]

I've read a number of posts here trying to find something similar to my current issue that is fairly recent. But I didn't find anything so I figure I'd post one.

The short story is that I'm trying to refi a property I rehabbed, and now I'm told that it only appraises for $22K, which is about $40K less than what I have in the home. I'm not sure what to do next.

The long story is that I purchased and rehabbed a property for about $65K. After waiting for the 6-month seasoning, I started the refi process about 3 months ago, working with a mortgage broker. We've gone through a few lenders. We were able to get one, and our appraiser appraised the home at about $90K. That was lower than expected because another one of my properties appraised at $105K just a couple months earlier.

Anyway, the lender didn't like the appraisal because it included properties over the previous 6 months. Apparently, because of the recent changes by Fannie Mae, like this new Home Valuation Code of Conduct, the lender wanted our appraiser to find 3 or 4 properties from the previous 3 months. Because of the market, they were not to be found. As a result, the lender sent out one of their own to do a field review (drive-by appraisal).

To my shock, the home appraised at $22K. I know house values have gone down, but anyone who drives around the neighborhood can tell that those homes, including mine, are worth more than $22K.

So my question is what are my options now? Has anyone run into something like this? I know its difficult refinancing in this environment, but I have to think that someone's doing it. Anyone?