"Patti Sanders, an aerospace engineer in Oakdale, Calif., knew prices were down sharply but said she was "flabbergasted" recently when her 3,100-square-foot Victorian home was appraised at $250,000, compared with $635,000 assayed two years earlier. The new estimate prompted a lender to reject her application for a refinancing that would have lowered her mortgage payments about $400 a month." Wall Street Journal, 6/9/09
To be clear--her lender is willing to lower the interest rate on her loan. But won't lower it because the appraised value has dropped. So the lender won't make it easier for her to stay current on the lender's loan. Why are lenders shooting themselves?
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