Mortgage Rate Lock Agreement Fine Print

by Paula S from Porter, Texas

Paula asks Kate about the fine print in a mortgage rate lock agreement: Would you use this lender? After locking in Paula's interest rate, she's notified that her lender is re-locking a higher rate after reviewing the credit report. Adding insult to injury, the loan originator begins threatening her with collections when Paula asks about cancelling the loan application. Disgusting!


Paula asks Kate about Mortgage Rate Lock Agreements

Hi Kate,

Am I still liable for a $400 cancellation fee since the lender changed my rate after locking my mortgage rate.
Mortgage Rate Lock Agreement Fine Print

I signed a rate lock agreement for 3.5% but did not pay attention to the fine print concerning the cancellation fee of $400. I get a call back saying that the rate would now be 3.62% after review of my credit score.

Should the lender have checked my credit prior to promising a rate lock? Does putting a disclaimer box about possible rate changes on the paperwork negate their liabilities?

When I mentioned I was not happy with the process and wanted to cancel the loan the response from the lender was to tell me I would owe them $400 and if I did not pay they would send me to collections.

I thought that was a bit premature to threaten collections this early in the process. How binding is that written lock in rate document?

The mortgage rate lock agreement, e-disclosures agreement, and acknowledging I applied for a loan with the company are the only documents I have signed.

Thanks for your help, Paula

Kate Answers: Mortgage Rate Lock Agreements

***zz-portrait-left.shtml*** Dear Paula,

What are they thinking! I can't tell you how disgusted I feel.

If this lender feels free to threaten you, their brand new customer, with a pending collection, I question the quality of their service throughout the remainder of the loan process.

Now mind you, I am not an attorney and haven't read your disclosures. But I can't imagine that only your side of the obligation is binding (if the agreement is binding at all)!

For instance, why didn't they check your credit score before locking in your rate? I can't see how you are obligated to a higher cost without the recourse of cancellation because they they failed to do their homework.

It is irresponsible to charge you a $400 fee to compensate for their shoddy locking practices! In fact, I am questioning if this is merely a ploy to raise your mortgage rate during a volatile financial market.

Resolving at a Local Level

Here's what I'd do. First I'd review the mortgage rate lock agreement backwards and forwards until understanding their legalese as much as possible.

Then I'd make an accurate log of the conversation with the loan originator prior to locking in the rate. Next, I'd call the department supervisor to see if I could resolve this at a local level.

Federal Reserve Board's Guide to Locking Mortgage Rates

The Federal Reserve Board understands the seriousness of locking in interest rates. You can go to their official website at A Consumer's Guide to Mortgage Lock-Ins where you'll find the names and addresses of agencies who handle complaints, depending on the category of lending institution.

Good luck and best wishes,



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