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Profile picture for hpu73

Signed rate lock agreement but now I want out.

I signed a rate lock agreement set to expire on January 5, 2009.  The original request was for a conventional refinance but the appraisal came back $15,000 less than expected so it did not work out.  The broker switched me to an FHA loan which I do not want.  He is telling me I will have to pay his company $2350 (1% of orig. loan amt) if I do not close before December 31, 2008. What are my options?
  • December 26 2008 - Southwest
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Answers (25)

Unless he had a 2 year rate lock, I am assuming he already resolved this issue.

Tom,
You may want to look at post dates before you respond.
  • December 02 2010
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You should just walk away....
You are not obligated to close.
  • December 02 2010
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Clay,

The FHA terms aren't part of this thread (I do agree that they stink, and TDSML would probably find the fees excessive which is a violation of thier regulations).

hpu73 signed an ageement that is permissible in TX.  In fact, in TX the broker could have collected the rate lock fee in advance, and does not have to refund it as long as the agreement clearly states that the fee is nonrefundable.  In this case the agreement states that the fee is not collectible, but only if hpu73 did not materially misrepresent anything in the loan application.

I know you think the recission period established by the Federal Truth in Lending Act gives hpu73 a way out, but if you read the Act you will find that it says, "...the CREDITOR shall return any money..."  Brokers are not creditors. 

Even if hpu73 closes the FHA loan, the rate lock agreement applies to a conventional loan that never closed let alone was rescinded, so I'm not sure how closing the loan and rescinding helps. 

At this point the only relevant issue is the rate lock agreement.  The broker has offered to waive enforcement of the original agreement if hpu73 switches to an FHA loan, but hpu73's response should be to cancel the refi and let TDSML deal with the broker if they attempt to pursue collection of the rate lock cancellation fee.
  • December 28 2008
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hpu73, the only client I have ever done a loan for that KNEW what their house would appraise for, is my appraiser. The FHA terms they gave you suck, plain and simple. Tell them you have cancelled your loan because they could not deliver what you agreed to on a rate lock. It does not matter why, it just matters that they can not deliver the terms of the rate lock agreement. Also tell them you have discussed the matter with several other lenders, ALL OF WHOM FIND THEIR $3000 PLUS PROCESSING FEE PREDATORY, and that the Dept of Savings and Mortgage Lending may find it PREDATORY also. If they continue to push the argument, CLOSE THE LOAN THEN RESCIND IT. They can not touch you after that, period.   

  • December 27 2008
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Profile picture for tchau_99
This does sound like a scam mortgage lender..... This bank is short money to lend it to you. Cancel the deal and call your credit card or bank to cancel the check.

Let this scam lender know that you are filing a complaint to the enforcements if they honor your request.
  • December 27 2008
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In that case, just tell them to cancel the deal, and if they try to collect the rate lock fee contact enforcement at TDSML.
  • December 27 2008
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Profile picture for hpu73
I told him it was hard for me to say because of the newness of the neighborhood, but I did tell him what I found on Zillow which was $275k and what I am taxed on which is $235k.  We decided on $250k as the value to run the numbers with - the appraisal came back at $235k.
  • December 26 2008
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Wow, what a mess.  First, Mortgage Brokers in TX are licensed by the Texas Department of Savings and Mortgage Lending.  We are in fact allowed to charge certain fees prior to closing, and can charge them whether the transaction closes or not.  To do so the fees must be disclosed in advance, and the disclosure must note whether the fees are refundable or not.  Rate lock agreements have specific requirements, but it sounds like the agreement you signed complies. 

If you were just trying to break your rate lock agreement, they could pursue collection of the fee(s).  However, in your case the rate lock in question was for a conventional loan.  Apparently they cannot obtain a conventional loan for you under the agreed upon terms  The rate lock agreement does not apply to the proposed FHA loan. 

The real question is did you misrepresent the value of your home when you applied for the loan.  If you told them it was worth $250K, and it only appraised for $235K, they may have a pretty good argument for collecting the fee, since they wouldn't have locked a conventional loan had they known the real value. 

If you told them a lower amount or said you had no idea what the value is, then they have no argument, and if they pursue the matter further you should contact TDSML at 512-475-1350 and ask to speak with someone in enforcement.

If you need further assistance, feel free to contact me via my profile.  I do answer the phone on weekends.
  • December 26 2008
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Profile picture for Harry L Henning
Make them honor your signed lock in at 4.875% or go away. Put it in writing to them, certified mail or email and have a nice day. 
  • December 26 2008
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The key to that verbage is "withdraw or cancel your loan application".  You did neither of those.  Your loan (if I read this correctly" was denied due to lack of collateral value.  You should not pay them another dime, you should find another broker who can give you 5.0% on a FHA loan with half those fees, and you should report them.
  • December 26 2008
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You can call the Texas Dept of Banking, tell them the situation and ask if you are liable, I don’t think so. What’s to stop them from quoting 4.875% conv, then giving you FHA at 5.75%, 6%, 6.5%, 7%, etc. I think you will be fine but by calling the Dept of Banking, who they get their Lic from, there will be no doubt with that answer. 1-877-276-5554

  • December 26 2008
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Profile picture for tchau_99
If you have not sign the yet, you will only lost the locking fee.

If you sign it already, you are too late. They got you on paper.

However, they cannot force you into a new loan (from conventional to FHA) without your consent. They need to pay $$$$ you to so since you did not initiated one. Common sense - you do not need to worry. 

If they force you to do so, you file a complaint or do a research on law suit against them for harassing you.

It is paintful to lose a locking fee but the fee is small. They will lose and your comments on them. Now, you can really annoy them by giving negative testimony about them so other consumer is aware of them.  Do it until they go bankrupt since they do not deserve to be praise.

Before you decide.........is FHA interest rate and fees doing you a favor? No - complaint and get out with your locking fee lost. Make sure you give as much negative feedbacks about them as possible. If it is helping you, then make the decision.
  • December 26 2008
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Profile picture for tchau_99
If you have not sign the yet, you will only lost the locking fee.

If you sign it already, you are too late. They got you on paper.

However, they cannot force you into a new loan (from conventional to FHA) without your consent. They need to pay $$$$ you to so since you did not initiated one. Common sense - you do not need to worry. 

If they force you to do so, you file a complaint or do a research on law suit against them for harassing you.

It is paintful to lose a locking fee but the fee is small. They will lose and your comments on them. Now, you cannot really annoy them by giving negative testimony about them so other consumer is aware of them.  Do it until they go bankrupt since they do not deserve to be praise.

Before you decide.........is FHA interest rate and fees doing you a favor? No - complaint and get out with your locking fee lost. Make sure you give as much negative feedbacks about them as possible. If it is helping you, then make the decision.

  • December 26 2008
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Profile picture for hpu73
The rate lock I signed on the Conv was for 4.875%, but the FHA is 5.5%.  They are saying it is basically the same deal because the payments are only slightly different between the two.
  • December 26 2008
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Profile picture for hpu73

The section they refer to reads like this:

We do not charge an upfront fee to lock your loan.  However, once we accept your lock, your loan is committed into a secondary market transaction and we incur costs.  If you elect to lock your loan at this time, you agree, subject to loan approval, to close your loan in accordance with the terms stated herein, regardless of the changes in the market.  If you cancel or withdraw your loan application or fail to close by the Lock Expiration, or Borrower has made a material misrepresentation on the loan application, or Borrower has failed to provide documents necessary to the processing or closing of the loan, you agree to pay a lock break penalty equal to 1% of the Loan Amount.  If incurred, the Lock Break Fee shall immediately due and payable and the lock terms in this Agreement shall be void.  You will not be subject to the Lock Break Fee if your loan is denied or if the purchase conract is terminated.

  • December 26 2008
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Sorry, this POS will no cooperate when I try to type something today. In addition to the fees from your previous post, they gave you a rate of 5.5%. If you signed a rate lock conf and they will charge you for not closing, AND YOUR STATE HAS A 3 DAY RIGHT OF RECISSION, go ahead and close, then rescind the loan. They have no recourse and if they threaten further, tell them you will go the Atty General of your state and the Texas Dept of Banking and report them. We need a texas lender to say if there is a 3 day recission period, as I dont know that.
  • December 26 2008
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Just walk away. They really have no recourse. I have seen some lenders have borrower some form of compensation guarantee but have never seen it stick. That individual is truing to get a deal done not looking for your best interest.
  • December 26 2008
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Bigboy, this is from your other post:



Line 801 shows a charge for $2297 (loan origination fee)
Line 810 shows a charge for $3193 (processing fee)
Line 811 shows a charge for $995 (underwriting fee)
Line 813 shows a charge for $200 (closing fee)

Is this too much?  

  • December 26 2008
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also, if you initially locked on a conventional mortgage, that 'contract' is void- you could not qualify. There is no law that forces a borrower to stay with a mortgage company, let alone stay with one who could not give you the deal you wanted. What state are you in? I would go so far as to suggest you file a complaint- IF they harass you anyway.
  • December 26 2008
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you have to pay them a fee if you don't close with them? Sounds like extortion. Typical.
When you locked, did you sign any form saying that you were obligated to close with them? 

I saw your other post- run away from this company. Their fees are outrageous, their rates are not competitive, and they use scare tactics and heavy fees to deter you from shopping around. Don't hand over a dime!
  • December 26 2008
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The lender is not from zillow.
  • December 26 2008
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Is this a Zillow Lender?
  • December 26 2008
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  • December 26 2008
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  • December 26 2008
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  • December 26 2008
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