Neither under-exaggerate or over-exaggerate are valid. Exaggerate basically means to make an overstatement. Obviously you cannot under-overstate something or over-overstate something. This is nonsense. The problem stems from the ignorance of the true definition of the word and hearing bad English repeated by peers and/or members of the media.

There are no degrees of exaggeration required. The light switch is either on or off. It is not over or under-switched on.