On January 22, I locked an interest rate of 5.00% with a mortgage broker which would expire on March 3 for a 30 year FHA with 10% down on a $360k house.  My wife and my credit scores are 720 & 790.  On January 22, I also signed and delivered to the broker all necessary paperwork, loan application, disclosures and GFE.  By February 2, I had sent all payroll verification information, bank statements, tax returns, W2's and a copy of the deposited earnest money check (which was requested by the broker on January 29).  I have been working with this mortgage broker for about one year as I was searching for a home, so she was well aware of my needs and situation.  Well, the loan did not close by March 3 and now the mortgage broker states that she will be able to close the loan by March 12.  She did not obtain a loan approval from the lender until March 3 and the approval came with the condition that I provide additional information to the underwriter.  The underwriter wanted updated verification of wages, new bank statements, a new copy of the deposited earnest money check and a copy of my daughters birth certificate (I am not kidding about this).  By March 4, I had delivered all of this new/updated information to the broker.  Now she is telling me that everything is in order, but I will have to pay an additional .5 point ($1620) because my rate lock expired.  Can she do this?  It seems to me that I have done everything they have asked for in a timely manner and the reason the loan did not close on time is not my fault.  I feel they should not charge me any additional fees because they could not close a loan in 40 days.  Also, .5 points for a rate extension of 9 days seems very high no matter who is at fault.  She is asking me to sign a revised GFE showing the additional .5 point and return to her tomorrow 3/6.  If I do not return to her by tomorrow, she states that I will have to pay an additional .5 point (now totaling 1 point above original GFE) in order to close the loan.  This transaction is happening in the State of Arizona, if that makes any difference on the type of advice I receive.

From what you have described, that seems inappropriate. The troubling issue is that you need to close pronto...and this lady knows it.

I would make every effort to get here to eat the cost. There are no guarentees that she will comply with the knowledge that she "has you over a barrel" but I would not go down without a fight.

Good Luck,

Jason

It seems inappropriate and unethical to me.  I plan on sending an email to her and her manager today to state my case.  On Monday I will start trying to call some of the corporate officers.  She definitely knows that she "has me over a barrel" and I feel like they delayed the closing just so they could collect more fees.  If I don't go along with them, I will loose $4000 earnest money.  Also, the seller has already moved out of the house and signed a short term lease.  His plan is to buy a new house once he receives the equity money from this transaction.  One question I have is, if I sign the revised GFE, does that mean I agree with the situation and I have less of a chance to get them to drop the extra .5 point?  I am afraid that if I do not sign and return the revised GFE today, they will stick me with a full point on Monday.

"I am afraid that if I do not sign and return the revised GFE today, they will stick me with a full point on Monday."

As of now the maximum you stand to loose is 1/2 point.  Imagine the situation if for some strange reason the interest rates were to rise on Monday, then you may loose the rate and pay more.

If I were you, I would lock the rate and continue the fight!!

Jacob Varghese

Alright, I signed and delivered the revised GFE showing the additional .5 point.  This house is now supposed to close on 3/12.  Should I begin the fight with the mortgage broker now, or wait until I receive the HUD 1 form.  I am just concerned that if I start the fight right now, she may delay delivering the HUD 1 form.  Also, can anyone tell me if the interest rates for FHA loans in Arizona have changed enough since January 22 to justify paying an additional .5 point today for a 5% lock?  One last thing, I was reading the Arizona FHA Borrower Disclosures today and under the heading "Interest Rate and Discount Points", it states that after your loan is approved at a given interest rate and discount points, any increase in the discount points which I am required to pay requires re-underwriting of the loan.  My mortgage broker stated on 3/3 that the loan was approved and asked me to sign the revised GFE on 3/5.  Seems to me that she is not following the FHA rules.  If she needs to resubmit my application to underwriting, there should be no way that we can close on 3/12.  Am I correct, or do I have the wrong interpretation?  Thinking it may be an angle that I can use against her.

Jonas,

Your mortgage broker may not be able to extend your rate locak and may be subject to "worst case pricing" since the original lock expired.  In either case,there could be fees typically from .25 to .5 points.  Why there would be an additional fee of .5 points if you don't agree to the new terms is most likely a way to get the new GFE in before you shop for another lender.

While I did not go back to rate sheets on 1/22, with most of my lenders, a 5% rate on FHA has not seen a great deal of change in the recent past. 

The only underwriting that may be required due to the change in fees would be to verify that you have seasoned funds to cover the additional amount that you may have to bring to closing.  That argument would carry very little weight.

 I think that the best that you could do is ask the reason for the additional fee and see how comfortable you are with their answer.  If you don't feel comfortable with the explanation, you could tell them as much and mention that you would not be giving any referrals nor ever provide them with any repeat business.  At this point it would most likely cost you more money to change broker/lenders, so while the fee may be on the high side, it is probably better to pay and close on your home if they won't reduce it. 

Fellow mortgage brokers out there.  Correct me if I am wrong.  In order to raise any type of 0 tolerance fees, doesnt there need to be some sort of acceptable "change of circumstance" in place.  I may be missing something here.

You are correct - there is not a change in circumstances - RESPA violation - this was put into place specifically so mortgage originators cannot change the fees charged - just because the LO and the bank did not do thier work -

In this scenario, the rate lock had expired, which is included in the changed circumstance definition. 

I thought it might be.  Wasnt quite sure trying to keep up with everything.  Thanks Ralph

Welcome!

Your rate never should have expired - there should have been a relock or float down option given to you - which is much less expenseive than letting the lock expire and then relock - and I stand corrected - this is not a RESPA violation - however, I would be hard pressed to request a borower who has complied on every issue to pay for a rate lock expiration they did not cause -

• Changed Circumstance Reminder: HUD has confirmed that extending or re-locking a rate before the lock expiration date is an acceptable Changed Circumstance, and a revised GFE can be issued before the rate has expired.

Jennifer Buchanan:

a relock or float down option given to you - which is much less expenseive than letting the lock expire and then relock

Jennifer,

Not all lenders will allow for a float down or rate lock extension.  Many have gone to worst case pricing and require a relock.

Jennifer Buchanan:

I would be hard pressed to request a borower who has complied on every issue to pay for a rate lock expiration they did not cause -

I would agree with not passing on fees due to a broker/lender caused lock expiration.

I think you should ask that they provide you with a detailed timeline of events that caused the delay and subsequently the rate lock extension.  There are often times where things go on behind the scenes that are out of the lenders control which can cause for delays in processing your loan.  One such example would be if there was an issue with title or the appraisal.  I am not saying that you should have to pay the extension but nothing is ever black and white in the lending business.  If they can't provide you with a timeline of events and a good explanation on what caused the delay I think you have a very strong case against having to pay the extension fee.  Finally, rates are at least as good as they were on January 22nd so the issue of rates being higher now is false.  Hopefully this helps and Good Luck!

Thanks everyone for your response.  The broker told me today the HUD 1 should go out tomorrow for review by the title company.  Then loan docs should go to the title company on Thursday.  Tomorrow, I plan on confronting her about the additional .5 point she wants me to pay.  I am going to address several points that were made on this forum as well as a few I came up with doing my own research.  Hopefully, bringing this information to the broker before the loan docs have been sent to the title company will not jeopardize the loan.  If anyone has more information or ideas, please post and I will let everyone know how this turns out.  One again, thanks for your help.

Ok, but w/ 10% down and 720 score, what in Sam Hill were they doing with an FHA loan anyway? 4.875% was paying .50% conventional (minimum) that day, FHA 1.00+. So much for "borrower's best interests, huh?

This thing would have closed in 2 1/2 wks in our lender shop and most of your's too. No excuse, file complaint?