is it legal to change the terms of a mortgage after a loan commitment letter was issued?

is it legal to change the terms of a mortgage after a loan commitment letter was issued?is it legal to change the terms of a mortgage after a loan commitment letter was issued?
asked 7 years ago

We just got a commitment for a mortgage to close in a week, and after we, the title company and our realtor all received the loan commitment and scheduled the closing, the lender called back and said the terms were different than they’d said and issued a new commitment letter. Is this legal? We live in Florida if that matters.
We just got a commitment (CLC with NO stipulations) for a mortgage to close in a week, and after we, the title company and our realtor all received the loan commitment and scheduled the closing, the lender called back and said the terms were different than they’d said and issued a new commitment letter. Is this legal? We live in Florida if that matters.
Okay, I obviously need to clarify what happened – we got an original commitment letter prior to appraisal – based only on the appraisal. This was for 100% financing (what we applied for). 3 days later we got a final commitment letter – clear to close, for 100%. 2 hours later they sent another commitment letter, saying the first was a mistake for 95% financing. The appraisal, btw was for 15,000 over purchase price. Nothing else could possibly materially have changed in two hours. No new disclosure was given to us – and the lender knew we had to have commitment by Sunday as term of our contract. BTW – we did not misstate anything, provided every document that was asked for (one at a time 2 days between) promptly. I think we were bamboozled. I just want to know what my recourse is other than walking away and now probably losing the house. We had in fact been approved at 100% by two other lenders, just with stated terms not quite as good.

kate replied 10 years ago

It is legal , nothing is in stone until you close at escrow .

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Elsa D replied 10 years ago

Yes, a letter is not a loan and they find additional data during the loan process which can effect the loan. Terms can be changed at anytime prior to signing.

KELSEY replied 10 years ago

Yes because the purpose of the loan commitment letter is the lenders commitment (guarantee) to give you a loan. Meaning as you said, that no stipulations are left to take care of. The purpose of the letter is not to guarantee any specific loan terms (i.e. interest rate, term, etc), just guarantee that the lender will indeed provide you with a loan.

alterfemego replied 10 years ago

It depends on what the new commitment letter is stating. If they quoted you in writing “terms” for a loan, I would make them hold to them. I don’t care if the Loan Officer has to eat some money to make it happen. Now if there were an honest mistake,a typo etc. then maybe consider accepting the new letter. But if the rate changed, or terms involving money changed, I’d have to weight carefully their right to make the change. Now understand if you decide to challenge them, it could delay your closing and the sellers might not be happy. So I would talk with your Realtor and get their input and suggestions.

diesel6999999 replied 10 years ago

When you ask a question, is it legal ?, then any one answering should note you should seek legal advise. That being said, was the commitment from a mtg. broker, or the servicing lender. What were the changes that concerned you specifically? Was the commitment signed, and did you receive a disclosure when you took the application? You have the option of contacting licensing and regulation if you feel you are being abused. Seek legal advice! There ARE R.E.S.P.A. regulations that deal with these issues, if , the rate, or term was changed and affected you in a derogatory manner. The original commitment, was in fact UN-true, or non-attainable within R.E.S.P.A. guidelines. It is NOT true that you have no options. The Truth in Lending Act is there as well. A new commitment cannot be issued if it changed rate and term, with out giving you a T & L first, and should be accompanied by an explaination. Hope this helps, Good Luck!

Brain replied 10 years ago

It doesn’t matter, if you are not comfortable w/what they are offering you are not obligated to go through with it. So, please don’t. If it is a purchase and you choose not to proceed you will lose your earnest money, unless you get another loan. However, most likely what you are being offered now is what you qualify for, so either you take that or shop around some more, but more than likely you’ll get the same. You didn’t mention the difference but it should only be around .25 or .50 difference. If the program is completely different, and you don’t feel comfortable DON”T SIGN. It is better to lose your earnest money than a house. Think about it.

Casey C replied 10 years ago

This is the problem wtih my industry… bad loan officers. Unfortunately, what you are going through is all too common. Sometimes these guys do it fully knowing that they are going to bait and switch you, but most are so incompetant that they didn’t structure your loan properly in the first place and the underwriter has to fix it a couple of days before closing.

If you are uncomfortable with the terms or they aren’t what you were promised, you should take the following steps.

1. Call another lender and get prequalifed. See if you are able to get the terms you were originally promised. It’s free to find out. In fact, I’d be more than happy to do that for you.

2. If you can get terms that are closer to what you were originally promised, you’ll need to have your loan officer or yourself get in contact with all involved parties to convince them that you need some additional time to close because your first lender tried to take advantage of you. Fortunately, since this market is slow, everyone should be patient and willing to work with you as long as you and your new lender do a good job of explaining what happened.

3. Walk away. Consider the money you deposited as a lesson learned and walk away. It’s why good poker players continue to win… they know when to fold. Cut your losses, politely ask for some or all of your deposit back and if they won’t give it back, harrass your lender and ask them to pay you back since they put you in this position.

I’m sorry you have to go through this. If you’d like more information, let me know. I work for chase.

BamaGreenBack replied 10 years ago

Commitment letters can be binding. I am a Banker and we write commitment letters or pre-approval letters with back-out clauses all day long. A pre approval letter doesn’t mean jack. I typically use the phrase, “this is a commitment for financing” when I am committing to a customer.

As a Banker, if I give someone a commitment letter that says this is a commitment for financing, I fully expect to live up to that letter. Check with a lawyer. They love suing banks.

Good luck.

Mary B replied 10 years ago

Yes. Loan programs change, and what has happened is that the investor that probably provided the loan program is not longer able to fund the loan…banks are STILL going out of business.

Yes, it’s legal. They need to give you a more concrete reason, as I have made a speculation. You need to make sure your LO isn’t trying to scam you…that is why you need details.

This is the time for your Realtor to shine and get to the bottom of it.

If the investor went out of business, you will be TOTALLY wasting your time with an attorney. There is nothing in RESPA that states a bank has to honor the commitment if they are unable to through no fault of their own…or if circumstances change with you.

The state, doesn’t matter.

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