Is Breaking a Mortgage Rate Lock Agreement Legal
by Jen from Burke, Virginia
Ask Kate if breaking a mortgage rate lock agreement is legal: Let's say you're refinancing and locked your interest rate. You are about to sign final loan documents when the hatchet drops. You learn that you owe an additional $2000 to keep your locked rate of 3.8% and your lender is playing dumb. Jen from Burke, Virginia asks me if this is a legal practice.
Good Faith Estimate and Mortgage Rate Lock Agreement at Closing By Jen from Burke, Virginia
We are in the middle of a refinance. We signed a 20 year refinance Good Faith Estimate for 3.8% with $535 of credit towards closing.
We signed the documents the day we received the offer and before the time we were told it would expire.
Now we are in the closing stage and have been told that the rate was not locked at the price of our Good Faith estimate and now we must pay $2000 to keep the 3.8% rate on top of all of the other closing costs. Is this legal?
They have told us they don't know how the mistake was made but they can't fix it. It is almost a month later. What can I do?
This company also was going to charge us a subordination fee for our second mortgage which you can't do in the state of Virginia? Are these honest mistakes or unethical?
Ask Kate answers: Good Faith Estimate and Mortgage Rate Lock Agreement at Closing
Whether the mortgage company is sloppy at processing your refinance, specifically your rate lock, or down-right unethical, you do not have to put up with this. They can too fix it! They must!
Open your packet of loan disclosures that you've signed thus far during your refinance, specifically the Good Faith Estimate (GFE) and the Rate Lock Agreement.
You need both documents. Having a Good Faith Estimate of closing costs is not sufficient to verify your rate lock. The GFE must be accompanied by a Rate Lock Agreement. Here is a rundown on the function of each document with a link to more information on my website.
Good Faith Estimate of Mortgage Closing Costs
The Good Faith Estimate
verifies the loan amount, interest rate, closing costs, and monthly mortgage payment. But if the rate is not locked simultaneously, the rate (and thus the payment) is subject to change until locked.
Mortgage Rate Lock Agreement
The Rate Lock Agreement
will specify your locked interest rate, discount points (the cost or credit associated with the rate), and just as important, the date on which the lock expires. Your loan process must be funded and recorded before the lock-in period expires.
You should also peruse the Rate Lock Agreement for other terms that are included with the rate lock, for example, floating down for a lower rate and extending rate lock expiration dates
By the way, borrowers should bring to closing both the Good Faith Estimate and the Rate Lock Agreement so that they can compare them to the final loan documents.
Determining If Your Lender Is Unethical
As I said before, you should not put up with broken rate lock agreements, without cause. It's one thing to nullify a locked rate because you (as the borrower) delayed closing or did not properly disclose your finances. It's clearly another matter for your lender to blatantly attempt to wiggle out of an agreement because interest rates increased after you locked.
The first step in retrieving your locked rate is to call you loan originator. Have your Good Faith Estimate and Rate Lock Agreement on hand so you can refer to them.
Should you find that you are spinning your wheels with the loan originator, go to the official website of the mortgage company. Determine the officers of the institution and begin calling them one by one until you get someone with authority who will listen to you.
Keep a log of all conversations, such as names, dates, contact numbers, and details of the conversation. You will need these for the next step.
If You Need to Accelerate a Complaint
If there is no resolution, let the mortgage company know you will be immediately filing complaints with state and federal officials, including the Consumer Financial Protection Bureau.
I've already done the leg work for you. Here is how to easily get the names and addresses of government entities who are prepared to take action if you are not being treated fairly by mortgage lenders.
How to Contact Washington D.C., Write Your Government Agencies, and File a Mortgage Complaint
You have the power to make a change! Contact your elected representatives and government agencies to tell your story, file a complaint, express an opinion, and request changes that affect homeownership.
1. Submit a complaint with the Consumer Financial Protection Bureau, established by Congress to protect consumers, or you can call 855-411-2372.
2. Go to WhiteHouse.gov, 'Contact Us' to reach Corresponding with the White House. This is is a quick and simple way to write the President, telling about your struggles with homeownership and ask for specific change.
3. Go to Senate.gov, 'Find Your Senators', scroll down to your state and click. You will be given your US Senators with contact information. Send the same letter you sent to the White House.
4. Go to House.gov, 'Find Your Representative' and fill in your zip code. You will be given your House of Representatives with contact information. Send the same letter you sent to the White House and Senate.
5. Go to State.gov Of course, first fill in your state's name. Then on your state website, do a search (for example, 'mortgage help') to find contact information. Send the same letter you sent to the White House, Senate, and House of Representatives.
6. Call your Better Business Bureau to report specific companies. For example, report Rust Consulting to the BBB if you did not receive your settlement check.
One more thing! You will also want to read How to Protect Your Locked Mortgage Rate
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