July 6, 2015
We recently got a reader question about FHA loan interest rate locks–the borrower signed a contract for an FHA loan at a certain interest rate, then was told later that the rate would be higher because the paperwork was signed after a certain point in the day when the interest rate lock had to be submitted in order to guarantee the rate. Does the borrower have any recourse?
This is a tricky question to answer because at first glance, if two parties have signed a legally binding agreement, it stands to follow that one party cannot simply go back and change the terms of that agreement. To say that the borrower would not be eligible for the rate agreed upon in writing by both parties in the legally binding document would seem to be in contradiction of everything people know and assume about such contracts.
We are not legal experts, so we can’t say for sure what happened, what recourse might be available to the borrower, or whether fine print in the agreement might permit such practices.
However, we can strongly urge any borrower who has experienced such seeming irregularities to get in touch with the FHA immediately for advice. You can call the FHA at their toll-free number, 1-800 CALL FHA to get more information or get a complaint started.
In cases like these, the borrower may need to seek legal counsel. It’s best to get a lawyer with experience in lending law, real estate law, or other related areas of expertise.
The fine print of any agreement is important to consider. Does the lender have a clause permitting such an increase in the interest rate lock-in depending on certain conditions being present? If so, is the language of that fine print legal? These are questions that an FHA representative can help clarify, and a lawyer may be needed to bring a legal case in situations where it’s not clear of one party is actually in breach of contract or not.
Borrowers should always contact the FHA when there is evidence of irregularity in the FHA loan process. The same goes for discrimination or other violations of federal law such as the Fair Housing Act. The victims are often times the only line of defense when it comes to cases where actual irregularities or discrimination occur. It’s not for us to say whether this particular case is legally actionable or not, but it never hurts to make sure you know your rights and responsibilities as a borrower.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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