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I locked my rate back in the middle of Dec. It was a 60 day lock at 4.625% with no points or origination fee. I checked the GFE and the rate lock confirmation I was emailed when I got them to be certain.
Yesterday, I got my HUD-1 settlement form and it has a 1% origination fee on it. Is this just an oversight? An intentional attempt to try to slip one by me? Is it something I need to worry about or can it be resolved before my closing?
I emailed my mortgage broker as soon as I saw the problem last night to let him know but I haven't heard back yet. Time's getting close. If I don't get this resolved before our appointment, clearly we're not going to close today. Who's at fault here? Thanks.
This happened to me years ago and is one of the reasons that propelled me into the real estate business (making sure myself and others don't fall victim to shady mortgage practices).
Is this for a home purchase or refinance? If it is a purchase, then my advice to you is to proceed to the title company (so you're not accused of breaching your contract), but if you get there and the loan documents have not been fixed, then REFUSE to sign anything. The escrow officer knows how to get in touch with the lender's underwriter, processor and loan officer, so hopefully this will get their attention. My guess is that the lender either corrected the mistake directly with the title company, or if he's shady, then he's banking on you signing the documents as is.
Make sure you bring your rate lock sheets and show them to the escrow officer and ensure that your documents are all in line before you sign.
A GFE is just a Good Faith Estimate not the final numbers and they is something I always explain to my clients. The lender/underwriter has the final say not the client/Real Estate agent/Loan officer or title company. Maybe you got the 30 day lock and not the 60 day lock. If you walk away you might not qualify to get another loan. So your Loan officer is working for free? If I ever had a client who wanted me to work for free I would walk away. How about you go to work and tell your boss you will work for free? 1% origination is good and very very very very cheap. Sometimes your rate lock does not have the rate hit until final clear to close. You might lock at 4% but pricing department will check your credit score and give you a .15% or more hit because of the range of your credit score. Then they will give you a hit again depending on the State/Program/LTV so now your rate is no longer 4% it is now 4.75% or higher.
A 1% origination fee is standard in some states and is not always considered 'points'. I consider points to be discount points - which are paid to lower your rate. An origination fee is typically how a lender gets paid.
I would look at the GFE very closely and if it was not on the original good faith estimate that you signed nor on any subsequent Good Faith Estimates that you signed then you have every reason to ask the lender to honor the original that you signed...they are not forced to by any means, but they should acknowledge the mistake and work to correct it.
That is an excellent rate indeed. That rate is very close to the PAR rate. How is the mortgage company making money if they are not charging at least 1 origination point or raise the rate? are the fees high compared to others? What is the APR? if it's significantly higher then may be they didn't make a mistake on the original GFE and have it hidden in the fees.
Yes you can threaten to walk but it could also be breach of contract because a GFE is just that, an estimate. I think (someone correct me if I am wrong) but doesn't the HUD1 have to be 10% higher than the GFE for the buyer to walk without breach?
Yes, talk to your Realtor and your loan officer. It could just turn out to be a costly mistake for them.
Yes you can threaten to walk but it could also be breach of contract because a GFE is just that, an estimate.
Sorry, please allow me to clarify (I was a little rushed to get out the door to a meeting when I originally posted, but felt compelled to reply to this post). I was not suggesting that he walks completely from the closing; just until the loan officer responds to his calls and either corrects the mistake or explain his case to OP's satisfaction. OP stated that he has a rate lock confirmation, not just a GFE, so I'm assuming he received a rate lock letter with the interest rate lock and terms. He also stated that he had a 60-day lock from December, so that should hopefully allow him some flexibility with the closing dates. It could be that he is just refinancing his loan, and if that is the case, then he should have plenty of time to clarify the loan's terms and conditions.
The loan origination is not the only way that a loan officer makes money. They also make money on the yield spread (YSP, or back end of the loan). Going back to Dec. 17th, I see that the 30-yr. rate was at 4.375% with 1% origination, so 4.625% with no origination sounds about right.
However, interest rates have gone up since then, so be careful about picking your battles. If you have the proof, try your best to get the lender to honor his rate lock, but do not let your loan commitment run out unless you are refinancing and interest rates start dropping in the near future, as it will cost you more to start your loan process again. If you are buying, then make sure you discuss this with your Realtor so s/he can discuss the situation with the sellers. This will be all the more reason for the escrow officer to get in contact with the lender or his manager to resolve the situation so you can proceed with closing.
I have seen plenty of last-minute issues and problems come up right before closing and for the most part they get resolved that same day or the next at the latest.
That GFE, no matter how much of an estimate it is, should have disclosed the origination...If pricing changed throughout the course of the loan, you should have been re-disclosed. The Loan Officer is not responding? I smell a rat.
I always explain to my clients. The lender/underwriter has the final say not the client/Real Estate agent/Loan officer or title company .
I completely disagree and have been in the same situation twice in 26 years... both times with Mortgage Brokers and never with a Bank or Savings and Loan.
In both cases... I had the final say... not the lender/underwriter or anyone else... I read the closing documents and found that it was not what I had agreed and I had copies of my correspondence to prove it. I gave the Mortgage Broker 24 hours to get it right... or else the loan with him was off.
The first time, there was a lot of hemming and hawing going on that "My Action" would likely result in loosing the property... you know what... Somehow it all magically got straightened out and I closed on the agreed terms.
The second time, in 2005... I was in escrow and two mortgage lenders did not deliver... one tried to switch me to a variable and the other said the home had too much land 3 days before closing and the loan would be more expensive??? The seller called me and said she is sorry the sale didn't go through and that the title company called to tell her I couldn't get the loan because I was being difficult about a 3/4 point increase.
After I called the title company and chewed them out and told them how dare they call the seller's agent and tell them I can't close!!!
I bought the home for cash and closed in contract... and felt darn good doing it... it's easy to get taken advantage of when you do nothing to stop it.
A year later in 2006, I refinanced at a good fixed rate and never looked back.
Don't let anyone tell you buyers don't have a say...
Last edited by Ultrarunner; 01-27-2009 at 05:44 PM..
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Is this just an oversight? An intentional attempt to try to slip one by me? Is it something I need to worry about or can it be resolved before my closing?
