Refinancing And Mortgage Interest Rate Lock Deposit

by Nikki from Massachusetts

Ask Kate: Refinancing and mortgage interest rate lock deposit
I'm in the process of refinancing my mortgage. I paid $3800 deposit to lock in the interest rate which was 1% of the amount of loan request.

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I got a call from the bank today that my loan application is rejected, because the value of my house is less than the amount that I owed the bank.

I bought the house for $460,000 in 2003. The house was appraised at $510,000 in 2006 when I refinanced it 2 yrs ago. The appraiser said my house is only worth $340,000 today.

I owe the bank $380,000. The bank told me that I won't be able to close my loan and the $3800 that I paid for rate lock deposit is non-refundable according to rate lock-in disclosure.

I've never gotten the lock-in agreement in writing from the bank after I locked in my rate. However, the bank has this fine print posted on their website.

"You can lock your rate once your application is approved. In some cases a rate lock will only be accepted up to 5 days before your scheduled closing. You must provide a 1% lock-in fee at the time you request a rate lock. Your rate is not locked until you receive written confirmation."

Do you think I might be able to get my deposit money back, because I've never gotten the written confirmation from the bank? Do you have any recommendations on how to deal with this situation?

Refinancing And Mortgage Interest Rate Lock Deposit Information

Dear Nikki,

I have a few thoughts on the matter because I have never heard of this type of policy. Furthermore, a reputable mortgage company would not attempt keeping a mortgage rate lock deposit after a low appraised value derails the mortgage process. It just isn't good business.

So here are 4 considerations.

1) Start a log of dates and conversations regarding your mortgage rate lock and deposit. Easily forgotten details might come in handy down the road.

2) Before your property appraisal was completed, you did not have mortgage loan approval. So the first question that comes to mind is why was a lock deposit taken from you before loan approval? This appears to be contrary to their policy stated on the website.

3) I am not sure about specific laws in Massachusetts but generally borrowers must receive a rate lock agreement within a few days of a mortgage interest rate lock. Even more so if a deposit was required. Go to your state website to find out about the attorney general or the governing body that oversees mortgages.

4) Then call the mortgage company holding your deposit and let them know you expect a refund. If they are not receptive, you have the right to let them know you are contacting the attorney general to file a complaint.

Here are a couple of pages on mortgage rate locks.

Mortgage Rate Lock Guarantee and Nitty Gritty Mortgage Interest Rate Lock

You are not alone with mortgage rate lock questions. Many Readers have written me asking questions and offering their experiences. You can see some of the letters at Ask Kate - Mortgage Rate Lock FAQs. After reading through the pages, please let me know if you have more questions.

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Best Wishes,

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Finding The Help You Need For Locking Rates

My Interest Rate Lock Guarantee - Help for timing your rate lock.

The best solution to avoiding hidden fees is to ask the right questions before you lock mortgage rates.

All about getting mortgage broker fees in writing - Otherwise your rate lock is meaningless!

How good is a mortgage interest rate lock guarantee? In the end, you have to read your lender's paperwork.

Because Yield Spread Premium is a common reason for losing your rate lock, here is the insider scoop on this odd sounding term.

Questions to Ask BEFORE You Lock

Ask Kate about locking - Ask a question and get an answer from Kate.

Search Readers' questions and Kate's answers at Mortgage Rate Lock Center

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