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.


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!

Ask Kate at Get-Your-Best-Mortgage-Rate.com
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...

How to Contact Washington D.C., Write Your Government Agencies, and File a Mortgage Complaint

Ask Kate how to contact your elected representatives and government agencies to file a mortgage lender complaint, tell your struggles with homeownership, and request changes that affect homeownership.

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.

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,

Ask Kate

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?

Ask Kate at Get-Your-Best-Mortgage-Rate.com
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,

Ask Kate

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