I just want to know if the requirements from my mortgage loan officers are legitimate.  I started the mortgage process in september and the closing date was scheduled for 10/26 it has now been extended twice. 

I am a employee of the bank from where I am trying to get this loan and receive a 1 point discount on closing cost.  I am thinking that since I am a employee of this bank they should be taking care of me ... but it seems I am just another customer.

First of all he quoted me 3 rates with varying interest rates and closing points.  I choose the lowest interest rate with the highest closing points.  which was 4.625 with 1.625 and this was with my discount.  this was back in 9/17/2009.  He replies telling me that he forgot to add adjustments to the closing points of 1.5 extra points.  .75 points because my down payment is 20% and not 25% (i am buying a condo) and .75 points because of the joint credit score of me and my fiance are not in the highest tier (basically he took the lower score of both of us which was my fiance's score).  So it ends up being 4.625 with a 3.125 points.  I hesitate but think that this is the bank i work for they should be looking after me and if it is required I can do nothing about it and ask to lock in with this rate.  I still ask to meet him and discuss this sudden jump in rates.

He explains to me at this meeting that it was because I am buying a condo which requires a 25% down instead of 20% and because my fiances credit score is not in the highest tier so that is another increase.  I ask that my fiance be removed from the loan since she is hindering the closing cost, he was able to do this and the rate went back down .75 points.  As for the down payment requirement, I explained to him that the offer was accepted and that he never told me anything about the down payment being 25% and he always told me 20% is good enough.  He also showed me his rate matrix sheet to show me how it is calculated.  It seem it was a requirement so I had no other thing to argue with him about so I left it at that. 

When the papers came back removing my fiances name I asked since it is basically a new loan could they give me the rate during that period, he said he couldn't and that the rates must remain the same.  I told him I did some shopping on rates outside of the bank and I could basically get a better rate if I went with someone else (this was around 10/5 so the rates then were a lot lower) he then let me lower the rate to 4.375 but with a higher closing of 3.625.  He already ordered an appraisal so if i cancel I would still have to pay that and a application fee so I went with the lower rate but higher closing cost. 

Fast forward to this week the closing date has been extended twice and won't be able to close till next week (week of 11/9).  The seller is not very happy that we had all these extensions.  He suddenly tells me that the bank requires contents insurance and that I must purchase it to proceed with the loan.  I am already approved for the loan and just waiting to sign the loan documents and escrow.  He got the condo documents earlier in october if it was required for that type of insurance I am sure he could have let me know earlier.  I am not sure how much this is gonna be but I am upset that he made two mistakes that would throw off my finances without giving me earlier notice. It feels I am stuck now.

The rate that I have is not really lower then what I can get outside even when I am a employee of the bank with a discount.  Any suggestions or comments are greatly appreciated.  Thanks in advance.

Not too much in the line of suggestions as your closing is so soon, but everything he is telling you is on par - he should've been able to tell you / inform you of all that up front though.  The 20% vs 25% - depends on how much of a conversation you went into when you initially got pre-approved.  Some people want to get pre-approved quickly due to time constraints, and it's possible that due to the rush, he never had a good opportunity to discuss.

.75 add-on for attached housing >75% LTV

definitely add-ons for lower FICO's...

and Fannie Mae started requiring a HO-6 ('Walls-In') policy earlier in the year on all attached housing unless the Master Policy covered the interior / Walls-in.

Once you lock in, you lock in.  Depending on the lender, there may be either a Float-Down option or a rate renegotiation option - I suppose that would be your option.

A rate of 4.375% is definitely going to have multiple points associated with it, especially with a FICO < 720.

I have done many loans for bank employees where I was able to offer better terms than the bank they worked for offered them.  On those that the terms weren't as good or were equal too they choose to do the loan outside of the bank because of privacy issues.  In other words, they didn't want their employer or other employees of the bank to know their private financial information. 

I second Bryan's comments.  I too have made loans to bank employees that were better in rate/cost than the employee was able to get at their own bank with the "supposed employee discounts".  I also expeirenced this first hand when years ago I was an employee of then Norwest Bank (later merged with Wells Fargo) and we too had "employee discounts" available if we used them for our personal home mortgage needs, while buying a home I checked into this and was able to go elsewhere without the "discounts" and I got a better rate/cost loan, and did not have to divulge my personal information to my employer.

As akaagassi had said, most of what you've been hearing about the different hits to your rate is probably accurate.  But being that you work for the bank, I can see how you would be upset that they've sort of dropped the ball and didn't do a thorough job ahead of time when quoting the interest rate hits. 

My guess is that the person who was handling this for you figured you wouldn't be shopping anywhere else and wasn't worried about having everything nailed down.  Loan program changes and other things do come up at the last minute to throw a monkey wrench into the original plan, but these sound like issues that should have been caught from the start.  Sounds like you're in the final stretch now so if you're good with the rate I'd go ahead and close and remember Bush's famous quote, "Fool me twice...  never gonna fool me again."

He is spot on with all of what he has told you. My guess is that he is either a newby or lazy in that this was not made clear to you from the outset. With all that being said...you are getting a very fair deal. Bad service...but a very fair deal.

Just go ahead and close it....

Take Care,

Jason