My bank does not use a formal rate lock agreement with the borrower. We do lock a rate with the investor as part of our loan processing - but no formal agreement with the borrower. So, our initial Loan Estimates are sent with the Rate Lock marked "NO". When we lock the rate with the investor later, we have been sending a revised Loan Estimate within 3 business days - usually there are no new costs added as a result. But sometimes, a point may be added or a lender credit may change. (No rate lock fees.)

TRID considers a rate to be locked when we have an executed rate lock agreement with the borrower - not when we lock the rate with the investor. Are we doing this properly - by sending a revised LE when we lock a rate with the investor? (Locking the rate is one of the "changed circumstances" requiring a revised LE.)

Nope - what you and the investor do has nothing to do with the consumer.

Tagging on to this thread. We do not use written rate lock agreements at all for our portfolio loans. If the credit score meets a sufficient cutoff, we lock our rate internally and and verbally lock the rate with the customer. We do mark "Yes" for the rate lock since we have made a verbal commitment with the customer about their rate. If the credit score is too low, we have a floating rate.
We do not lock our rate internally and we mark "No" on the LE. Then, if it is approved, we lock the rate at whatever it is at that time and reissue the LE. Is this an acceptable practice since we don't have formal agreements at all?

No - a verbal rate lock is not an agreement and in many States a verbal agreement on any loan over $50,000 is not even valid.

If rates would go up 500 basis points before closing - we would see if you would actually honor these verbal rate lock agreements
Some of us were actually around in the 80's when rates fluctuated that much.

These are portfolio loans, not SMM loans so it is a little different. Since we lock our internal rate with our funding bank as well, we are protected until the rate lock expiration date, which we disclose to the customer. Our rate can't change so we would not change the borrower's rate, which, in essence means their rate is locked.

The rate is not locked with the consumer unless you have entered into a written rate lock agreement with the consumer. What you say or do internally or in the secondary market, is meaningless when it comes to disclosing the information to the consumer.

37(a)(13) Rate lock.
1. Interest rate. For purposes of § 1026.37(a)(13), the interest rate is locked for a specific period of time if the creditor has agreed to extend credit to the consumer at a given rate, subject to contingencies that are described in any rate lock agreement between the creditor and consumer.

Also refer to Official Interpretation - 19(e)(3)(iv)(D) Interest rate dependent charges

I am not sure how "a creditor sets the interest rate by executing a rate lock agreement with the consumer" or "no later than three business days after the date that the consumer and the creditor enter into a rate lock agreement" can happen if not in writing. You might tell them the rate is locked - but there is no executed agreement between the two parties.

Your bank's practice notwithstanding, Randy is correct. You don't have a formal rate lock with your borrower under the laws of most states, and you definitely don't have a rate lock as defined in the regulation. Stop disclosing that you have one unless you actually sign a written rate lock agreement with your borrower.