Expired Mortgage Rate Lock

by Shauna
(Oregon, USA)

Expired Mortgage Rate Lock: Hi Kate, My husband and I decided to take advantage of the low mortgage interest rates to refinance our home from a 30 year fixed rate mortgage to a 15.

Shauna continues... We both have credit scores above 800. The house appraised at 245,000 and we only owe 152,000.

We were quoted a 3.5 rate and a good faith estimate of closing costs that we agreed to. We have provided all the necessary documents to the lender in a timely manner. We also paid a $500 lock fee.

Now, after repeatedly phoning our lender and not getting any return calls, it appears our lock will expire. Do we have any recourse? This lender has failed to perform through no fault of ours.

This was an easy no-brainer refinance. Apparently if we walk away from this deal, we will lose $500. I feel so ripped off and I'm wondering what we can do about this?

Kate Answers: Expired Mortgage Rate Lock

Dear Shauna,

If I took every letter with a similar story about expired mortgage rate locks, I could wallpaper my entire house. I find this very disturbing.

There are a couple of reasons for such irresponsible behavior on the part of some banks.

Scenario 1 - Mortgage Rate Locked

If mortgage rates go up after locking but the bank does not get the loan closed and sold in time, they lose money. "Better the homeowner loses their lock than the bank suffers a loss" seems to be the theme.

Scenario 2 - Interest Rate Never Locked

Now sometimes, the interest rate is never locked even though the homeowner was told it was. If rates continue downward, the bank and/or loan originator profit. (Think gambling.)

But if mortgage rates increase... Oh-oh, now there is a BIG problem. At this point, many originators (or even the bank itself) begin to drag their heels. Solution? Shift the blame. Find a problem here or there and whaddaya know. The homeowner receives a phone call that the loan can't close in time to save the mortgage rate lock.

Protect yourself. The best way to get out of the dark is to understand the facts found here at Yield Spread Premium - Say WHAT!

What To Do About Expired Mortgage Rate Locks

So here's what you do. Make copies of your mortgage rate lock agreements (all pages) and your entire good faith estimate of mortgage closing costs. Create a time line of your loan process.

If walking into the loan company is possible, your appearance will create the most attention. Otherwise, overnight the package and request a return receipt including a signature that it was received.

Send a copy of the same package to your state's authority, usually the attorney general. You can find this information on your state's website, in your case Oregon.

Don't forget a factual cover letter including your contact information. Be sure to include your desired outcome.

In the meanwhile, here is information on 15 year fixed rate mortgages, the best way to pay off your house.

Shauna, one more thing about your expired mortgage rate lock. I'd like to hear the outcome.

Comment here on Expired Mortgage Rate Lock. Or Ask Kate another question here.

Best wishes,

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