Here's my situation. I'm working with a mortgage broker to refinance my existing mortgage. I locked in a rate on Feb 14, 2012. The lock was for 30 days. The broker has now told me that they cannot complete the loan in the 30 day lock period, so I'll have to pay $1,300 to extend the rate lock.

The reasons they have given me for not being able to complete the loan on time are

1) I entered in an incorrect SSN for my wife on the initial intake form (this was corrected on Feb 17)

2) They have been overloaded with purchases and refis

I understand my responsibility for the incorrect SSN, but I'm having a hard time understanding how it should cost me $1300.

What are my options? Can I simply use another broker? Are there rules that are in place since I have locked with this broker?

Is this common practice? If I do move forward with them, I will try and negotiate either a lower payment to extend the lock or a lower interest rate (since it seems like rates have dropped in the past month (mid Feb 2012 to mid Mar 2012).

Thanks for any advice!

  • 3
    How much did you pay for the initial lock-in? $1300 would seem more like a brand-new mortgage application with a brand-new application fee plus a full fee for locking in the rate for another 30 days. My recommendation would be to decline to pay the $1300. This is a re-finance and so there is no issue that an offer to purchase will expire. If interest rates on March 31 (say) are lower, the broker will be happy to give the previously promised rate even though the lock-in expired. If interest rates are significantly higher, you may want to re-evaluate the re-financing decision. Mar 12 '12 at 0:20
  • 2
    Why would you extend the lock on the current rate when you could let the current rate expire and get a new lower rate?
    – user12515
    Dec 14 '14 at 4:31

Without knowing the exact details of the mortgage brokers balance sheets, it's quite possible that your incorrect SSN cost them. The opportunity cost of the mortgage broker working with you means that the broker may not be able to work with other potential customers. It's quite possible that the $1,300 represents all or a portion of the loss that they've incurred because of your error.

Additionally, the fee may cover the costs charged by the lender. For instance, many lenders charge lock-in fees in exchange for a promise that they will offer the current rate until your loan is processed. It makes sense that longer lock-in periods may cost the lender more than shorter lock-in periods since there is more financial uncertainty as the period is lengthened.

So essentially, by incorrectly providing an SSN, your asking the lender to basically give you a longer lock-in period for no consideration. While there may be lenders that are willing to do this, it's possible that this lender isn't willing to take on that risk.

It sounds like your options are either to pay the lock-in fee extension, let the lock-in expire and take your chances with the lower market rates since you say they're lower, or go with another broker.

Since you have a relationship already with your current broker, it may be best to weight the options of either paying the fee or taking on the risk that the rates will be lower. Additionally, find someone who can help you with the paperwork going forward, and make sure all of the information you provide is correct and accurate.

With these points in mind, oftentimes when dealing with financial institutions it comes down to talking to the right people. The first person you talk to may claim you must pay a fee, but if you explain the situation to a supervisor or a manager you may find someone more sympathetic to your plight who may be willing to work with you. Also, your willingness to walk away may prove to be a higher cost to them than the $1,300 fee.

  • 1
    rate lock is pure revenue to the broker in this market. Since rates don't change almost at all, and if they do - very insignificantly, most of this money goes directly to them. Getting the credit report 3 days late because of the SSN mistake should have cost 3 days rate lock extension if at all, not 30.
    – littleadv
    Mar 11 '12 at 20:52
  • It's not exactly clear what's involved on the broker or lender's side, but I do think the op could continue making phone calls to possibly waive the fee. Sometimes it's just about talking to the right person. I'll update my answer.
    – jmort253
    Mar 11 '12 at 20:56

Rates haven't changed significantly in the last month. According to Zillow Mortgage Market, the rates now are similar to what was 1 month ago (according to the graph, in California rates were 3.70% on Feb. 12 and they're the same now, on Feb. 17 rates were 3.75%).

Bottom line is that $1300 is totally unjustified, there's no reason to expect the rates to have changed in a month significantly, so the lock won't mean losses to the broker.

If they insist - I would suggest going to another broker/bank. I had Wells Fargo and Bank of America be ready to close in 21 days when I pressured them enough a couple of years ago, and had Wells Fargo and my local credit union do refinance in 3 weeks as well. If the broker can't do it that fast - switch brokers anyway.

Consider losing the application fees etc, though, so start with bargaining.

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