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My lender included $2800 as "lender credits" in LE document and interest rate was locked at 3.625%. I had chosen high interest rate with escrow due to higher lender credits. They mentioned that my rate lock and lender credit was based on credit score of 700-720 . Now, after 3 weeks and less than 24 hours before closing, the lender is saying that all attempts to improve my credit score using quick fix from 697 to 700 have not worked and they can only offer $1300 as lender credits and that I need to confirm (aka blackmailed) whether to proceed with closing or not ? My question is
1) can a lender lock rate assuming that borrower will have certain credit score and
2) can they let borrower know 24 hours before closing that credit score is not as they expected (697 but not 700) and cut down lender credit from $2800 to $1300 while keeping interest rate same
Being a first time buyer and scared, I just proceeded with closing and accepted $1300 lender credits. I now realized that lender mentioned only $25 as lender credits in final CD and has offered to pay $1300 outside of closing directly as cheque.
3) Is this even considered legal?
A lock is tied to a certain score. If you were locked at 3.625% with a 720+ score and the final score is less, then that is a Change of Circumstances and a change can be made.
As far as can they lock under one set of assumed facts, well yes, we do that all the time. In a refinance we assume a value is X, but when the appraisal comes in it is Y and the rate changes. It would be sketchy (but still legal as long as they provide proper notice) if you weren't aware of the need for a certain score, but it sounds like you were well informed and they attempted to give you the best rate they could.
As far as paying anything outside of closing not on the CD, I can only say in most cases it should not happen. However, there are provisions for rebates and it depends upon how these funds are handled and Texas State law. Redfin and Cartus routinely offer legal rebates post closing and well within the law.
My lender included $2800 as "lender credits" in LE document and interest rate was locked at 3.625%. I had chosen high interest rate with escrow due to higher lender credits. They mentioned that my rate lock and lender credit was based on credit score of 700-720 . Now, after 3 weeks and less than 24 hours before closing, the lender is saying that all attempts to improve my credit score using quick fix from 697 to 700 have not worked and they can only offer $1300 as lender credits and that I need to confirm (aka blackmailed) whether to proceed with closing or not ? My question is
1) can a lender lock rate assuming that borrower will have certain credit score and
2) can they let borrower know 24 hours before closing that credit score is not as they expected (697 but not 700) and cut down lender credit from $2800 to $1300 while keeping interest rate same
Being a first time buyer and scared, I just proceeded with closing and accepted $1300 lender credits. I now realized that lender mentioned only $25 as lender credits in final CD and has offered to pay $1300 outside of closing directly as cheque.
3) Is this even considered legal?
Location: Dallas, TX
So they locked you when you were a 697 based on some wishful thinking that they might be able to get the score up to 700 by closing time??
Yes, thats right @TimtheGuy. Rate and lender credit were locked for 700 score when my actual score was 697 at that time with expectation that credit quick fix will bring score to 700 at closing.
What I don't understand is that why was I notified less then 24 hours before closing that score is still 697 and it wouldn't effect my rate but only lender credit and asked me to decide whether to proceed with closing or not. This lender credit is not documented anywhere on final CD and I'm being paid outside of closing as cheque. I did not even get a loan estimate document during entire process as there was no "loan officer" and the whole process was handled by small mortgage lending company itself.
I think you're confused. To say you never received anything throughout the process cannot be. By law, they must provide you with disclosures to sign within so many days. The initial disclosures have to be within a certain percentage of the final numbers.
Also, your final disclosure must be sent to you 3 days prior to closing which means you're not 24 hours away from closing.
I think you're confused on many levels, and you should be getting someone on the phone to help explain things to you. A lender cutting a check outside of closing never happens in Texas. Realtors can rebate money back like that, but I've never heard of a lender giving outside of closing.
You purchased your rate of 3.625%. With the initial way they tried to work it, you would get a credit for that rate of $2800. Since your score didn't go up, it seems the 3.625% is now the par rate not costing you or crediting you anything. Every rate has a price. Not sure why the lender is giving you $1300 outside closing or how he plans to do that, legally.
It all depends on how the file was presented and what the OP was aware of at the time of lock. Whose story do the emails support? We (where I work) won't do it, but I've had borrowers practically be on the edge of begging to lock with a lower rate on the condition their score improves before closing. We can't facilitate that request due to our compliance stops.
But Rebates are definitely legal in most states, I've been exposed to many, including in Texas. Here is the DOJ website on rebates and the affect of rebates on ATR,
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