Mortgage Lender Raises Rate After Homeowner Locks

by Erika from Bradenton, FL and by Mari from Grant Park, IL

Ask Kate what to do when your mortgage lender raises the interest rate after locking: Erika locked in her mortgage rate at a cost of $600 and received a written mortgage rate lock-in agreement. A few days later, her lender disclosed to her that the same interest rate would now cost $4,000. Can the lender do this? Mari would like to know how much it will cost her to cancel her written rate lock agreement.

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Lender Breaks Mortgage Rate Lock-In Agreement

By Erika from Bradenton, FL
Lender Breaks Written Mortgage Rate Lock-In Agreement Terms

Hi Kate,

We locked in an interest rate 2 weeks ago.

It's in writing and we agreed to pay $600 in points for this rate.

The Good Faith Estimate reflects the interest rate and points.

Now, with no explanation, the lender has re-disclosed and the Good Faith Estimate says we will be charged $4000 to get the same, locked in interest rate!

Can they do this? This is a family sale with about 80k built in equity (loan is way less than appraisal). Thanks so much!

***zz-portrait-left.shtml*** Ask Kate answers: Lender Breaks Mortgage Rate Lock-In Agreement

Hi Erika,

No, no, no! A mortgage lender cannot raise an interest rate after locking in, issuing a Good Faith Estimate, and disclosing lock terms in a written agreement!

But I should preface this by saying the terms cannot be changed as long as the loan closes within the time-frame of the lock's expiration date.

Changed Circumstance and Locked In Mortgage Rates

But there's also a loophole that can be used to alter the terms of the agreement. It's called Changed Circumstance. So before you call a supervisor and insist on getting your locked-in rate restored to the cost of $600, not $4000, you should understand how this loophole works.

Go to New Good Faith Estimate Form and Changed Circumstance for the down-low.

On the other hand, it could be that the Good Faith Estimate disclosing the cost of $4000 was actually generated on a day other than when you locked and does not take into account the true cost of your lock. (Think about it like this, the right hand did not know what the left hand was doing.)

To find out, call your loan originator to verify the terms of your lock, that is, at the cost of $600. Then request a fresh copy of the signed and dated disclosure confirming the agreement.

If you are suspect that your loan originator is trying to wiggle out of your agreement, put on your stomping boots and start working your way up the chain of supervisors until you reach someone with enough authority to restore the original terms at which you locked.

Who to Contact to File a Mortgage Complaint

Hopefully, you will find that this is merely a clerical error and that it gets resolved easily. If not, the government wants to hear from you. Here is where to file complaints about lenders that are not treating mortgage borrowers fairly...
***zzz-link-write-reps.shtml*** As an added protection, you will also want to read Mortgage Rate Lock and Estimate of Closing Costs.

Best wishes for straightening out your lock,

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What Will It Cost to Cancel a Locked Mortgage Rate

By Mari from Grant Park, IL
Cost for Cancelling Locked Mortgage Rate

Kate,

Can you tell me approximately what the dollar amount could be for cancelling a Mortgage Rate Interest Lock?

***zz-portrait-left.shtml*** Ask Kate answers: What Will It Cost to Cancel a Locked Mortgage Rate

Hi Mari,

I wish I could tell you even an approximate cost.

However, lenders are allowed to set their own cost to mortgage borrowers for cancelling a locked-in interest rate.

For example, some institutions impose no charges if a borrower with a locked rate cancels upon deciding to move his or her loan application to another bank. Others have a cancellation fee.

Floating Down a Locked-In Mortgage Rate

Here's another scenario. Let's say a homeowner wants to remain with the same lender but cancel their lock after the market improves and interest rates fall. Now that's a different story and most lenders, if they allow the practice, will charge borrowers for the right to float down the rate. Go here for more on floating down a mortgage rate.

Fees to float down a rate can vary greatly between companies. To verify what your bank charges, you will need to peruse your written mortgage rate lock agreement, especially the fine print!
You'll also want to read what happened to these borrowers after they locked their rates... Mortgage Closing Costs and Rate Lock Policies.
Best wishes in getting your lowest mortgage rate possible,

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