If they are adjusting the amount they can lend because the margins are too thin or telling you the deal metrics are not checking out it is likely due to the expected earnings not being sufficient. 

If there is not enough STRs in the market you are in then you have to adjust business practices.

More than likely the asset will in a location where cap ex & management/operational costs are disproportionately higher and therefore your expense ratio will also have to be adjusted to a higher number.  

Quote from @Daniel Araque: I'm writing this in hopes that maybe Tardus leadership adjusts this....

I generated the list by combining Zillow's smooth, seasonally adjusted home value dataset (ZHVI) with their rent index (ZORI) for metro areas.

So for the Comps you make to arrive at your ARV something that jumped out at me was the adjustments.

Bringing better comps to the appraiser’s attention is definitely worth a shot and can sometimes lead to adjustments.

Quote from @Carl Rowles: When you insure a SFH rental property, do you try to adjust and of the coverage amounts?

Adjusted for inflation, the prices of homes in a desirable location appreciate more than average wages. 

Whether the balloon or the adjusted rate approach, the borrower is incentivized to refinance.