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I have a friend of mine that was dealing with a mortgage broker (of a big name financial service company) of refinancing his current loan on his home. His current rate was about 4.99% back in October 2010. He spoke to the mortgage broker and the broker said that rates are very low and promised to get a low interest rate. He came back with 3.99% with a quarter point (broker even said that he would eat the quarter point). My friend jumped on it and told him to lock it in at 3.99%. He signed a lock in agreement at 3.99% and the application also stated 3.99%. Well, a few days later, the broker comes back and says he got a call from the bank saying that they never received the rate lock and therefore could not lock in the rate at 3.99 and the rate started climbing. He demanded that they honor it at 3.99 but they came back and said that they don't have to honor unless a GFE was issued which one hadn't been issued yet. To make a long story short, they refused and my friend decided to walk away. In the end, he was unable to get 3.99 and due to the fact that he thought it was locked in, he lost his opportunity to seek out another bank or lender while he supposedly "locked" in.
My friend has considered filing a lawsuit for either negligence or fraud due to the lost opportunity and what the lower rate would have cost him over the course of his loan. Any thoughts? It seems odd that a broker can promise 3.99, prepare the application and lock in agreement, have the borrower/applicant sign it and then come back and not honor it without some kind of penalty.
While that is certainly immoral, I'm not sure if it'd be illegal. They can consult an attorney, it may cost them something for their research, or first they may want to call up the bureaucracy that enables the loan officer to legally originate loans in that state - be it the state's banking/financial/real estate division, etc. - and inquire if that is something they are concerned with. At least that is how I'd start looking into it.
However what damages did your friend actually suffer? Was there another lender that he was looking into that the mortgage broker in question was able to offer more attractive financing than? I think the basis for a lawsuit like that would be to be able to clearly ascertain what was lost, measuring the actual damages. Did your friend make reasonable efforts to obtain other refinancing soon after realizing his rate wasn't locked with the mortgage broker? Just some questions that people in a position of power may have.
He will reach out the Department of Banking and Insurance as a start. Apparently this broker was the first and only one he sought and after the broker failed to lock in he did not seek out anything further because the broker said that the rates were climbing. The way he was looking at it, if he had been able to close on the loan at 3.99% he would have saved about $75,000.00 in interest over the life of the loan compared to what he is currently paying. For him, even if he had been able to lock in a rate at 4.5% with one point, he didn't feel the cost savings were enough and therefore didn't close on another loan.
He will reach out the Department of Banking and Insurance as a start. Apparently this broker was the first and only one he sought and after the broker failed to lock in he did not seek out anything further because the broker said that the rates were climbing. The way he was looking at it, if he had been able to close on the loan at 3.99% he would have saved about $75,000.00 in interest over the life of the loan compared to what he is currently paying. For him, even if he had been able to lock in a rate at 4.5% with one point, he didn't feel the cost savings were enough and therefore didn't close on another loan.
At the very least I don't see how he could win the entire amount. Just because he chose not to go with a rate of 4.5% I don't see how anyone else would be responsible for that.
While that is certainly immoral, I'm not sure if it'd be illegal. They can consult an attorney, it may cost them something for their research, or first they may want to call up the bureaucracy that enables the loan officer to legally originate loans in that state - be it the state's banking/financial/real estate division, etc. - and inquire if that is something they are concerned with. At least that is how I'd start looking into it.
However what damages did your friend actually suffer? Was there another lender that he was looking into that the mortgage broker in question was able to offer more attractive financing than? I think the basis for a lawsuit like that would be to be able to clearly ascertain what was lost, measuring the actual damages. Did your friend make reasonable efforts to obtain other refinancing soon after realizing his rate wasn't locked with the mortgage broker? Just some questions that people in a position of power may have.
The damages would be the difference in payment due to the interest rate. The poster above is right, I doubt you would be able to recoup the entire amount only the amount that you would have lived in the home for. It's not illegal but if the broker signed an agreement for a 3.99% interest rate he is obligated to go through with his end.
To the OP. I don't know how much this will cost you and if you want to sue over this. But I think your friend is right.
Can always subpoena the one the broker or lender has.
And they can always say it doesn't exist. Does the person have anything in writing at all to prove the conversation even existed?
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