It’s their money so I guess you could say they can decide to do whatever they want to do.
Think about it – if you were a lender and you were operating in a known declining market, wouldn’t you take steps to reduce your exposure to those declines? I know I would.
No bank can decide on their own what the appraised value is, regardless is the market is increasing or decreasing. An appraiser’s opinion of value is their own to determine. Now a lender can decide they don’t agree with an appraiser and express their own opinion, but that’s nowhere near the same thing as that lender reducing the appraised value – they’re just reducing how much they’ll loan on that value.
The only exception to this is if the lender employs or contracts with an appraiser to conduct reviews of appraisals. It’s very possible and indeed common for a review appraiser to agree with some appraisals and disagree with others. In the case where they disagree and come up with a lower value conclusion they have to support that.
But on the appraisal or appraisal review side none of what happens is supposed to be a matter of whim or client dicate. Reviewers are just as liable for what they say as appraisers are; and a reviewer can lose their appraisal license if they allow their client or their company to pressure them into “lowballing” appraisals just as readily as if they’re stretching values.
FTR, I hadn’t heard any news of WF arbitrarily reducing appraisals. What’s far more likely is their reviewers have gotten more serious about the trash they were previously accepting and have started rejecting those appraisals. In other words, they’re being allowed to do their jobs instead of just rubber stamping marginal work like they were before.