Today, Tanta of the popular Calculated Risk blog explained that homeowners should not be surprised – especially because most HELOCs were not based on physical appraisals in the first place.

“This Kratzer [writer from FeeDisclosure.com]…has to have heard of this thing called an “AVM,” or automated valuation model that a HELOC servicer can run on a specific property, to determine current value. What’s with kicking up sand here? In fact, if he wasn’t born yesterday he has to know that most HELOCs were originated with an AVM used to establish value, not an old-fashioned formal appraisal (unless they were originated at the same time as a first lien, and the appraisal for that loan–paid for in that loan’s closing costs–was re-used for the HELOC).”

If you receive a lender notifying you that your HELOC has been frozen or can canceled, don’t expect the lender to fund a physical appraisal. Most lenders will allow you to pay for an appraisal out of your own pocket. However, the expense may not be worth it – particularly if the automated valuation is close to the actual value of your home.