Q:Jerry,  First, thanks for all the advice in your column, it has come in handy.

My wife and I are in the midst of a refinance with cash-out.  We locked in the rate the day before the war, back in March.  We left the country for 10 days in May (I did inform our lender of our travel plans and dates), and while we were away, we received loan commitment paperwork from our lender, indicating that the rate lock expiration date was the day we returned.  We did not have time to respond to the lender before the rate lock exp. date indicated in the correspondence.

Our lender has told me that the rates are automatically extended beyond the lock period, since they are not necessarily closing their loans on time due to the volume of business.

My question is this:  do we have the right to lock in at a new rate (they are more favorable now), since the rate lock expiration date has passed?

Thanks,
Dennis H.
 

A: Dear Dennis,

Unfortunately, your lender is correct.  When you lock your interest rate, you are making a commitment to take the interest rate offered on a given day.  If your rate lock expires, you are given what is called “worst case pricing”.  In other words if rates go up, you get stuck with a higher interest rate, but if they go down you will receive the same one rate you locked in.  This may seem unfair on the surface, but in order to lock in your interest rate the lender had to purchase a futures contract to deliver the loan on the secondary market at the rate in which you locked.  If interest rates have improved substantially since you locked in March, ask your loan officer if they offer a float down option.  This option is offered by some lenders if your loan fits a variety of parameters, and again, only if interest rates have improved quite a bit since your original lock date.   Best of Luck,

Jerry