3 keys to a perfect rate-lock

Walk away if lender doesn't put these in writing

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Dec. 6, 2010

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Walk away if lender doesn't put these in writing

Jack Guttentag
Inman News

"In your recent article on locking problems, you advise borrowers to protect themselves by getting the lender 'to clarify its ground rules for locking, preferably in writing.' We always play it straight with borrowers but we don't write too well -- how about giving us your version of what an honest lender's lock statement would look like?"

Fair enough, here it is. The statement is for "Fair-Locking Lender," or FLL. Side comments directed to borrowers are in brackets.

FLL's Lock Policy

When FLL locks your loan, it commits to the interest rate, points and other fees that are shown in our Lock Confirmation Statement, regardless of whether or not market interest rates increase between the date the lock is issued and the date your loan is funded. Similarly, you are committed to honor the lock if market interest rates decline during that period.

FLL will inform you when all the requirements and conditions for a lock, which are shown below, have been met. We will also keep you up to date on current prices, which could be different from the prices quoted to you earlier. At that point you can request that we lock, or you can allow the price to float and lock later. FLL will not lock until authorized by you.

[Borrowers should not request a lock while they are still shopping; that is an unfair practice.]

Lock Period

Our lock commitment holds only for a specified period during which the loan must be funded. If it is not funded within that period, the lock expires. Whether the lock can be extended depends on the reasons for the failure to fund -- see Rate Lock Extensions below.

Our obligation in assuring that the loan is funded in time is to provide you at the outset with our best judgment of how much time we need to process, underwrite and fund your loan, assuming you do your part. Your obligation is to provide all the documents we request from you in a timely fashion.

[Borrowers should keep a written record of document requests, when received and when provided -- it could save you some grief later on.]

Requirements to Lock and Conditions for Lock to be Honored

Before we lock the rate, we want reasonable assurance that we have all the information about you and your loan that affects the rate. The column labeled "Required to Lock" in the table below shows information that we may require you to provide us before we lock your loan. The requirements can vary from case to case, and we will check those that apply to your case. The "Condition of Lock" column shows any conditions that must be met for us to honor your lock.

For example, if we require an appraisal before we lock, we will check item (f) under "Required to Lock." Alternatively, we may lock without having an appraisal but require that the appraisal, when it is received, equal or exceed a specified minimum value shown under "Condition For Lock." A lower value voids the lock.

Action 

Required to Lock

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