Ever feel like your mortgage lender strung you along until your rate lock expired? Think it was intentional on their part because they wanted you to lose the rate- that was too good to be true in the first place? Well, it might just be and you might just have a leg to stand on in your fight to keep that rate.

A mortgage rate lock must be either written or electronically transmitted to the applicant. This can be done before or after you receive your commitment letter, but it must include the following: interest rate, points and lock-in expiration date. Make sure you get a copy of it.

A lender cannot lock in your rate for a period of time if they do not feel that they can reasonably provide the commitment and close before the lock in expires. If the mortgage loan officer locks it in (for example) less than 30 days from the date of application and assures you they will close, the lender would have to act pretty quickly. If the appraisal was not even ordered in the first three weeks, it won’t happen and let’s see whose fault that is!

There are regulations that most lenders have to adhere to when it comes to locking in your mortgage interest rate and more when it comes to honoring it, or losing it, as it may happen to be.  Below are some things to consider (either way):

Applicant fault:

·         The applicant failed to provide the lender with documents requested in a timely manner (timely defined as within 7 days from request)

·         The applicant/attorney failed to close within the lock period because of an unrelated reason (vacation)

·         The applicant failed to provide documents at the closing requested by the lender (bring another pay stub or bank statement)

·         The applicant omitted or misrepresented information in the loan application which would have caused the lender to deny the loan in the first place. (Oops)

·         The applicant changed their loan program or does not qualify for chosen program and changes it. The loan is considered brand new and the previous lock in no longer exists.

·         The applicant applies for a government program that has been discontinued.  Here, the applicant can chose another program or simply pull their application and receive a refund for all fees not spent by the lender.

Lender fault:

·         The lender requires a specific bank attorney to close the loan and they cannot schedule it prior to the expiration date. The lender will need to extend the rate lock.

·         If the lender requests additional documents within 7 days prior to the lock expiration, they will have to extend the lock period an additional 7 days to give the applicant time to gather the paperwork.  However, if the borrower omitted, changed or misrepresented information that the lender needs further information on, they do not have to extend the rate. Also, if the appraisal or inspections came back and the lender needs more information then they do not need to extend the rate lock.

 

As you can see, there are many reasons why the lender does not have to honor and so many ways the borrower can lose the rate lock, that the responsibility is more likely on the borrower. The biggest issue would be last minute requests for information. Typically lenders will re-lock or extend a rate at no charge or very little cost, but it is best to know ahead of time the bank policy if this should happen. In addition, it is very smart to read the fine print and make sure you and your attorney provide all the requested information to the lender in a timely fashion.  Also note that some of these regulations are mandated by state banking laws, so each state might vary. Know your loan and know your lender!