Unhonored Rate Locks

Did you know that a locked rate is a commitment for a loan to be delivered to a lender?   Mortgage companies and loan originators are often judged by how many loans they deliver or what their lock fall-out ratio is.   A normal expection used to be around 70-75% of locked loans to be delivered–now I’m hearing reports of 30-40% of locked loans actually being delivered to the lender.  

This is dangerous for mortgage brokers and correspondent lenders.  Why?  Wholesale lenders are cutting back and “cherry picking” which companies they’ll work with.   A significant factor is lock-fall out.  If odds are, a locked  loan is not going to be delivered, why should they work with that mortgage company?    

Sometimes the wholesale lender may be ordering the mortgage company to be “cut off” of future business and sometimes it may be the wholesale lender having their Account Executives that they need to reduce their client base to a certain amount of accounts (as a way to reduce the commission they’re paying the AE’s). 

There can be many reasons for a locked loan not to be delivered, such as:

  • the loan could not be approved because of the property (appraisal issues) or the borrower.
  • private mortgage insurance issues.
  • the borrower decides not to proceed with the transaction.

Here’s how one wholesale lender rates fallout:

  • 0-24.99% = Full approval.
  • 25-34.99% = Monitor
  • 35-49.99% = Watch
  • 50-74.99% = Probation
  • 75% or more = Inactivated.   Good by wholesale relationship with that lender.

Wholesale lenders don’t care if it’s due to the borrower not proceeding with the refi or if it was their underwriting that “killed the deal”…it often counts towards that dreaded lock fallout ratio.

A disturbing trend I heard from a local title insurance company is “double applications”.  Where a borrower is proceeding with a refinance transaction with two different lenders.   If both loan originators have the loan locked, someone is going to lose!   Not to mention, the expense to the title and escrow companies who are working on a transaction a consumer is not going to honor.   The only way this is caught, is if the title or escrow company happen to be the same one that the two loan originators the consumer is using.   Regardless of if both loans are locked or not, it’s unscrupulous behavior.    

Borrowers–please do not have two loan applications going on at the same time with two different loan originators.   When you do decide to lock in a rate with a mortgage professional, understand it IS a commitment.

About Rhonda Porter

Rhonda Porter is an NMLS Licensed Mortgage Originator MLO121324 for homes located in Washington state. Her blog, The Mortgage Porter, is nationally recognized for sharing relevant information to consumers about mortgages.

She has been originating mortgages since 2000 at Mortgage Master Service Corporation #40445 Consumer NMLS Website: http://www.nmlsconsumeraccess.org/TuringTestPage.aspx?ReturnUrl=/EntityDetails.aspx/COMPANY/40445
NMLS ID 40445. Equal Housing Opportunity.

You can follow Rhonda on @mortgageporter, Facebook and/or Google+

Comments

  1. Rhonda,

    Are rate locks still free?

    I thought that in order to lock, the homeowner had to plunk down $500 or some other fee in order to commit to that lender.

    I’m thinking that homeowners wouldn’t be too swift to lock in at multiple lenders if there was a chance of losing a non-refundable fee.

  2. Rhonda,

    Are rate locks still free?

    I thought that in order to lock, the homeowner had to plunk down $500 or some other fee in order to commit to that lender.

    I’m thinking that homeowners wouldn’t be too swift to lock in at multiple lenders if there was a chance of losing a non-refundable fee.

  3. Great question, Jillayne, The industry is reverting back to charging $450-$500 as a lock in fee. Consumers should verify that this fee is credited towards the transaction when the loan closes.

  4. non-refundable?

  5. JD Blackwell says:

    Even if the transaction fails to close for reasons beyond the control of the borrower? It’d be the last referral you ever got from this agent.

  6. I can’t help but think that lenders bring this upon themselves.

    In an environment where the consumers have continually taken it on the chin and have been burned by lenders changing terms at the last minute, asking for more money down, and looking for any reason to charge a higher interest rate, why should the consumer not protect themselves from this by running double, if not triple applications?

    The lenders have a long way to go before they can restore the goodwill and confidence that the rate I am quoted will be the same rate on the final loan document, let alone convincing me that when the closing date comes, the loan will actually be funded. Too many would-be-buyers have had a hard time getting financing and this phenomenon is a side-effect of tight lending market. Spending an extra $500 to insure that you can get the best rate, terms, and ensure you get the loan funded might be money well spent.

    When lenders and consumers can restore faith in one another, this practice will likely stop. Until then, don’t blame the consumer for trying to protect themselves from a system that is increasingly not in their favor.

  7. I can’t help but think that lenders bring this upon themselves.

    In an environment where the consumers have continually taken it on the chin and have been burned by lenders changing terms at the last minute, asking for more money down, and looking for any reason to charge a higher interest rate, why should the consumer not protect themselves from this by running double, if not triple applications?

    The lenders have a long way to go before they can restore the goodwill and confidence that the rate I am quoted will be the same rate on the final loan document, let alone convincing me that when the closing date comes, the loan will actually be funded. Too many would-be-buyers have had a hard time getting financing and this phenomenon is a side-effect of tight lending market. Spending an extra $500 to insure that you can get the best rate, terms, and ensure you get the loan funded might be money well spent.

    When lenders and consumers can restore faith in one another, this practice will likely stop. Until then, don’t blame the consumer for trying to protect themselves from a system that is increasingly not in their favor.

  8. Jillayne, I’m not sure if you’re suggesting non-refundable lock deposit or asking?

  9. JD, true–it is a referral to a consumer from an agent when its a purchase…and possible a referral from a past client. Both are great…as long as the consumer isn’t doing “double applications”.

    Regardless of why a locked transaction fails to close, it’s a strike against the originating mortgage company. In this environment, I’m writing a letter explaining circumstances to the wholesale lender if we’re not able to deliver a loan… some reasons have been due to the borrowers change in employment (hours cut back or laid off) for example.

  10. Harley, you’re right that the abuse can go both ways. I hope that any mortgage professional who’s reading this will stop allowing the practice as well. It is unsavory behavior on the consumers part. There are a lot of things we can do as humans to “protect ourselves”…if it imposes harm to another, is it the right thing to do?

    Consumers must do their “shopping” upfront and give more weight to the qualities of the mortgage professional–if they’re working with an honest, ethical and experienced mortgage professional, having a competitive rate will follow.

    The lock in fee is not necessarily an additional fee. At our company, we have always collected an appraisal deposit–instead, we’re collecting it earlier in the process when the client indicates they want to lock in the rate. The fee is applied towards costs at closing. Many lenders have always collected upfront application or lock in fees…this is nothing new.

    Wholesale lenders and guidelines become tougher when fall-out rates are higher. It’s a terrible cycle….these are dicey times for all lenders (including banks). This practice may make the difference of a mortgage company being able to weather this storm.

  11. Harley, you’re right that the abuse can go both ways. I hope that any mortgage professional who’s reading this will stop allowing the practice as well. It is unsavory behavior on the consumers part. There are a lot of things we can do as humans to “protect ourselves”…if it imposes harm to another, is it the right thing to do?

    Consumers must do their “shopping” upfront and give more weight to the qualities of the mortgage professional–if they’re working with an honest, ethical and experienced mortgage professional, having a competitive rate will follow.

    The lock in fee is not necessarily an additional fee. At our company, we have always collected an appraisal deposit–instead, we’re collecting it earlier in the process when the client indicates they want to lock in the rate. The fee is applied towards costs at closing. Many lenders have always collected upfront application or lock in fees…this is nothing new.

    Wholesale lenders and guidelines become tougher when fall-out rates are higher. It’s a terrible cycle….these are dicey times for all lenders (including banks). This practice may make the difference of a mortgage company being able to weather this storm.

  12. I’m in the middle of a refinance that hasn’t yet closed and can understand why consumers might do this. Fortunately we have a great loan officer who locked our rate for 90 days. But the processing and underwriting phase took so long and was such a hassle that I doubt we’ll go back to the same lender in the future. We paid a fee to lock the rate but if they weren’t going to be able to get the loan done when they finally did I would have strongly considered going to another lender.

    For the record our file was >20% equity, very high credit scores, and no other debt. Essentially there was such a backlog of mortgage applications that it just took a very long time for the lender to approve everything and send the docs over to escrow.

  13. Jeremy, I’m afraid to say that during these times w/a refi, it’s possible you would have the same results…just possible though. Why did you have a 90 day lock and why isn’t the loan closed? Do you have a second mortgage that needs to be subordinated–what’s the rest of the story? How can you still be “in the middle?”

    Processing and underwriting is jammed.

    Purchases take priority over refi’s.

    If I’ve done a short lock for a refi, I own up to it. I have yet to lock 90 days for a refi.

  14. We have a 2nd with a credit line of whopping zero dollars and balance of zero dollars that we would have had to pay a fee to close. In the end we would have been better off paying that fee than keeping it open and taking on the accrued interest charges because of the delays in processing the subordination.

    The loan is in the final stages of closing so there’s light at the end of the tunnel.

  15. Jeremy, in defense of you LO–your second mortgage/HELOC is the problem…not her. Any LO would have the same issues.

    We’re refinancing right now too w/a very low balance HELOC we don’t want to give up…I’m 75 days into our transaction (and I’m a LO).

    Banks don’t want to subordinate second mortgages and they are dragging their feet….some are denying the subordination as second mortgages/HELOCs are proving to have very high fallout.

  16. Rhonda and Jillayne:

    I believe the maximum fee a mortgage broker can retain from a non-completed loan is $300.

    Lenders and brokers often do take a larger upfront fee, but generally that is for the appraisal also.

    I currently do not take any upfront/application fees, but require that the borrower pay the appraiser directly, both for purchases and refinances.

    Even if the loan does not go through, for any reason, the appraiser must be paid.

    And Rhonda, some lenders are much more strict regarding fallout than your example.

    It all goes back to honoring commitments.

  17. Rhonda and Jillayne:

    I believe the maximum fee a mortgage broker can retain from a non-completed loan is $300.

    Lenders and brokers often do take a larger upfront fee, but generally that is for the appraisal also.

    I currently do not take any upfront/application fees, but require that the borrower pay the appraiser directly, both for purchases and refinances.

    Even if the loan does not go through, for any reason, the appraiser must be paid.

    And Rhonda, some lenders are much more strict regarding fallout than your example.

    It all goes back to honoring commitments.

  18. Regarding subordinating a 2nd.

    Better off closing it, paying the fee, and opening a new one, if possible.

    That’s what I’m doing with mine (I am also an LO).

    Resubordinations are a total crap-shoot! Some take days, some take months, and some never happen at all.

    Be sure you and your mortgage professional have a complete game plan, and know the risks.

  19. Roger, re “It all goes back to honoring commitments.”

    What do you do if you are working with a person who doesn’t care about your willingness to honor lock commitments?

    Essentially, what can happen if you’re taking a lock deposit, you’re essentially taking a deposit for an appraisal earlier in the transaction (if you’re locking before you order the appraisal)…if I’m ordering an appraisal before locking; then I’m collecting an appraisal deposit. I don’t collect both a lock and appraisal deposit–it’s either or.

    I have yet to have to deal with an FHA cash-out at 85% where there would be two appraisals! OUCH.

    Also, comment 13 is a trackback to the post I wrote about subordinating seconds. ;)

  20. Roger, re “It all goes back to honoring commitments.”

    What do you do if you are working with a person who doesn’t care about your willingness to honor lock commitments?

    Essentially, what can happen if you’re taking a lock deposit, you’re essentially taking a deposit for an appraisal earlier in the transaction (if you’re locking before you order the appraisal)…if I’m ordering an appraisal before locking; then I’m collecting an appraisal deposit. I don’t collect both a lock and appraisal deposit–it’s either or.

    I have yet to have to deal with an FHA cash-out at 85% where there would be two appraisals! OUCH.

    Also, comment 13 is a trackback to the post I wrote about subordinating seconds. ;)

  21. I’m in a similar boat with a lender who gave me a rate lock commitment two months ago, and has been sitting on the file since then. They won’t be able to process my file in time (60 days!) and so my lock will expire. They won’t extend the lock either.

    I’m shocked that lenders can do this. I locked with them — thus not pursuing other options — and have already paid for appraisal. Pristine refi application. Isn’t there anything I can do???

    M

  22. M, are you sure that your lender hasn’t been processing the transaction? I know it must seem that way–possibly to my refi clients right now. There are several “bottle necks” that happen during a refi boom, which we are in right now (and it’s only going to get worse with the Obama mortgage plan being added to the mix).

    Has your appraisal come back yet?

    The biggest traffic jam I’m experiencing with refi’s is underwriting right now (after we have the appraisal). I’m hearing that some lenders are around 2 weeks after the appraisal.

    I’m guessing the loan originator must have locked it on a mandetory lock vs a best efforts lock. Have you asked them about extensions? What do they say?

  23. M, are you sure that your lender hasn’t been processing the transaction? I know it must seem that way–possibly to my refi clients right now. There are several “bottle necks” that happen during a refi boom, which we are in right now (and it’s only going to get worse with the Obama mortgage plan being added to the mix).

    Has your appraisal come back yet?

    The biggest traffic jam I’m experiencing with refi’s is underwriting right now (after we have the appraisal). I’m hearing that some lenders are around 2 weeks after the appraisal.

    I’m guessing the loan originator must have locked it on a mandetory lock vs a best efforts lock. Have you asked them about extensions? What do they say?

  24. You’re right, it’s in processing. The lender says they can have it to escrow one day after the rate lock expires. And they are only giving me two choices for extension.

    1. Pay half a point ($2k) to extend or
    2. Take a 5% rate (over 4.875%) and maintain my no points and no fees original lock.

    Appraisal came back within one week of locking the loan, and I paid for the appraisal out of pocket so we could get it back that fast. And we’re talking a 60 day lock!

    So I looked online last night and it sounds like Provident (the lender) might have a reputation for this? Hmmm. Feels like I should have some recourse, but I’m not sure what it is.

    Thanks,
    M

  25. maggie, I’m afraid that most lenders are taking much longer than “normal” with refinances. Here are some more factors that are causing these delays:

    Staffing in every aspect of the industry has been reduced from previous severe decline in business from loan originators, processors, underwriters, appraisers, escrow, title, etc.

    Underwriting is much tougher and with guidelines changing frequently. It takes longer to underwrite a mortgage, even in a perfect world without the glut of business. Appraisals and every aspect of the mortgage are being scrutizined with a fine tooth comb.

    Purchases often take priority over refinances in the processing/underwriting world because there is a legal contract that must be followed which included a closing date AND there are buyers and sellers (more parties) involved.

    I’d say the longest part of a refi transaction right now is underwriting (once the appraisal and all required documentation are provided).

    Don’t forget there is a 3 day right of recsision that takes place after you sign your documents (3 postal days must pass before the loan can be funded) which must be factored into your extension period.

    If you’re subordinating a second mortgage–I’m hearing some lenders (like Chase) are taking 2 months just to process the request (which is no guarantee they’ll subordinate)…this is AFTER full loan approval–including the appraisal.

    Once docs get to escrow, they need some time to review and prepare the HUD. They’re also inundated with business so it may or may not be possible to get you in right away (I never make promises of when escrow can schedule appointments–I’ll ask for a rush when I need it but I don’t abuse it–they all ready get plenty of abuse from pushy people).

    Add an additional huge wave of refi’s with Obama’s refi plan for home owners who have not been able to due to lack of equity and refi’s are only going to take longer. Some banks are hoarding the refi’s for their own which also may impact that banks service time.

    I’m doing 60 day locks now on all my refi’s. I’ll be extending a couple of refi’s this week.

    Extensions ARE more expensive right now (for purchases and refi’s) and do vary from lender tot lender.

    How many days does 0.5% in extension fees buy you? Are you working directly with Provident?

  26. maggie, I’m afraid that most lenders are taking much longer than “normal” with refinances. Here are some more factors that are causing these delays:

    Staffing in every aspect of the industry has been reduced from previous severe decline in business from loan originators, processors, underwriters, appraisers, escrow, title, etc.

    Underwriting is much tougher and with guidelines changing frequently. It takes longer to underwrite a mortgage, even in a perfect world without the glut of business. Appraisals and every aspect of the mortgage are being scrutizined with a fine tooth comb.

    Purchases often take priority over refinances in the processing/underwriting world because there is a legal contract that must be followed which included a closing date AND there are buyers and sellers (more parties) involved.

    I’d say the longest part of a refi transaction right now is underwriting (once the appraisal and all required documentation are provided).

    Don’t forget there is a 3 day right of recsision that takes place after you sign your documents (3 postal days must pass before the loan can be funded) which must be factored into your extension period.

    If you’re subordinating a second mortgage–I’m hearing some lenders (like Chase) are taking 2 months just to process the request (which is no guarantee they’ll subordinate)…this is AFTER full loan approval–including the appraisal.

    Once docs get to escrow, they need some time to review and prepare the HUD. They’re also inundated with business so it may or may not be possible to get you in right away (I never make promises of when escrow can schedule appointments–I’ll ask for a rush when I need it but I don’t abuse it–they all ready get plenty of abuse from pushy people).

    Add an additional huge wave of refi’s with Obama’s refi plan for home owners who have not been able to due to lack of equity and refi’s are only going to take longer. Some banks are hoarding the refi’s for their own which also may impact that banks service time.

    I’m doing 60 day locks now on all my refi’s. I’ll be extending a couple of refi’s this week.

    Extensions ARE more expensive right now (for purchases and refi’s) and do vary from lender tot lender.

    How many days does 0.5% in extension fees buy you? Are you working directly with Provident?

  27. I need to find out the number of days that the extension will buy me. I’m working with a mortgage broker. I think the thing I was having a hard time understanding was how the lender could do the lock and then get tied up in processing time… thus causing me to pay for it.

    But what I think you’re saying is that it’s they way of the refi world. I certainly understand processing timelines. I think I was feeling unfairly played because I had a long lock, turned in all my stuff early, and have basically just been waiting. Not feeling like I should have to pay for the processing time.

    But I have to pay for the processing time, don’t I…

  28. The last time we experienced a refi boom of this level was following 9-11. It’s difficult to plan for. The locks I’m extending this week, I’ll be paying for or spliting w/the client (or they may pay) depending on each individual situation. A couple I locked for 45 days–right when the “boom” was beginning, thinking I could close in advance of the rush and knowing that if I need 60 days to pull this off, I’m chipping in (if not paying all of it). I have some clients who did not provide their documentation in a timely manner and they will need to pay for their extensions (or a majority of).

    I have never worked with Provident as a lender but I know that a lot of lenders that I do work with will offer “market pricing”…meaning the lock expires and it is relocked at current pricing. That may be another option for you. Some may not offer this.

    Each lender is different–I provided some examples of extensions from various lenders in the link I provided at comment 18.

    Another option is not closing the refi.

  29. I just received this memo from one of the lenders we work with and I think it illustrates how breaking locks will increase the costs of mortgages overall to the consumer:

    At the time of closing, delivery to [the bank] becomes a mandatory commitment for Best Efforts locks. We do retain the right to collect pair-off fees when we discover that a locked loan was closed but not delivered to [the bank]. We have an active research and discovery process in place and are currently invoicing for these fees.

  30. In addition to the bank mentioned above, I learned of another major bank who requiring a 0.25% as an upfront lock fee which will be credited towards closing costs when the loan closes. The broker/correspondent lender must deliver the fee to the bank within 48 hours or the lock is cancelled.

    It’s getting tougher!

  31. In addition to the bank mentioned above, I learned of another major bank who requiring a 0.25% as an upfront lock fee which will be credited towards closing costs when the loan closes. The broker/correspondent lender must deliver the fee to the bank within 48 hours or the lock is cancelled.

    It’s getting tougher!

  32. Nish San says:

    Let me offer a different perspective. Once a borrower promises to lock in with a lender 30 days before the closing date. The lender becomes the dominant partner in the relationship. How many lenders actually bother to offer the “float down” option to give their client those extra bucks or spend more time on the details ? once they think a borrower has stopped “looking” , it’s basically a race to get the loan closed.

    God help the borrower if the lender is friends with the real estate agent agent and the inspection agent. Then it’s a team effort to get the transaction closed.

    If I m spending half a million dollars, I m going to make sure that I darn better get the best deal and have the upper hand right until the loan closes.

    I pulled my own credit report, kept 3 loan offers running simultaneously , didnt allow my lender to contact my real estate agent until the last few days. Spend the money on the triplicate apprasials ( basically $800 dollars extra) and pulled the trigger on the loan at the last possible hour. My savings ? at least $2300 dollars in costs and 1/8 of a percentage point. The loan officer who made me believe that he had my interest at heart …had a $7200 padded offer and the other 2 were closer to each other by the difference I saved. All three were in discussions with me over a month so I understood them well.

    My experience is that with so many variables in buying a home, to be asked not to keep the loan purchase option competitive (ie don’t keep multiple loans in the works)is down right an unfair request/expectation.

    If its commitment one is looking for, then you need to have an open kimono policy. Publish on a trusted medium with your borrower your rates, commisions etc on a per minutes basis PRIOR to the trigger being pulled. Just like the stock market. This is a problem waiting to be solved in my opinon, even thought an individual makes these transactions only a few times in their lifes.

    • In support of obtaining multiple rate locks, with multiple brokers, check out my story in the following section concerning my story of unhonored locks and putting my eggs in one basket. Look for my screen name of Jun.

  33. Nish San says:

    Let me offer a different perspective. Once a borrower promises to lock in with a lender 30 days before the closing date. The lender becomes the dominant partner in the relationship. How many lenders actually bother to offer the “float down” option to give their client those extra bucks or spend more time on the details ? once they think a borrower has stopped “looking” , it’s basically a race to get the loan closed.

    God help the borrower if the lender is friends with the real estate agent agent and the inspection agent. Then it’s a team effort to get the transaction closed.

    If I m spending half a million dollars, I m going to make sure that I darn better get the best deal and have the upper hand right until the loan closes.

    I pulled my own credit report, kept 3 loan offers running simultaneously , didnt allow my lender to contact my real estate agent until the last few days. Spend the money on the triplicate apprasials ( basically $800 dollars extra) and pulled the trigger on the loan at the last possible hour. My savings ? at least $2300 dollars in costs and 1/8 of a percentage point. The loan officer who made me believe that he had my interest at heart …had a $7200 padded offer and the other 2 were closer to each other by the difference I saved. All three were in discussions with me over a month so I understood them well.

    My experience is that with so many variables in buying a home, to be asked not to keep the loan purchase option competitive (ie don’t keep multiple loans in the works)is down right an unfair request/expectation.

    If its commitment one is looking for, then you need to have an open kimono policy. Publish on a trusted medium with your borrower your rates, commisions etc on a per minutes basis PRIOR to the trigger being pulled. Just like the stock market. This is a problem waiting to be solved in my opinon, even thought an individual makes these transactions only a few times in their lifes.

  34. Nish, I’m sorry that you’ve had the type of experiences with a mortgage originator that would cause you to use them in that way. My commitment to my clients does not stop at locking (nor does it stop at closing).

    It’s unfortunate that the loan originators are not paid hourly instead of commission.

    How did you prevent LO’s from talking to your realtor?

  35. Nish, I’m sorry that you’ve had the type of experiences with a mortgage originator that would cause you to use them in that way. My commitment to my clients does not stop at locking (nor does it stop at closing).

    It’s unfortunate that the loan originators are not paid hourly instead of commission.

    How did you prevent LO’s from talking to your realtor?

  36. What a mortgage promised to you is not always what you going to get in the end. The first rate lock was unhonored because the mortgage broker was not able to lock the rate half days after I signed rate lock. My loan was approved at beginning of loan and declined one month later because the mortgage broker offered me low rate that is only available for lower loan amount. My loan amount is higher and thus not eligible for that low rate program. Mortgage rate had skyrocketed while I waited the loan to close with this mortgage broker, I lost the opportunity to lock low rate with other credible lenders such as banks. I regret that I committed my loan with a mortgage broker who has no accountability to perform a loan.

    • Jun, unfortunately this can happen with anyone who orignates a mortgage (broker or banker). In fact, right now I’m helping my neighbors mother navigate her refi (it’s not in WA State) with one of the big 3 banks…the bank loan originator promised her a low rate and never locked it. The bank manager stated that their LO was new but went thru all the training and still tried to stick my neighbor’s mom w/a higher rate and fees. After several months of excuses from the bank and much persistance, the bank is finally going to close the rate at what was offered by the bank.

      It doesn’t really matter what type of institution you’re going to with regards of locking. What matters is ethics and quality of your mortgage originator as well as the level of communication the borrower has with the loan originator.

      In this volatile market, rates may change 2-5 (or more) times a day. The mortgage originator should have found out if you were willing to lock in only a X% and what to do if they could not offer that.

      You mention that your rate was only available at a lower loan amount–did your mortgage change from conforming to high balance? What was the specific change with your loan amount? If your loan amount was always higher, did your mortgage originator know this when you were quoted the rate?

      As soon as someone tells me that want to lock, I let them know that I’m going to confirm the rate. This is done immediately. It’s quite possible that while I’m preparing to lock, rates may all ready be gone. I’ll try to contact the borrower immediately to let them know if rates have gone up before locking (unless I have their permission to lock at the higher rate). Hopefully I’m locking with the client present or on-line, however this is not always possible.

      If the client is not available in the event of a rate change, then rates may continue to climb if direction from the client is not able to take place.

  37. My mortgage did not change from conforming to high balance. My mortgage broker knew exactly how much we needed. As a matter of fact, they recommended the borrowing amount and they have been advertising the conforming limit of %567,500 in the Seattle times over two months.

  38. In the rising interest environment, consumers cannot afford to spend several months to argue with bank or mortgage broker to fix their mistakes. It is harder and time consuming to uncover any unethical and unfair practices because of the middle man involved in the loan process.

    • Your situation may involve bad practices… we don’t have both sides of the story. Consumers do need to be vigilant with making sure the PERSON they are working with on their mortgage is qualified and ethical.

      How did you select your mortgage originator?

      • I did not select my mortgage originator. I selected my mortgage broker from The Seattle Times newspaper. My mortgage broker has been advertising 15-20 day closing on the Seattle Times newspaper, and they quoted me low rate and fee on their initial rate lock and good faith estimate. Because their loan processor did not return my follow up phone calls and emails for a long time, I complained and the mortgage broker emailed me back saying that they will extend the rate lock for free until the loan closes. It turned out none of their promises were delivered.

        • Jun, again I’m sorry for your ordeal. You selected your mortgage by going after what seemed to be a low rate–you shouldn’t be faulted for that–I bet this is how most people select who will be handling their one of their largest debts secured to their greatest asset.

          This is a perfect example of why consumers should not use rate alone to select who will be handling the mortgage. I’ve written many posts about this–I’d recommend working with a mortgage originator who blogs next time–they’re more transparent and have a reputation to lose.

  39. Jun, did you get a written lock confirmation?

  40. Yes. I signed the first rate lock in the broker’s office. I got call back from the broker several hours later that he was not going to honor the rate lock because the rate got worse. I signed the second rate lock with broker and he emailed me back stating that the rate is guaranteed and confirmed. One month later, the rate lock is invalid because the loan program he put me into has lower loan limit amount. The broker asked me to sign the third rate lock at higher rate under a different program. It does not look like that the rate lock agreement I signed can protect me from the rate hike.

    • Jun, that’s really terrible. And I do thank you for sharing your circumstances with fellow RCG readers.

      The lower loan amount part I really don’t get. The loan originator should have known at the time of locking what your loan amount was. Did this have to do with a low appraisal?

      Did you contact the loan originator’s manager?

      A rate lock commitment really can’t be provided to you until AFTER the rate is locked. We have a form that we use in the event we’re taking an application after hours (when/if you’re not able to lock) in which the client directs us to lock at a certain rate or to lock regardless of rate or to float. With rates changing every 3-4 hours, it’s too risky not to immediately lock.

      Once is a lock commitment which details the criteria the rate is locked on. If certain things change that impact your rate (such as a dropping credit score when the credit report has expired or a low appraisal) a loan originator should let you know as soon as possible that your rate/program has been changed. This is one of the good things about the new MIDA regulation.

  41. Yes. This is terrible and my family went through lots emotions. This could happen to any consumers. I was not sure about my rights. Could you let me know what the new MIDA regulation is?

    The mortgage broker denied my loan 31 days after my initial application, the reason on the decline was that I was not qualified for DU plus program. I have never heard DU plus program until the loan was denied. Per DU finding my loan was approved but ineligible to deliver to Fannie Mae because the loan amount exceeds the program limit. I hope this will help you understand the lower amount part. The loan amount was stated on the rate lock agreement and GFE and the loan originator should have known. This is a conventional refinance and my loan was approved by other banks under high balance loan based on the same financial information. The appraised amount came back $50k higher than stated. It has nothing to do with my credit score because my credit scores are above 800. There is no other debt and income was qualified.

    Regarding the loan originator’s manager, he is the mortgage broker and owner of the mortgage company. When he told me that he failed to lock the rate, I asked my deposit back. He told me that it is hard to get my money back because the check had already been processed by the loan processing department. They claimed that they are a big corporation with several departments and team members. However, I recently found out that the loan originator’s real last name is the same as the broker. I could not find anyone else working for that company.

    The rate lock happened during business hours. The first rate lock agreement was emailed me at 10:52:45AM. The broker required me show up in their office to deliver the money in order to lock the rate. I took time off during lunch time and rushed to the office with the money, documents and signed the loan documents. To my surprise, I got call around 4:30PM that he could not deliver the rate. The mortgage broker said that he did not have to honor the rate and the rate lock agreement was not legally binding. I was not sure about my right. Since it was hard to get my deposit back, I agreed to pay $1350 more to lock the same rate. The second rate lock was emailed to me at 16:34PM. The second rate lock was dishonored 31 days later.

    By committing my loan to this mortgage broker, I lost time and opportunities to lock a low rate under high balance program with my original loan servicer – Bank of America. I feel I am being harmed by this broker but am not sure about my rights. I hope consumers can learn something from my story.

    • Jun, thanks for providing the additional details… I’ll share this with you: the HARP program SUCKS. It’s very challenging and underwriting guidelines have been changing constantly. It’s a mess…especially if you had private mortgage insurance previously.

      I would recommend for anyone who is upside down to contact their mortgage servicer (in your case, BOA) and others they would like to work with if they have a choice. I didn’t know you were DU Plus until this comment.

      I am sorry for your frustrations–I’m not making apologies for the mortgage broker–I have no idea who they are and/or/if they dropped the ball. But as I said, this program is a disaster. I receive more DU Plus “eligible” approvals on refinances that don’t need it (40% loan to value, for example). I guess what I’m trying to say is that there may be more to it–although it sounds like maybe you were not kept informed step by step of what was going on.

      I recently closed a DU Plus refi for one of my past clients…they did everything the bank asked them…and I sent the loan back to the bank (I’m a correspondent lender, I rarely broker) thinking it would perhaps make the transaction easier…it was like pulling teeth, hair…you name it. I did keep my client informed step by step and actually pretty much tried to talk them out of doing the refi because of the cost involved and odds against us getting it closed (which it did close after much grief–with the rate I locked them at HOWEVER they did pay an extension fee and I split the cost of the extension fee with them).

      Did they provide a lock confirmation with details of the terms of when the deposit could be refunded? In 90% of our transactions, if the rate cannot be honored by no fault of the borrower, your rate lock deposit would be refunded in whole.

      To bash “mortgage brokers” as a whole is not fair…nor would I bash “banks”… I get several emails every day from people upset with their broker or banker…it really does not matter about the institution. In fact I would argue that banks are less regulated on a local level…and DFI agrees. Your case is one of the grass is greener…but you didn’t have a chance to see.

      To bash an individual for not communicatinig what was going on step by step during these times–have at it. But individuals work for all types of institutions. Please know I’m saying this to you NOT as a mortgage broker (I work for a correspondent lender that can broker, but we fund a huge majority of our loans)…I’m very concerned how the “mortgage broker” industry is getting a very bad wrap as a whole. There are bad apples everywhere and until we have regulations that go across the board (to anyone who originates a mortgage) this will continue.

      You had points of being able to walk away from the transaction, including the three day right of rescission which is signed at closing–yet you did not…why?

      Have you contacted the state regulators (can’t do that with most big banks) with your complaints?

      Jun, I hope that you sharing your situation helps our readers avoid these types of issues in the future.

      I recommend our readers get second opinions from other mortgage professionals if things start to go sideways, as they did for Jun.

      • My loan is not upside down and it is not a HARP program. My loan is a conventional refinance. I can obtain competitive rates with many lenders. I was not aware of DU plus program until the loan was declined. As non mortgage professional, I do not know what DU plus is about. Could you educate us what DU plus program is about? Is DU plus program only for upside down loan or HARP, is that why I am not qualified for this program?

        DU plus program is technical term that is known by mortgage professionals, not average consumers. I do not understand when you say that you tried to talk your client out of the DU plus program. Why did you apply DU plus program at the first place if you know that the chance of delivering that rate and fee under that program is slim? I would not think that your client would go through such an ugly process if you warned your client that the chance of getting the rate and fee on your good faith estimate is very low under the DU plus program.

        • I filed a complaint to BBB. The business failed to respond twice and got “F

          • You asked why I continued the process and went through with the loan? Start the process again? That would lead to an even higher interest rate as interest rates continued to rise at that time. The best reason to walk away from this loan was if I had started multiple loan processes in the beginning just as suggested by another blogger – and take the best deal to me.
            It appears that if mortgage brokers cannot regulate themselves and if the government cannot get practices like this under control, then the only choice for consumers is to start multiple loan processes. Forget recommendations to get another opinion, it’s too late… I suppose this is unfortunate for mortgage brokers, but this would probably convince the industry to be better fiduciaries to their customers.

          • This can happen with ANY mortgage originator regardless of what type of institution they work for.

          • Jun, you missed a question I had for you (or I’m missing it w/how our comments are set up now at RCG):

            How did you select your mortgage originator?

        • June, here’s a post I wrote when DU Plus first came out: http://www.mortgageporter.com/reportingfromseattle/2009/04/home-affordable-refinance-price-hits.html DU Plus is also known as HARP or may even be called the “Obama refi”.

          The program is challenging. Some lenders are willing to do it; some are not. Some programs qualify and some don’t. It’s really a huge mess.

          If you don’t understand something or if things don’t seem to be adding up with your mortgage originator (I’m writing this not to just you, June, but anyone who is reading this post which is now far off base from what it was originally written about) THEN GET A SECOND OR THIRD OPINION AT RIGHT AWAY. You don’t have to wait until the end.

          • I did not wait until the end. I spend lots time and energy to follow up the loan. The mortgage company told me the loan was approved at the beginning of the process. They did not tell me that they applied DU plus for me until the end when the loan was declined. Right now, I do not believe anything the mortgage company claimed. The company used two variations of company names. After checking the DFI, I found out that the loan originator used a different version of name…

  42. Yes. This is terrible and my family went through lots emotions. This could happen to any consumers. I was not sure about my rights. Could you let me know what the new MIDA regulation is?

    The mortgage broker denied my loan 31 days after my initial application, the reason on the decline was that I was not qualified for DU plus program. I have never heard DU plus program until the loan was denied. Per DU finding my loan was approved but ineligible to deliver to Fannie Mae because the loan amount exceeds the program limit. I hope this will help you understand the lower amount part. The loan amount was stated on the rate lock agreement and GFE and the loan originator should have known. This is a conventional refinance and my loan was approved by other banks under high balance loan based on the same financial information. The appraised amount came back $50k higher than stated. It has nothing to do with my credit score because my credit scores are above 800. There is no other debt and income was qualified.

    Regarding the loan originator’s manager, he is the mortgage broker and owner of the mortgage company. When he told me that he failed to lock the rate, I asked my deposit back. He told me that it is hard to get my money back because the check had already been processed by the loan processing department. They claimed that they are a big corporation with several departments and team members. However, I recently found out that the loan originator’s real last name is the same as the broker. I could not find anyone else working for that company.

    The rate lock happened during business hours. The first rate lock agreement was emailed me at 10:52:45AM. The broker required me show up in their office to deliver the money in order to lock the rate. I took time off during lunch time and rushed to the office with the money, documents and signed the loan documents. To my surprise, I got call around 4:30PM that he could not deliver the rate. The mortgage broker said that he did not have to honor the rate and the rate lock agreement was not legally binding. I was not sure about my right. Since it was hard to get my deposit back, I agreed to pay $1350 more to lock the same rate. The second rate lock was emailed to me at 16:34PM. The second rate lock was dishonored 31 days later.

    By committing my loan to this mortgage broker, I lost time and opportunities to lock a low rate under high balance program with my original loan servicer – Bank of America. I feel I am being harmed by this broker but am not sure about my rights. I hope consumers can learn something from my story.

  43. Rhonda and Jun:

    Let me chime in agreeing with Rhonda that the DU Plus Refi Plan has been surprisingly difficult for loan originators to execute, both at the retail and wholesale level.

    I have completed several, and I am working on several more. They are not for the faint of heart.

    I don’t say this to excuse the behavior of the loan originator you worked with, but to corroborate the difficulty we are all experiencing.

    The DU Plus Refi is very attractive on the surface, and when it works it is an amazing improvement of a difficult situation, but there are many lenders that are not following the overall intent and guidelines established by the government.

    From your information, it is not entirely clear why the loan would be in the DU Plus program, instead of a conventional refinance.

    I hope you get some good advice, whether from a bank, or a broker, as both have good and bad loan originators.

    I do feel that the broker should have refunded your check upon request, once it was clear that the lock was not honored. That only seems like the right thing to do, in that circumstance.

    • Roger, we can receive a DU Plus response from automated underwriting even if we’re not after that type of refi. I’ve had loan to values of 40% that get a DU Plus response with no appraisal required…gee thanks for the free appraisal but these guys don’t NEED the HARP program. I often wonder if it’s transactions like this that are included in the figures our government boasts about when they say they’ve helped X many people (who didn’t need the program to begin with).

  44. Rhonda Porter says:

    Jun, here’s a comment from a RCG reader, Jovan, who’s been having issues with a bank, extensions, etc.

    It really has little to no difference what type of institution you use… it’s the quality of the person you select for your mortgage origination.

  45. My loan is not as complicated as Jovan’s because I do not have any other debt. I wonder how Jovan was able to talk to the bank mortgage originator directly. Is there any way I can find out the contact information of my loan underwriter at the GMAC bank?

    The mortgage company told me multiple versions of stories and they keep revising like market rate. For example, I signed rate lock with them, later they told me the rate was not locked. They told me the loan was approved, one month later they told me the loan was declined. They told me they extended rate lock, later they said the bank was going to raise the rate between 3/8 to 2 percent. They later said that they put me into an undisclosed niche program that have limited time offer. When I signed third rate lock agreement three business days before the closing, I discovered that the rate was locked 12 days ago and it was going to expire in three business days. I do not know the truth story because the mortgage company refused to let me contact the bank directly.

    • Jun, I don’t know. I obviously was not your loan originator and there’s nothing I can do to help you at this point except I guess provide some “therapy” as you vent on how your transaction went on my blog post. It sounds like you contacted DFI from your previous comment, what did they tell you? Are they investigatng?

  46. My loan is not as complicated as Jovan’s because I do not have any other debt. I wonder how Jovan was able to talk to the bank mortgage originator directly. Is there any way I can find out the contact information of my loan underwriter at the GMAC bank?

    The mortgage company told me multiple versions of stories and they keep revising like market rate. For example, I signed rate lock with them, later they told me the rate was not locked. They told me the loan was approved, one month later they told me the loan was declined. They told me they extended rate lock, later they said the bank was going to raise the rate between 3/8 to 2 percent. They later said that they put me into an undisclosed niche program that have limited time offer. When I signed third rate lock agreement three business days before the closing, I discovered that the rate was locked 12 days ago and it was going to expire in three business days. I do not know the truth story because the mortgage company refused to let me contact the bank directly.

  47. I filed the complaint to the Washington State department of financial institutes five months ago. Unfortunately, it is still in the queue waiting to be assigned to an examiner at this time.

    However, I recently received a letter from the chief compliance officer from the Ally bank (Previously GMAC bank) in response to my complaint to FDIC. The letter stated that my loan was never declined by GMAC bank. The bank actually approved our original loan application and the rate increase was due to the rate extension on the original rate lock. The letter detailed the timeline of the loan activity, which explicitly states the delay in processing was by America Home Mortgage. Based on the letter, the CEO of America Home Mortgage failed to deliver free rate extension promised both verbally and in his email to me. America Home Mortgage took advantage of rising interest environment and falsely claimed that our originally agreed upon loan was turned down with the intent of insuring that we would agree to whatever the terms of a new loan were and fees they charged us.

    Consumers, America Home Mortgage claims of 20 day loan turnaround on the Seattle Time newspaper is a false advertisement. Their practice of increase rate and fee and lack of commitment to promises are unethical and it is reflected in their failure to respond to my complaint to the Better Business Bureau http://www.bbb.org/.

  48. I filed the complaint to the Washington State department of financial institutes five months ago. Unfortunately, it is still in the queue waiting to be assigned to an examiner at this time.

    However, I recently received a letter from the chief compliance officer from the Ally bank (Previously GMAC bank) in response to my complaint to FDIC. The letter stated that my loan was never declined by GMAC bank. The bank actually approved our original loan application and the rate increase was due to the rate extension on the original rate lock. The letter detailed the timeline of the loan activity, which explicitly states the delay in processing was by America Home Mortgage. Based on the letter, the CEO of America Home Mortgage failed to deliver free rate extension promised both verbally and in his email to me. America Home Mortgage took advantage of rising interest environment and falsely claimed that our originally agreed upon loan was turned down with the intent of insuring that we would agree to whatever the terms of a new loan were and fees they charged us.

    Consumers, America Home Mortgage claims of 20 day loan turnaround on the Seattle Time newspaper is a false advertisement. Their practice of increase rate and fee and lack of commitment to promises are unethical and it is reflected in their failure to respond to my complaint to the Better Business Bureau http://www.bbb.org/.

  49. My loan is not upside down and it is not a HARP program. My loan is a conventional refinance. I can obtain competitive rates with many lenders. I was not aware of DU plus program until the loan was declined. As non mortgage professional, I do not know what DU plus is about. Could you educate us what DU plus program is about? Is DU plus program only for upside down loan or HARP, is that why I am not qualified for this program?

    DU plus program is technical term that is known by mortgage professionals, not average consumers. I do not understand when you say that you tried to talk your client out of the DU plus program. Why did you apply DU plus program at the first place if you know that the chance of delivering that rate and fee under that program is slim? I would not think that your client would go through such an ugly process if you warned your client that the chance of getting the rate and fee on your good faith estimate is very low under the DU plus program.

  50. I filed a complaint to BBB. The business failed to respond twice and got “F

  51. You asked why I continued the process and went through with the loan? Start the process again? That would lead to an even higher interest rate as interest rates continued to rise at that time. The best reason to walk away from this loan was if I had started multiple loan processes in the beginning just as suggested by another blogger – and take the best deal to me.
    It appears that if mortgage brokers cannot regulate themselves and if the government cannot get practices like this under control, then the only choice for consumers is to start multiple loan processes. Forget recommendations to get another opinion, it’s too late… I suppose this is unfortunate for mortgage brokers, but this would probably convince the industry to be better fiduciaries to their customers.

  52. Jun, again I’m sorry for your ordeal. You selected your mortgage by going after what seemed to be a low rate–you shouldn’t be faulted for that–I bet this is how most people select who will be handling their one of their largest debts secured to their greatest asset.

    This is a perfect example of why consumers should not use rate alone to select who will be handling the mortgage. I’ve written many posts about this–I’d recommend working with a mortgage originator who blogs next time–they’re more transparent and have a reputation to lose.

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  1. [...] many may have second mortgages that are not going to be paid off as part of the refinance.    A recent comment on my post about unhonored rate locksprompted this post…it’s probably not his mortgage professionals fault his refi is taking [...]

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