My broker increased the origination fees after GFE after locking my rate and property was apprasied. Is this allowed?

Asked by Adam Wood, Laguna Hills, CA Mon Aug 30, 2010

I am trying to refi a condo 2 get some cash out & take advantage of lower rates. Last week we locked the rate & then ordered an appraisal. Lender gave me 2 GFE's One @ 80% LTV & a second @ 75% LTV to compare costs. The cost difference between the 2 at the exact same rate was about $300 so I chose gave instructions to go 80% LTV. Now I am being told by the broker that he missed something at the 80% LTV mark that will cause the 80% LTV loan to go up in cost by almost 2k from the GFE & the broker is trying to convince me now to go 75% LTV instead & blaming the lock desk for the mistake because they supposedly gave him the wrong pricing.

My understanding of HUD rules is that once an apprasal is ordered & a rate is locked a GFE can not be changed & any mistakes should be eaten by the lender or broker & I should not be expected to now have to pay extra for my loan.

What can or should I do now in this scenario, given the fact that I already paid out of pocket for my apprasial?

Help the community by answering this question:

+ web reference
Web reference:

Answers

16
, ,
Sat Sep 17, 2011
Inexperience or haste caused this to occur. I doubt that this was intentional. There are lenders that will accept another lenders appraisal along as it's not a FHA Loan. On FHA this lender would have to release the appraisal. They may drag their heels with that.

Happy funding, Rudi
Web Reference:  http://www.umboc.com
0 votes
, ,
Fri Sep 16, 2011
I am glad I'm not that lender, sounds like a RESPA violation to me. Mmm! I have to ask myself how some of these companies get away with this? My company would eat it and charge it back to me.
Web Reference:  http://www.AFN-Loans.com
0 votes
Connie Bramb…, Agent, Rancho Cucamonga, CA
Fri Sep 16, 2011
Hi Adam,
To answer your last question you just asked, there is no "Mortgage Broker Approval Agency" and by the time you filed a complaint with the proper agency it would be too late anyway. If you have an actual signed lock in your possession then I would suggest you take it to the highest ranking person at the mortgage company and request they honer the lock. If they refuse you can close and seek damages through the court system.
So sorry to hear about your problem.
Connie Bramble
Prudential CA Realty
714-337-8718
0 votes
RefinanceLoa…, Home Buyer, San Ramon, CA
Fri Sep 16, 2011
Hello,

I am in a similar situation. Could you please help me understand how you resolved this situation. In my case appraisal came out little lower so the told me that that they can only do the loan refinance at the agreed upon rate if I pay 2k more in costs. Other option they are giving me is to move to LTV ratio of 75%. In my case GFE does not mention about LTV and verbally we have agreed upon for 75 % +
0 votes
Adam Wood, , Laguna Hills, CA
Mon Aug 30, 2010
Thank you all for your responses and input. At this point I am going to go back to the broker and based on what I now know try to see if he will honor his original GFE and get him to hopefully eat the mistake.

If he does not, who is the Mortgage Broker Approval agency that I need to contact and how do I contact them to get this situation resolved as I need to get this taken care of ASAP before my loan lock expires in the next 10 days?
0 votes
Nike (Nikki)…, , Beverly, Chicago, IL
Mon Aug 30, 2010
Hi,

This is absolutely his fault and you should call him out on it. He has to be aware that he is totally flouting the GFE laws and is jeopardizing his license. The appraisal is not the main issue here nor is it the LTV. He has flouted the laws from day one, simply by giving you two GFEs for the same loan application. He made the error in not calculating the "add-on" fees for the 80% ltv rate correctly. I would simply write a letter to his Management, attaching copies of the two GFEs and his email to you, and asking them to rectify the situation asap . Once you are locked in, their errors become their problem. If they fail to react satisfactorily, take the issue to your Mortgage Broker approval agency.
I hope you pursue this matter until it is correctly resolved.
0 votes
Adam Wood, , Laguna Hills, CA
Mon Aug 30, 2010
It seems the consesus is that the two LTV options should have all been listed on one GFE.

Nonetheless, they were given to me on two seperate GFE docs via e-mail, I don't think this was done to be deceptive but more just to seperate the two scenarios.

The appraisal came out around what I expected and again the important key element is that both of these GFE's that I recieved came in AFTER the appraisal and I specifically told the broker to move forward with the 80% LTV scenario and he is claiming now that he cannot honor that GFE because of an alleged error made by the Lender.
0 votes
Julie Rice T…, , San Mateo, CA
Mon Aug 30, 2010
David,
Gregory is right...you cannot issue two different GFEs and there is no "ooops", once a GFE has been issued, with few exceptions. Did your appraisal come in lower or higher than you expected? If the appraisal came in lower, maybe the extra $2000 is just less "cash out" you are able to take, since 80% of a lower appraised value results in a lower loan amount.

If the appraised value came in equal to, or higher than you expected, then your GFE at 80% Loan-to-velue should stand. This new GFE was a challege for all of us to adapt to, but once we did, we clearly see how it protects the consumers...which is what it was designed to do. If you have the GFE in your possession that shows the 80% scenario at the cost you want, he must honor that, and he must pay the difference. I would let him know that you will take this to his broker and also straight to the DRE if he does not honor it.

Good luck!
Julie
JThall@lmglending.com
0 votes
Gregorio Den…, , San Diego, CA
Mon Aug 30, 2010
The first red flag is that they issued 2 separate GFEs for 80% and 75%, this is a no-no. The GFE provides for different scenarios and only one should be issued. The change of circumstance after the appraisal is a valid reason but if they messed up the GFE at 80% and issued it, then they have to honor it. THere is no wiggle room on this one. Demand they give you the terms of the 80% GFE as disclosed or it's a serious RESPA violation on their part. There is no "ooops" with the 2010 GFE.
Web Reference:  http://WeFixRates.Com
0 votes
Adam Wood, , Laguna Hills, CA
Mon Aug 30, 2010
To provide some clarification a little over 2 weeks the broker alerted me via e-mail that he locked my rate.

6 days later we completed the apprasial and over e-mail I was given two revised GFE's based on the new appraised value one at 75% LTV and one at 80% LTV.

I clearly e-mailed him back the same day and said move forward with the 80% LTV GFE which was only $300 or so more than then the 75% LTV scenario at the time.

One week later, as the loan was going through underwriting I was then told that the broker made a mistake which he blamed on the rate sheet given to him by the lender which would cost me almost 2K more to go with the 80% LTV scenario and I had two options now.

Pay 2k more to go 80% LTV instead of $300 or go 75% LTV at the same interest rate for 2k less than the 80%LTV option.
0 votes
Eric Blossman, , Austin, TX
Mon Aug 30, 2010
Hello David,

Once given a Good Faith Estimate, the lender is locked in on the price. They are attempting to steer you to the 75% product because it is the one that is priced correctly. The regulations have nothing to do with when the appraisal is ordered, but what does matter is the GFE that is issued. Once issued, it cannot be changed unless there is a valid "change of circumstance." Missing an "add-on" for 80% ltv is not a valid change of circumstance and the lender is liable for the difference in price. These are new regulations and have serious penalties to the lender when broken.
0 votes
Connie Bramb…, Agent, Rancho Cucamonga, CA
Mon Aug 30, 2010
Hi David,
Your assumptions seem acurate, but are you sure he locked the rate and terms? Did you get a rate lock sheet to sign and approve or was this just a verbal thing? Seems like your lender should have known something was up when there was pretty much no difference between the 2 loans. Making a mistake does not automatically mean the lender has to pay for your loan unless they put it in writing. Do you think the lender was fraudulent in their practice? Or was it an honest mistake that was brought to your attention quickly? Remember the GFE is JUST an estimate, Until you have something in writing. True they should be acurate. How much time was there between the quote and the correction? If this is hapening way down the road I think you should speak to the lenders broker and see if they can ocmpensate you somehow for this error. Getting the appraisal done really has nothing to do with locking the loan, but I can certainly see your point of not doing an appraisal if you are not getting the loan you thought you were. Check your timelines; and talk to the manager or broker at the lending institution.
Best of luck to you,
Connie Bramble
Prudential CA Realty
714-337-8718
0 votes
Gregorio Den…, , San Diego, CA
Mon Aug 30, 2010
Your loan officer is trying to pass the buck. It is not the lock desk who gave him the wrong pricing.
The issue is that Fannie Mae has a .75 point pricing adjustment at 75.01% - 80% on condos that your loan officer missed. If he actually gave you a GFE and did not include that, he has to eat it plain and simple. He cannot change his GFE because that is not what's called a "change of circumstance". He dropped the ball and that's a shame, but it's not your shame. Force him to perform on the GFE as it was given to you; the lender will also have to follow through with it or it is a serious RESPA violation with serious consequences to them.
0 votes
Glen Mitchell, Agent, Half Moon Bay, CA
Mon Aug 30, 2010
Has the appraisal been completed? Have you checked in with any other lenders to verify their fees? Can the broker provide you with anything from underwriting that they gave you the wrong price? Just thinking out loud here, but if I were the lender and was going to be stuck with making no money(if thats trully the case) then I would rather pay your appraisal and send you on your way to the next guy. Or perhaps I would do it... explain what happened and how I'm a really good guy, love referrals, want you as a future client and am going to eat the mistake on this one. I'd follow up with you and remind you I need some more business please let your friends know what a great job I did for you and how honest I was. On the flip side, I dont agree 100% with the new rules and maybe a mistake really was made. What if someone walked in to your business, you rung him up for a sale and as he walked out the door you realized you had undercharged him $2000. You get his attention and say wait I didn't charge the correct price. Unfortunately he smiles says thanks, you already rang me up and I have my receipt, and out the door he walks. So my point is mistakes do happen, so there may be some judgement call on your end of do you really stick it to the guy just because you legally can or do you do the right thing and pay the guy for his work. If the guy really isn't honest it may still pay to go somewhere else and even pay a new appraisal if need be. $350ish isn't much out of pocket to get the best help possible and know you are dealing with someone honest. Glen
0 votes
Emily Knell, Agent, Huntington Beach, CA
Mon Aug 30, 2010
Get a 2nd opinion with a major, direct lender. Wells Fargo, for example, their not being a "broker", there's less of a chance they're not charging loopy junk fees. You could call Lisa Banhagel at 949-500-5780 or email her at Lisa.P.Banhagel@WellsFargo.com.

Or, demand that your current lender give you a copy of your HUD-1 Settlement statement, they must show the difference between your GFE & what's being charged now., there must be a line item on the HUD to show what exactly this extra $2,000 in fees is for.

EmilyKnell1@yahoo.com
562-430-3053 cell
0 votes
Ashly Fox, Agent, San Clemente, CA
Mon Aug 30, 2010
Call JOe Keamer with Alpine Mortgage 714-386-1338. In all my experience he is the most ethical lender I have ever worked with and at least he can give you peace of mind. That I am aware he is in violation of the new truth in lending laws and is doing a bait and switch, but as a Realtor I am not an expert in the new laws and would refer you to a lending professional.
0 votes
Search Advice
Search
Ask our community a question

Email me when…

Learn more