Posted on: 21st Jan, 2010 09:33 am
First time poster, long time reader. I'm hoping I can get some advice here. I am going through the first time home buyer process and am currently using an USDA loan. My mortgage broker told me 3 weeks ago I was locked in at 5%. He originally wanted to lock me in at 5.25%, but I had a better offer from another lender and he was willing to match it. I get a call today letting me know that my rate went up from 5 to 5.15% because of the USDA guidelines changing. Can the lender change the rates after I am locked in? I think he is trying to cover his mark-up because he didn't make as much as he wanted to, but I could be mistaken. I am trying to get some advice so I can figure out how I wanted to approach him. I signed a contract in December 12th and I will be closing next Friday. Thanks in advance.
if you were truly locked in at 5%, then there's no way your lender can change that, unless that lock expired. 5.15% isn't even a normal interest rate (could it have been 5.125%?). that one-eighth of a percent isn't going to make a whole lot of difference, frankly, but you need to fuss about this and get your 5% honored. do you have any documentation concerning the lock-in? that would be most helpful, that's for sure. even an email from the loan officer confirming the locked rate should suffice.
it was 5.125%. what happened was the mortgage broker told me that i was 100% locked in at 5% after all the paperwork went through (1 week ago). i then get a call today saying the usda changed their guidelines and that you needed a 660 score to qualify for the best rate. the lender changed their stipulations from what he told me and because my middle score is 658 i have to pay a .125% interest increase. are the lenders able to increase my rate after supposedly locking me in even if the loan program changes??? i'm just wondering if the broker didn't truly get the loan locked in at that rate and now i'm paying for it. at this point i don't care about the extra money i will be paying - it's the principal of the whole thing
well you ought to care about the money, but even saying that it's not sufficiently high to fuss too much. you're right about it being the principle of the thing - maybe they can give back something to you that will ameliorate the change in rate.
i'd also ask them to provide you with some sort of documentation as to the date on which the "change" in usda guidelines came about. if it's happened since the lockin, then that's more reason to be skeptical. if it's been in place, and the lender overlooked it in error, well i suppose that's excusable. we all are human after all, and we all make mistakes.
no matter what they give you in the form of documentation or as excuse for their action, you should ask for something. calculate how much you're losing in this change, and ask for comparable compensation. maybe they can cover the appraisal fee, or your attorney fees, or some other array of fees that you'd ordinarily have to pay. eliminating a point isn't reasonable, in all likelihood, because the loan officer does deserve to get paid, not matter what. nonetheless, seek some sort of compensation for your being so agreeable to be put through this.
i'd also ask them to provide you with some sort of documentation as to the date on which the "change" in usda guidelines came about. if it's happened since the lockin, then that's more reason to be skeptical. if it's been in place, and the lender overlooked it in error, well i suppose that's excusable. we all are human after all, and we all make mistakes.
no matter what they give you in the form of documentation or as excuse for their action, you should ask for something. calculate how much you're losing in this change, and ask for comparable compensation. maybe they can cover the appraisal fee, or your attorney fees, or some other array of fees that you'd ordinarily have to pay. eliminating a point isn't reasonable, in all likelihood, because the loan officer does deserve to get paid, not matter what. nonetheless, seek some sort of compensation for your being so agreeable to be put through this.
thank you for your help. i greatly appreciate it. i will contact my mortgage broker and let him know i want documentation from the lender of the new stipulations and when these changes occurred with the usda.
you're quite welcome - hope you get some sort of compensation for the annoyance and stress.
>>because of the USDA guidelines changing
As George suggested, request a copy of the guideline change from your Loan Officer. Make sure it's an official document directly from USDA, not from the company your Loan Officer works for. If it's from his company, that means it's not a USDA guideline change, instead, it's a new Overlay that's been bestoyed upon them by their Investor, and that means the increased FICO score requirement is specific to his company and his company only.
The most recent PN (Proceedure Notice) I can see is from December 17. Here's the link:
http://www.rurdev.usda.gov/regs/pn_list.html
Here's another good link and I didn't see anything there either regarding the guideline change:
http://www.rurdev.usda.gov/regs/hblist.html#hb35601
It'll be interesting to see what the Loan Officer comes up with. Remember, you can also call the USDA directly and ask them. If you find out your Loan Officer lied to you, you should report him to HUD and the USDA. We don't need anymore people like that in our industry.
Also, guideline changes like that usually don't impact loans in the pipeline that are locked. If they do, the document the USDA released will inform everybody how they're going to handle loans in the pipeline. Be sure to review that portion of the document (if it exists).
Interest rates have come down the past week and it doesn't make sense to me to increase your interest rate while interest rates are falling.
As George suggested, request a copy of the guideline change from your Loan Officer. Make sure it's an official document directly from USDA, not from the company your Loan Officer works for. If it's from his company, that means it's not a USDA guideline change, instead, it's a new Overlay that's been bestoyed upon them by their Investor, and that means the increased FICO score requirement is specific to his company and his company only.
The most recent PN (Proceedure Notice) I can see is from December 17. Here's the link:
http://www.rurdev.usda.gov/regs/pn_list.html
Here's another good link and I didn't see anything there either regarding the guideline change:
http://www.rurdev.usda.gov/regs/hblist.html#hb35601
It'll be interesting to see what the Loan Officer comes up with. Remember, you can also call the USDA directly and ask them. If you find out your Loan Officer lied to you, you should report him to HUD and the USDA. We don't need anymore people like that in our industry.
Also, guideline changes like that usually don't impact loans in the pipeline that are locked. If they do, the document the USDA released will inform everybody how they're going to handle loans in the pipeline. Be sure to review that portion of the document (if it exists).
Interest rates have come down the past week and it doesn't make sense to me to increase your interest rate while interest rates are falling.
one thing that i find that takes the blame off the loan officer is this: our corporate headquarters don't tell us what is guideline and what is investor-driven in all cases. one of the places i worked at forbade us to take on certain borrowers due to credit score guidelines, and we were all led to believe it was a guideline. well, it was a guideline, but it was the investor's and not the agency.
so this particular loan officer may just be quoting chapter and verse as directed by his bosses. it's a trap we often fall into, i believe; though far less likely as we learn the ropes of our individual companies.
so this particular loan officer may just be quoting chapter and verse as directed by his bosses. it's a trap we often fall into, i believe; though far less likely as we learn the ropes of our individual companies.
>>so this particular loan officer may just be quoting chapter and verse as directed by his bosses.
I feel it's best to go directly to the Agency to confirm guideline changes. Everytime a new guideline is released, it's published by the Agency. The most popular guideline changes are release by HUD in the form of Mortgagee Letters, and the other Agency's have their own variation of a Mortgagee Letter.
I feel it's best to go directly to the Agency to confirm guideline changes. Everytime a new guideline is released, it's published by the Agency. The most popular guideline changes are release by HUD in the form of Mortgagee Letters, and the other Agency's have their own variation of a Mortgagee Letter.