Verbal Mortgage Rate Lock Agreements Are Worthless

by Dom C. from Kendall, FL followed by Lee's comments

Verbal mortgage rate lock agreements are worthless: Dom's lender never issued a mortgage rate lock agreement form. Although Dom got the rate he was verbally promised, he was surprised by a $1600 fee when he signed his final loan documents. He asks me if it's too late to confront the lender since his transaction has already closed.



Lee offers his views on switching lenders after locking in a rate (see his comments at bottom of page). I'm loving what he has to say until... well, more on this later.

Ask Kate: No Mortgage Rate Lock Agreement

By Dom C. from Kendall, FL
No Mortgage Rate Lock Agreement

Hi Kate,

I was NEVER presented with a rate lock form and never signed one at good faith time and yet I was charged $1,600 at the closing for it.

The rate was honored but two days later, after the closing, I received a rate lock form signed by them and asked to return a signed copy to them.

Of course I did not return it.

Can I now confront the lender for a lock rate fee I never agreed to?

In Florida, a lawyer is not required so we did not have one. Thank you.


Ask Kate at Get-Your-Best-Mortgage-Rate.com
Kate's Answer: No Mortgage Rate Lock Agreement

Hi Dom,

If you were not issued a written rate lock agreement, you were lucky to end up with the rate you wanted.

However, the $1600 in points must have been a rude awakening at closing.

Important Terms on Mortgage Rate Lock Agreements

Additionally, without a rate lock agreement, the terms of your lock were left wide open. What would have happened if the lock expired before closing? Could you have re-locked and what would have been the cost? Was there a float down option if interest rates dropped? Was there a cost to cancel the lock?

My point is this. Never put up without getting a signed and dated mortgage rate lock disclosure. More on this at... Nitty Gritty Mortgage Rate Locks.

You asked if you can contact the lender to be reimbursed for the $1600 fee. I don't know how much time has passed but my advice is to call the lender to discuss the unexpected fees.

But get your ducks in a row before making the call. For example, jot down the date you originally applied, the name of your loan originator, when you think the rate was locked, disclosed fees, and date of closing.

Compare the documents you were issued upfront to the closing documents. Many are signed again at closing and perhaps this can help you compile a list of required documents the lender failed to give you during the loan process.

Consumer Financial Protection Bureau

If your best efforts at solving the problem directly with the lender are not successful, you can also file complaints. Go to How to Contact Government Officials and the Consumer Financial Protection Bureau for help.

Roger locked his interest rate over the phone. His lock agreement was faxed to him but filled out in another borrower's name. Now Roger is being charged additional points to lock in a higher mortgage rate. Read the rest of Roger's story at Broken Lock Agreement and Misplaced Loan Estimate!

Best wishes,

Ask Kate

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Consider Switching to Broker with the Lower Rate
by: Lee

Kate,

Regarding switching mortgage brokers for a lower rate, here is my advice.

1st: Shop
I agree that you should give the broker that contacted you the 1st opportunity to close your refinance. However, you should also COMPARISON SHOP. The Loan Estimators required by the government allows you to easily compare costs.

2nd: Be Honest with your Broker and let him know you are shopping.
Listen, another title for loan broker is "LOAN SALES PERSON." Sales people generally (even the kindest of them) are all taught to pressure (or persuade or educate) you into making a quick, binding commitment.

Given that most people tend not shop for mortgages or refinance mortgages that often, they don't understand the process. As a result, Loan Sales People attempt to make them feel like they are going to miss out on something by not shopping for a better rate.

3rd: If you find a better set of terms (i.e. closing costs and/or interest rates) tell original broker and see if he/she can meet or beat it.

Example:
One broker recently quoted me a 4.5 percent 30 year fixed rate. He wanted to submit an application, qualify me and lock the rate. On the day we initially spoke, his rate was in line with other rates I'd been quoted and the closing costs were better.

Two days later I received a call from another broker that offered me identical closing costs and a 4.25 percent 30 year fixed rate.

I simply called the 1st broker and said, "Is there any way you could get me a lower rate?" He replied, "No. In fact, rates have gone up. It's a good thing we locked."

Once I received loan disclosures and locked with the 2nd broker, I cancelled with the 1st broker. I DID NOT FEEL GUILTY. Why? Because I gave the original broker an opportunity to take his best shot and he either
a. Didn't have the relationships to secure me a better rate.
b. Or lied to me.

The difference in rate saved me about $83 per month. That dollar amount may sound small but that small difference in rate will save me a little over $30,000 over 30 years or $1,000 a year.

I felt a little torn but when I did the math... It was well worth it.

Just Remember....

1. Shop, Shop, Shop (and let Brokers know you are competing)

2. Don't be pressured into a loan.
Brokers know that you are not under ANY obligation to move forward with a loan. You can walk away at any point. Locking rates is a financial, marketing risk/cost taken by brokers to secure business in a crowded market. They don't take other risks. For example, they have consumers pay for an appraisal even before the loan closes.

3. Loyalty to a Broker? THIS IS BUSINESS.
Being loyalty to a broker is a FANTASY!!!!! That's like saying, "I will not shop. I will trust that my broker always gives me the best pricing." MOST brokers get deals done. Most are competent. There is very little beyond pricing that differentiates them.

Hi Lee,

Thanks for your comment. You make many good points!

But when you say, "MOST brokers get deals done. Most are competent. There is very little beyond pricing that differentiates them.", I heartily disagree.

All lenders are not created equal.

Otherwise, there wouldn't be an abundance of failed lock agreements. Are these failed lock-ins unavoidable? Or could they be due to a lack of training among lenders? Not enough experience? Dishonesty? Apathy? Carelessness?

Case in point, check out these related stories... Borrowers Ask Kate for Help with Botched Mortgage Rate Lock Agreements.

No two failed lock-in stories are identical but the results are similar. Borrowers are bullied into higher interest rates and unexpected fees in order to close their transactions. Not acceptable and why it's necessary to learn how to ask for more than a rate quote!

This is also why borrowers must be choosy about the institution and individual they hire to originate their mortgage transaction. An efficient way to find qualified loan originators is to ask trusted friends, co-workers, neighbors, and family members who did a good job for them. Then interview the candidates with... Questions to Ask Before Locking In a Mortgage Rate.

Sincerely,
Kate

P.S. Read Abreillia's comment that I posted today at HARP 2 Program Guidelines vs Lender Overlays, evidence that all lenders are NOT created equal! (Scroll to the bottom of the page to see her comment.)

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You can also ask Kate about your mortgage at How to Find Your Mortgage Lender.

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